SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
______________________
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________________________________________
Mark One
[x] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended August 31, 1997,
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the Transition Period From ____________ to ____________
Commission File Number 1-11098
SOLECTRON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2447045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
777 Gibraltar Drive, Milpitas, California 95035
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (408) 957-8500
Securities registered pursuant to Section 12(b) of the Act:
Common Stock traded on New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such report(s), and (2) has
been subject to such filing requirements for the past 90 days.
YES __X__ NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of 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. [ ]
The aggregate market value of the Registrant's Common Stock held by non-
affiliates on October 31, 1997 (based upon the last reported price of
the Common Stock on the New York Stock Exchange on such date) was
approximately $2,850 million.
As of October 31, 1997, there were approximately 114,880,598 shares of
the Registrant's Common Stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on January 14, 1998, which the Company will file
with the Securities and Exchange Commission within 120 days after the
end of the fiscal year covered by this report, is incorporated by
reference in Part III of this Form 10-K to the extent stated herein.
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SOLECTRON CORPORATION
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1. Business 4
Item 2. Properties 13
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 16
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 51
Part III
Item 10. Directors and Executive Officers of the
Registrant 52
Item 11. Executive Compensation 55
Item 12. Security Ownership of Certain Beneficial
Owners and Management 55
Item 13. Certain Relationships and Related Transactions 55
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 56
Signatures 57
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PART I
ITEM 1: SOLECTRON BUSINESS
Solectron Corporation (the Company or Solectron) is an independent
provider of customized manufacturing services to electronics original
equipment manufacturers (OEMs). Solectron provides a wide variety of
pre-manufacturing, manufacturing and post-manufacturing services.
Solectron's goal is to offer its customers the significant competitive
advantages that can be obtained from manufacturing outsourcing such as
access to advanced manufacturing technologies, shortened product time-
to-market, reduced cost of production and more effective asset
utilization. Solectron currently conducts operations in the Western,
Southwestern and Eastern United States, Europe and Asia. In fiscal 1998,
the Company added facilities in Mexico and Brazil. Solectron believes
that the geographically diverse locations of its facilities enable it to
build closer regional relationships with its customers and to better
meet its customers' cost and local market content requirements.
Solectron Corporation was originally incorporated in California in
August 1977 and reincorporated in Delaware in February 1997. Solectron's
corporate headquarters are located at 777 Gibraltar Drive, Milpitas,
California 95035. Its telephone number is (408) 957-8500.
The information contained within this overview of the business, is
qualified in its entirety by, and is subject to, the detailed
information, consolidated financial statements and notes thereto
contained elsewhere within this document under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Financial Statements and Supplementary Data".
Industry Overview
Solectron is benefiting from increased worldwide market acceptance of,
and reliance upon, the use of manufacturing specialists by many
electronics OEMs. Solectron believes the trend towards outsourcing
manufacturing will continue. OEMs utilize manufacturing specialists for
many reasons including the following:
Reduce Time to Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles and therefore have a growing need to reduce the time
required to bring a product to market. OEMs can reduce their time to
market by using a manufacturing specialist's manufacturing expertise and
infrastructure.
Reduce Investment. As electronic products have become more
technologically advanced and shipped in greater unit volumes, the
necessary investment required for internal manufacturing has increased
significantly for working capital, capital equipment, labor, systems and
infrastructure. Use of manufacturing specialists enables OEMs to gain
access to advanced manufacturing capabilities while substantially
reducing overall resource requirements.
Focus Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many
OEMs increasingly are seeking to focus their resources on activities and
technologies in which they add the greatest value. By offering
comprehensive electronics assembly and related manufacturing services,
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manufacturing specialists allow OEMs to focus on their own core
competencies such as product development and marketing.
Access Leading Manufacturing Technology. Electronic products and
electronics manufacturing technology have become increasingly
sophisticated and complex, making it difficult for OEMs to maintain the
necessary technological expertise to manufacture products internally.
OEMs are motivated to work with a manufacturing specialist in order to
gain access to the specialist's expertise in interconnect, test and
process technologies.
Improve Inventory Management and Purchasing Power. Electronics industry
OEMs are faced with increasing difficulties in planning, procuring and
managing their inventories efficiently due to frequent design changes,
short product life-cycles, large investments in electronic components,
component price fluctuations and the need to achieve economies of scale
in materials procurement. OEMs can reduce production costs by using a
manufacturing specialist's volume procurement capabilities. In addition,
a manufacturing specialist's expertise in inventory management can
provide better control over inventory levels and increase the OEM's
return on assets.
Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign
markets. Manufacturing specialists with worldwide capabilities are able
to offer such OEMs a variety of manufacturing location options to better
address their objectives regarding cost, shipping location, frequency of
interaction with manufacturing specialists and local content
requirements of end-market countries.
Strategy
Solectron's goal is to offer its customers the significant competitive
advantages of manufacturing outsourcing, such as access to advanced
manufacturing technologies, shortened product time-to-market, reduced
cost of production and more effective asset utilization. To achieve this
goal Solectron's strategy emphasizes the following key elements:
Quality. Solectron believes that product quality is a critical success
factor in the electronics manufacturing market. Solectron strives for
continuous improvement of its processes and has adopted a number of
quality improvement and measurement techniques to monitor its
performance. Solectron has received numerous superior service and
quality awards, including the Malcolm Baldrige National Quality Award in
1991 and again in 1997, the State of California Governor's Golden State
Award in 1994, the North Carolina Quality Leadership Award in 1996,
Malaysian Quality Management Excellence Award in 1996 as well as the
Malaysian Prime Minister's Quality Award in 1997, the Texas Quality
Award in 1996 and numerous awards from its customers. All of Solectron's
manufacturing facilities, except for Fine Pitch Technology, Inc. and the
recently-established facilities in China and Mexico, are certified under
ISO-9000 standards, which are international quality standards for
design, manufacturing and distribution management systems.
Manufacturing Partnerships. An important element of Solectron's
strategy is to establish partnerships with major and emerging OEM
leaders in diverse segments across the electronics industry. Solectron's
customer base consists of leaders in industry segments such as
networking, telecommunications, workstations, personal computers,
computer peripherals, instrumentation, semiconductor equipment and
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avionics. Due to the costs inherent in supporting customer
relationships, Solectron focuses its efforts on customers with which the
opportunity exists to develop long-term business partnerships.
Solectron's goal is to provide its customers with total manufacturing
solutions for both new and more mature products, as well as across
product generations. Solectron's manufacturing services range from
providing design and new product introduction services, to just-in-time
delivery on low to medium volume turnkey and consignment projects and
projects that require more value-added services, to servicing OEMs that
require price-sensitive, high-volume production.
Turnkey Capabilities. Another element of Solectron's strategy is to
provide a complete range of manufacturing management and value-added
services, including materials management, board design, concurrent
engineering, assembly of complex printed circuit boards and other
electronic assemblies, test engineering, software manufacturing,
accessory packaging and post-manufacturing services. Solectron believes
that as manufacturing technologies become more complex and as product
life-cycles shorten, OEMs will increasingly contract for manufacturing
on a turnkey basis as they seek to reduce their time to market and
capital asset and inventory costs. A substantial portion of Solectron's
revenue is from its turnkey business. Solectron believes that the
ability to manage and support large turnkey projects is a critical
success factor and a significant barrier to entry for the market it
serves. In addition, Solectron believes that due to the difficulty and
long lead-time required to change manufacturers, turnkey projects
generally increase an OEM's dependence on its manufacturing specialist,
resulting in greater stability of Solectron's customer base and in
closer working relationships. Solectron has been successful in
establishing sole source positions with many of its customers for
certain of their products.
Advanced Manufacturing Process Technology. Solectron intends to
continue to offer its customers the most advanced manufacturing process
technologies, including surface mount technology (SMT) and ball-grid
array (BGA) assembly and testing and emerging interconnect technologies.
Solectron has developed substantial SMT expertise including advanced,
vision-based component placement equipment. Solectron believes that the
cost of SMT assembly facilities and the technical capability required to
operate a high-yield SMT operation are significant competitive factors
in the market for electronic assembly. Solectron also has the capability
to manufacture using tape-automated-bonding, chip-on-substrate and other
more advanced manufacturing processes.
Diverse Geographic Operations. An important element of Solectron's
strategy is to establish production facilities in areas of high customer
density or where manufacturing efficiencies can be achieved. Solectron
currently has operations in the Western, Southwestern and Eastern United
States, Mexico, Brazil, Europe and Asia. Solectron believes that its
facilities in these diverse geographic locations enable Solectron to
better address its customers' objectives regarding cost, shipping
location, frequency of interaction with manufacturing specialists and
local content requirements of endmarket countries. In addition,
Solectron has its Asia/Pacific headquarters office in Taipei, Taiwan,
and a business development office in Tokyo, Japan. Solectron intends to
continue to expand its operations as necessary to continue to serve its
existing customers and to develop new business.
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International Manufacturing Capability
Western United States. Solectron's headquarters and largest
manufacturing operations are located in Silicon Valley, principally in
Milpitas, California. Solectron believes that the location of these
facilities in one of the largest concentrations of OEM electronics
manufacturers permits it to more efficiently provide low to high volume
printed circuit board assembly, system build and other services to such
OEMs. In addition, Solectron has a smaller site strategically located in
Everett, Washington to help serve Solectron's customers in the Pacific
Northwest and elsewhere.
The Company's subsidiary, Fine Pitch Technology, Inc., headquartered in
San Jose, California, provides extensive prototype services for
electronics OEMs, further enhancing Solectron's ability to address the
needs of design teams who require almost immediate availability of
highly complex prototype assemblies.
In November 1996, the Company completed its acquisition of Force
Computers, Inc. (Force), a leading designer and supplier of open,
scalable system- and board-level embedded computer platforms for the
telecomunications, industrial and command and control markets. Unlike
general purpose computers, embedded computers are incorporated into
systems and equipment to perform a single or limited number of critical
control functions and are generally integrated into larger automated
systems. A processor independent company, Force delivers products based
on SPARC, Pentium, PowerPC and 68K technologies and has expertise in
system design, board design, system integration and manufacturing. Force
also provides support services, such as system configurations,
application consulting and training to its customers. The addition of
Force Computers further enhances the Company's array of services,
particularly in pre-manufacturing areas. Force Computers' corporate
headquarters are located in San Jose, California. Its European
headquarters and a significant portion of its manufacturing operations
are located in Munich, Germany. In addition to its headquarters
locations, Force has thirteen sales support offices in the United States
and six sales support offices in various international locations.
Southwestern United States. In March 1996, Solectron acquired the
Austin, Texas-based Custom Manufacturing Services business from Texas
Instruments Incorporated (TI). This facility is staffed primarily by
former TI personnel with extensive manufacturing experience. Solectron
believes that the Austin facility is situated in a geographic region
with strong growth of electronics OEMs which will allow Solectron to
better service its existing customers and to attract new ones.
Eastern United States. Solectron's Eastern United States operations are
located in Charlotte, North Carolina and Westborough, Massachusetts.
These facilities are staffed by personnel with extensive electronics
manufacturing and product design experience. Solectron believes that the
Charlotte facility allows it to better pursue new business opportunities
with new and existing customers having Eastern United States operations
because of Charlotte's status as a transportation hub and its relative
proximity to major Eastern United States electronics markets. The
Westborough facility is located near Boston, in the center of a
geographic region with a large concentration of electronics OEMs.
Mexico. Solectron's site in Guadalajara, Mexico is expected to begin
providing printed circuit board assembly and system-build manufacturing
services to both existing and new customers in the first quarter of
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fiscal 1998. This site was established to offer customers a low-cost
manufacturing facility in North America.
Europe. Solectron has three European sites. One site is located in
Bordeaux, France. This facility was purchased from International
Business Machines Corporation (IBM). Solectron also has operations in
Dunfermline, Scotland, which were acquired from Philips Electronics.
Solectron believes that this facility allows it to better serve the many
electronics OEMs located in the United Kingdom. Solectron's printed
circuit board assembly operation now located in Herrenberg, Germany, was
acquired from Hewlett-Packard Company. This facility allows Solectron to
better serve the German market. In addition, Force Computers' European
headquarters and a major portion of its manufacturing operations are
located in Munich, Germany.
Asia. Solectron's Southeast Asia manufacturing operations are located
in Penang and Johor, Malaysia. The operations were established to better
serve the needs of OEMs requiring price-sensitive, high-volume
production capabilities and to provide more efficient manufacturing
services to customers located in Southeast Asia. The facilities
currently provide electronics assembly, materials management and other
services to customers located in Malaysia, Singapore, Japan, the United
States and other locations.
Solectron's facility in Suzhou, China began operations in fiscal 1997.
This facility currently provides low-cost manufacturing services to
Solectron's Asian customer base.
Acquisition of Ericsson Manufacturing Facility and Related Transactions.
In March 1997, Solectron entered into a memorandum of understanding with
Ericsson Telecom AB's Business Area Infocom Systems (Ericsson) to set up
a New Product Introduction center in Norrkoping and Stockholm, Sweden,
transfer a portion of production from certain Ericsson plants to
Solectron manufacturing sites and purchase an existing Ericsson printed
circuit board assembly operation. In July 1997, Solectron and Ericsson
signed certain definitive agreements regarding these transactions. In
October 1997, Solectron acquired certain assets, primarily inventory and
equipment, of Ericsson's Brazil operation and hired approximately 370
persons formerly associated with the printed circuit board assembly
operations of Ericsson Telcomunicacoes S.A. as employees of Solectron's
newly-formed subsidiary, Solectron Brasil Ltda. Under the terms of the
agreement, Ericsson will contract for Solectron's services from
Solectron Brasil Ltda. through September 1999. Thereafter, Solectron
will bear the risk of filling the manufacturing capacity at the site
with renewed business from Ericsson or new business from other
customers. Additional agreements related to the New Product Introduction
center and the transfer of certain other assets are being negotiated.
These transactions are expected to undergo multiple closings through
January 1998, subject to the successful negotiation of additional
definitive agreements and various closing conditions.
As Solectron manages the existing operations and expands geographically,
it may experience certain inefficiencies from the management of
geographically dispersed operations. In addition, Solectron's results of
operations will be adversely affected if these new facilities do not
achieve revenue growth sufficient to offset increased expenditures
associated with geographic expansion.
In fiscal 1997, approximately 26.8% of Solectron's sales were from
operations outside of the United States. As a result of continuous
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customer demand overseas, Solectron expects foreign sales to increase.
Solectron's foreign sales and operations are subject to risks of doing
business abroad, including fluctuations in the value of currency, export
duties, import controls and trade barriers (including quotas),
restrictions on the transfer of funds, employee turnover, work
stoppages, longer payment cycles, greater difficulty in accounts
receivable collection, burdens of complying with a wide variety of
foreign laws and, in certain parts of the world, political instability.
While to date these factors have not had an adverse impact on
Solectron's results of operations, there can be no assurance that there
will not be such an impact in the future.
Manufacturing
Solectron's Approach
To achieve excellence in manufacturing, Solectron combines advanced
manufacturing technology, such as computer-aided manufacturing and
testing, with manufacturing techniques including just-in-time
manufacturing, total quality management, statistical process control and
continuous flow manufacturing. Just-in-time manufacturing is a
production technique which minimizes work-in-process inventory and
manufacturing cycle time while enabling Solectron to deliver products to
customers in the quantities and time frame required. Total quality
management is a management philosophy which seeks to impart high levels
of quality in every operation of Solectron and is accomplished by the
setting of quality objectives for every operation, tracking performance
against those objectives, identifying work flow and policy changes
required to achieve higher quality levels and a commitment by executive
management to support changes required to deliver higher quality.
Statistical process control is a set of analytical and problem-solving
techniques based on statistics and process capability measurements
through which Solectron can track process inputs and resulting quality
and determine whether a process is operating within specified limits.
The goal is to reduce variability in the process, as well as eliminate
aberrations which contribute to quality below the acceptable range of
each process performance standard.
In order to successfully implement these management techniques,
Solectron has developed the ability to collect and utilize large amounts
of data in a timely manner. Solectron believes this ability is critical
to a successful assembly operation and represents a significant
competitive factor, especially in large turnkey projects. To manage this
data, Solectron uses sophisticated computer systems for material
resource planning, shop floor control, work-in-process tracking,
statistical process control and activity-based product costing.
Electronics Assembly and Other Services
Solectron's electronics assembly activities consist primarily of the
placement and attachment of electronic and mechanical components on
printed circuit boards and flexible cables. Solectron also assembles
higher-level sub-systems and systems incorporating printed circuit
boards and complex electromechanical components, in some cases
manufacturing and packaging products for shipment directly to its
customers' distributors. In addition, Solectron provides other
manufacturing services including refurbishment and remanufacturing.
Solectron manufactures on a turnkey basis, directly procuring some or
all of the components necessary for production and on a consignment
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basis, where the OEM customer supplies all or some components for
assembly.
In conjunction with its assembly activities, Solectron also provides
computer-aided testing of printed circuit boards, sub-systems and
systems, which contributes significantly to Solectron's ability to
deliver high quality products on a consistent basis. Solectron has
developed specific strategies and routines to test board and system
level assemblies. In-circuit tests verify that all components have been
properly inserted and that the electrical circuits are complete.
Functional tests determine if the board or system assembly is performing
to customer specifications. Solectron either designs and procures test
fixtures and develops its own test software or utilizes its customers'
existing test fixtures and test software. In addition, Solectron
provides environmental stress tests of the board or system assembly.
Solectron provides turnkey manufacturing management to meet its
customers' requirements, including procurement and materials management
and consultation on board design and manufacturability. Individual
customers may select various services from among Solectron's full range
of turnkey capabilities.
Procurement and materials management consists of the planning,
purchasing, expediting, warehousing, preparing and financing of the
components and materials required to assemble a printed circuit board or
electronic system. OEMs have increasingly utilized electronic
manufacturing specialists to purchase all or some components directly
from component manufacturers or distributors and to finance and
warehouse the components.
Solectron also assists its customers in evaluating board designs for
manufacturability. Solectron evaluates the board design for ease and
quality of manufacture and, when appropriate, recommends design changes
to reduce manufacturing costs or lead times or to increase the quality
of finished assemblies. Board design services consist of the engineering
and design associated with the arrangement and interconnection of
specified components on printed circuit boards to achieve an OEM's
desired level of functionality. Solectron also offers ASIC design
services and its subsidiary, Force Computers, offers product design
services for the embedded computer market.
Sales and Marketing
Sales and marketing at Solectron is an integrated process involving
direct salespersons and project managers, as well as Solectron's senior
executives. Solectron's sales resources are directed at multiple
management and staff levels within targeted accounts. Solectron also
uses independent sales representatives in certain geographic areas.
Solectron receives unsolicited inquiries resulting from advertising and
public relations activities, as well as referrals from current
customers. These opportunities are evaluated against Solectron's
customer selection criteria and are assigned to direct salespersons or
independent sales representatives, as appropriate. Historically,
Solectron has had substantial recurring sales from existing customers.
Over 78% of Solectron's net sales during fiscal 1997 were derived from
customers which were also customers during fiscal 1996. Although
Solectron seeks to diversify its customer base, a small number of
customers currently are responsible for a significant portion of
Solectron's net sales. During fiscal 1997, 1996 and 1995, Solectron's
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ten largest customers accounted for 65.5%, 64.0% and 70.2% of
consolidated net sales, respectively. Several customers each accounted
for more than 10% of net sales during these years. Hewlett-Packard
Company represented 13.5% and 10.7% of net sales in fiscal 1997 and
1996, respectively. Bay Network Incorporated accounted for 10.4% of net
sales in fiscal 1997. IBM Corporation represented 20.9% of net sales in
fiscal 1995. No other individual customer accounted for more than 10% of
Solectron's net sales in any of these years.
Backlog
Backlog consists of contracts or purchase orders with delivery dates
scheduled within the next twelve months. At August 31, 1997, Solectron's
backlog was approximately $875 million. The backlog was approximately
$612 million at August 31, 1996. Because customers may cancel or
reschedule deliveries, backlog is not a meaningful indicator of future
financial results.
Competition
The electronic manufacturing services industry is comprised of a large
number of companies, several of which have achieved substantial market
share. Solectron also faces competition from current and prospective
customers which evaluate Solectron's capabilities against the merits of
manufacturing products internally. Solectron competes with different
companies depending on the type of service or geographic area. Certain
of Solectron's competitors may have greater manufacturing, financial,
research and development and marketing resources than Solectron.
Solectron believes that the primary basis of competition in its targeted
markets is manufacturing technology, quality, responsiveness, the
provision of value-added services and price. To remain competitive,
Solectron must continue to provide technologically advanced
manufacturing services, maintain quality levels, offer flexible delivery
schedules, deliver finished products on a reliable basis and compete
favorably on the basis of price. Solectron currently may be at a
competitive disadvantage as to price when compared to manufacturers with
lower cost structures, particularly with respect to manufacturers with
established facilities where labor costs are lower.
Employees
As of August 31, 1997, Solectron employed 18,215 persons worldwide,
including 3,696 temporary employees. Solectron's international
operations employed 7,256 persons.
Patents and Trademarks
Solectron has obtained a limited number of U.S. patents related to the
process and equipment used in its surface mount technology. The
Company's subsidiary, Force Computers, holds a number of patents related
to VME technology. In addition, the Company has registered trademarks in
the United States and many countries throughout the world. These patents
and trademarks are considered valuable to Solectron.
Although Solectron does not believe that its trademarks, manufacturing
process or Force's technology infringes on the intellectual property
rights of third parties, there can be no assurance that third parties
will not assert infringement claims against Solectron in the future. If
such an assertion were to be made, it may become necessary or useful for
Solectron to enter into licensing arrangements or to resolve such an
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issue through litigation. However, there can be no assurance that such
license rights would be available to Solectron on commercially
acceptable terms or that any such litigation could be resolved
favorably. Additionally, such litigation could be lengthy and costly and
could have an adverse material effect on Solectron's financial condition
regardless of the outcome of such litigation.
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ITEM 2: PROPERTIES
The Company's manufacturing facilities are located throughout North
America, Europe and Asia. The table below lists the locations and square
feet owned or leased for the Company's major operations.
Square Feet Lease
---------------------- Termination
Location Owned Leased Dates
- -------------------- ---------- ---------- -----------
North America:
Milpitas, California (1) -- 1,149,000 1998 - 2005
San Jose, California -- 129,000 1999 - 2001
Charlotte, North Carolina 175,000 75,000 1998
Everett, Washington -- 75,000 1998
Austin, Texas -- 507,000 2000
Westborough, Massachusetts -- 75,000 2002
Guadalajara, Mexico 320,000 38,000 1998
Europe:
Dunfermline, Scotland 212,000 --
Bordeaux, France (2) 319,000 --
Herrenberg, Germany 71,000 --
Munich, Germany -- 210,000 1999 - 2001
Asia:
Penang, Malaysia 190,000 179,000 2000
Johor, Malaysia -- 66,000 1999
Suzhou, China (3) -- 30,000 1998
(1) Includes facilities located nearby in Fremont and Newark,
California. Approximately 30,000 square feet of facilies at this
location is subleased on a short term lease.
(2) Includes approximately 34,000 square feet subleased to a third party
under the terms of an annual warehousing agreement.
(3) A facility owned by the Company located on land leased for a term of
50 years from the government of China is currently under
construction at this location.
Around the world, the Company is subject to a variety of environmental
regulations relating to the use, storage, discharge and disposal of
hazardous chemicals used during its manufacturing process. Any failure
by the Company to comply with present and future regulations could
subject it to future liabilities or the suspension of production. In
addition, such regulations could restrict the Company's ability to
expand its facilities or could require the Company to acquire costly
equipment or to incur other significant expenses to comply with
environmental regulations.
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ITEM 3: LEGAL PROCEEDINGS
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
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PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Common Stock Information
The following table sets forth the quarterly high and low per share
sales prices of Solectron's Common Stock for the two-year period ended
August 31, 1997, as quoted on the New York Stock Exchange. All data has
been adjusted to reflect the two-for-one stock split effective August 4,
1997.
High Low
-------- --------
Fiscal 1996
First Quarter 21 13/16 17 1/2
Second Quarter 25 1/16 18 1/4
Third Quarter 25 20 1/8
Fourth Quarter 21 15/16 15 1/2
Fiscal 1997
First Quarter 29 15/16 17 1/8
Second Quarter 30 11/16 25 3/4
Third Quarter 32 1/2 23 9/16
Fourth Quarter 45 9/16 29 9/16
Solectron has not paid any dividends since its inception and does not
intend to pay any dividends in the foreseeable future. Additionally, the
covenants to the Company's financing agreements prohibit the payment of
cash dividends. At August 31, 1997, there were approximately 1,064
stockholders of record based on data obtained from the Company's
transfer agent.
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ITEM 6: SELECTED FINANCIAL DATA
The following selected historical financial information of Solectron has
been derived from the historical consolidated financial statements and
should be read in conjunction with the consolidated financial statements
and the notes included therein.
<TABLE>
Five Year Selected Financial Highlights
(in thousands, except per share data)
Consolidated Statements of Income Data:
<CAPTION>
Years Ended August 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $3,694,385 $2,817,191 $2,065,559 $1,456,779 $ 836,326
Operating income 236,422 175,425 123,434 88,350 53,140
Income before
income taxes 238,407 173,077 120,494 84,159 48,613
Net income 158,059 114,232 79,526 55,545 30,600
Primary net income
per share (1) $1.37 $1.10 $0.91 $0.66 $0.40
Fully diluted net
income per share (1) $1.36 $1.08 $0.81 $0.59 $0.38
</TABLE>
<TABLE>
Consolidated Balance Sheet Data:
<CAPTION>
As of August 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Working capital $ 931,690 $ 786,355 $ 355,603 $ 309,203 $ 265,025
Total assets 1,852,419 1,452,198 940,855 766,395 603,285
Long-term debt 385,850 386,927 30,043 140,709 137,011
Stockholders' equity 919,069 700,569 538,141 330,789 260,980
</TABLE>
(1) Adjusted to reflect two-for-one stock split effective August 4, 1997.
16
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements
that involve risks and uncertainties. Solectron's actual results could
differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those factors set
forth under "Trends and Uncertainties" below.
General
Solectron's net sales are derived from sales to electronics systems
original equipment manufacturers (OEMs). The majority of Solectron's
customers compete in the networking and data communications,
workstation, personal computer and computer peripheral segments of the
electronics industry. The Company uses advanced manufacturing
technologies in assembly and manufacturing management of complex printed
circuit boards and electronics systems. Solectron also provides pre-
manufacturing and post-manufacturing services. A discussion of some of
the potential fluctuations in operating results is included under
"Trends and Uncertainties".
On November 26, 1996, Solectron exchanged approximately 6.2 million
shares of common stock for all of the outstanding stock of Force
Computers, Inc. (Force), and assumed all of the outstanding options of
Force, after giving effect to the exchange ratio. Force is a designer
and provider of computer platforms for the embedded market. This
transaction was accounted for under the pooling of interests method.
The results of operations of Force prior to its acquisition were not
considered material to the Company's consolidated results of operations.
Accordingly, the Company's historical financial statements have not been
restated to reflect the financial position and results of operations of
Force, and pro-forma financial information has not been disclosed.
As of August 31, 1997, excluding the locations of the Force Computers
and Fine Pitch Technologies subsidiaries, the Company had manufacturing
operations in eleven locations, six of which are overseas. On April 2,
1997, the Company announced its twelfth manufacturing location in
Guadalajara, Mexico, which is expected to begin offering manufacturing
services to OEM customers in the first quarter of fiscal 1998.
Solectron has a sales support office located in Japan and in September
1997, opened its Asia/Pacific headquarters office in Taipei, Taiwan.
Force Computers and Fine Pitch Technologies are both headquartered in
San Jose, California. Force's European headquarters and a significant
portion of its operations are located in Munich, Germany. In addition
to its headquarters locations, Force has thirteen sales support offices
in the United States and six sales support offices in various
international locations. Fine Pitch has operations in California and in
Massachusetts.
In March 1997, the Company announced that it had signed a memorandum of
understanding with Ericsson Telecom AB's Business Area Infocom Systems
(Ericsson) to establish a strategic, global manufacturing partnership.
Under the terms of the memorandum of understanding, the Company will set
up a New Product Introduction center in Norrkoping and Stockholm, Sweden
and transfer production from certain Ericsson plants worldwide to
Solectron manufacturing sites around the world. In July 1997, Solectron
17
<PAGE>
and Ericsson signed definitive agreements upon completion of
negotiations of the general terms and conditions for Solectron's supply
of certain products to Ericsson, for the establishment of the New
Product Introduction center and for the transfer of certain assets to
Solectron.
In October 1997, Solectron acquired certain assets, primarily equipment
and inventory, of Ericsson's printed circuit board assembly operation in
Brazil. In addition, Solectron's newly-established subsidiary, Solectron
Brasil Ltda., hired approximately 370 persons formerly employed by
Ericsson Telecomunicacoes S.A. in Brazil.
Additional agreements related to the New Product Introduction center and
the transfer of certain other assets are being negotiated. These
transactions are expected to undergo multiple closings through January
1998, subject to the successful negotiation of additional definitive
agreements and various closing conditions.
Results of Operations
The electronics industry is subject to rapid technological change,
product obsolescence and price competition. These and other factors
affecting the electronics industry, or any of Solectron's major
customers in particular, could have an adverse material effect on
Solectron's results of operations. See "Trends and Uncertainties --
Potential Fluctuations in Operating Results" and "Competition" for
further discussion of potential fluctuations in operating results.
The following table sets forth, for the periods indicated, certain items
in the Consolidated Statements of Income as a percentage of net sales.
The financial information and the discussion below should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto.
<TABLE>
<CAPTION>
Years Ended August 31,
-----------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 88.4 90.0 90.2
----- ----- -----
Gross profit 11.6 10.0 9.8
Operating expenses:
Selling, general and administrative 4.7 3.6 3.6
Research and development 0.4 0.2 0.2
Acquisition costs 0.1 -- --
----- ----- -----
Operating income 6.4 6.2 6.0
Net interest income (expense) 0.1 (0.1) (0.1)
----- ----- -----
Income before income taxes 6.5 6.1 5.9
Income taxes 2.2 2.1 2.0
----- ----- -----
Net income 4.3% 4.0% 3.9%
===== ===== =====
</TABLE>
18
<PAGE>
Net Sales
The Company's net sales have increased significantly in each of the past
several years, reflecting the growing trend toward outsourcing within
the electronics industry. For the year ended August 31, 1997, net sales
grew to $3.7 billion, an increase of 31.1% over fiscal 1996 net sales.
Fiscal 1996 net sales of $2.8 billion were 36.4% greater than net sales
in fiscal 1995. The fiscal 1997 sales growth is attributable to
significant increases in sales volume from both existing and new
customers in North America, higher international sales and the
acquisitions of the Custom Manufacturing Services (CMS) business,
located in Austin, Texas and Force in March and November 1996,
respectively. The sales increase in fiscal 1996 was due to increased
orders from both new and existing customers at existing sites, the CMS
acquisition in March 1996 and the acquisition of the site now located in
Herrenberg, Germany in November 1995.
Sales in the North American region reflected increases in sales at all
locations to existing and new customers in fiscal 1997 compared to
fiscal 1996 as well as in fiscal 1996 compared to fiscal 1995. The
overall increase in sales in fiscal 1997 over fiscal 1996 was partially
offset by the effect of several ongoing programs reaching end-of-life
and deliberate management actions to achieve improved global load
balancing as well as specific product program transitioning. The growth
in North American sales in fiscal 1996 over fiscal 1995 reflects the
impact of the acquisitions of CMS and Fine Pitch in March 1996. Fiscal
1997 sales in most of the Company's European operations increased over
fiscal 1996 sales as a result of the global load balancing efforts noted
above as well as higher sales to existing and new customers. These
increases were partially offset by declines in sales during fiscal 1997
from older programs in the Bordeaux facility as these programs reach
end-of-life. Fiscal 1996 sales in Europe were lower than fiscal 1995
sales due to the same end-of-life issues in Bordeaux and similar issues
in the Scotland facility. Fiscal 1997 sales for the Company's Asian
sites increased over fiscal 1996 despite the impact of many of the same
end-of-life factors as in Europe. The growth in Asian sales in fiscal
1996 compared to fiscal 1995 primarily reflects increased orders from
new and existing customers in that region. Although the Company does not
currently anticipate any future decline in sales, to lessen the
potential impact of any possible future declines to customers within any
particular region or market segment, the Company is committed to seeking
diversification of its customer base among many countries, market
segments and product lines within market segments.
Several major customers accounted for more than 10% of the Company's net
sales in fiscal 1997, 1996 and 1995. In fiscal 1997 and 1996, Hewlett-
Packard Company (HP) was Solectron's largest customer and accounted for
13.5% and 10.7% of consolidated net sales in fiscal 1997 and 1996,
respectively. Bay Networks, Inc. accounted for 10.4% of consolidated net
sales in fiscal 1997. International Business Machines Corporation (IBM)
was Solectron's largest customer during fiscal 1995 and accounted for
20.9% of consolidated net sales in that year. Net sales to IBM in fiscal
1997 and 1996 were less than 10% of consolidated net sales, reflecting
both a decrease in actual sales volume to IBM and an overall increase in
Solectron's total consolidated net sales from all other customers. No
other customers accounted for more than 10% of net sales during any of
the years presented.
Solectron's top ten customers accounted for 65.5%, 64.0% and 70.2% of
consolidated net sales in fiscal 1997, 1996 and 1995, respectively. The
19
<PAGE>
lower percentage of sales attributable to the top ten customers over the
three-year period has resulted primarily from Solectron's ability to
obtain significant new business from other customers, thereby reducing
its dependence on these accounts. Solectron is still dependent upon
continued revenues from HP, Bay Networks and its other top ten customers
and there can be no guarantee that these or any other customers will not
increase or decrease as a percentage of consolidated net sales either
individually or as a group. Consequently, any material decrease in sales
to these or other customers could have an adverse material effect on
Solectron's results of operations.
Net sales at Solectron's international sites, as a whole, grew at a
slower rate over the last three fiscal years than aggregate net sales at
Solectron's domestic sites. International locations contributed 26.8% of
consolidated net sales in fiscal 1997, compared to 30.9% and 38.7% in
fiscal 1996 and 1995, respectively. In addition to the end-of-life
issues impacting international sales discussed above, the primary reason
for the decrease in international sales as a percentage of total sales
is strong growth in domestic sales, aided by the acquisition of the CMS
business in Austin, Texas, which is substantially comprised of domestic
sales.
As a result of Solectron's international sales and facilities,
Solectron's operations are subject to risks of doing business abroad.
While to date these dynamics have not had an adverse material effect on
Solectron's results of operations, there can be no assurance that there
will not be such an impact in the future. See "Trends and Uncertainties
- -- International Operations" for a further discussion of potential
fluctuations in operating results associated with the risks of doing
business abroad.
Solectron's operations in Milpitas, California contributed a substantial
portion of Solectron's net sales and operating income during fiscal
1997, 1996 and 1995. The performance of this operation is expected to
continue as a significant factor in the overall financial performance of
Solectron. Any adverse material change to the customer base, product
mix, efficiency, or other attributes of this site could have an adverse
material effect on Solectron's consolidated results of operations.
Solectron believes that its ability to continue achieving growth will
depend upon growth in sales to existing customers for their current and
future product generations, successful marketing to new customers and
future geographic expansion. Customer contracts can be canceled and
volume levels can be changed or delayed. The timely replacement of
delayed, canceled or reduced orders with new business cannot be assured.
In addition, there can be no assurance that any of Solectron's current
customers will continue to utilize Solectron's services. Because of
these factors, there can be no assurance that Solectron's historical
revenue growth rate will continue. See "Trends and Uncertainties" for a
discussion of certain factors affecting the management of growth,
geographic expansion and potential fluctuations in sales and results of
operations.
Gross Profit
The gross margin percentage improved to 11.6% for fiscal 1997 from 10.0%
for fiscal 1996 and 9.8% in fiscal 1995. The improvement is primarily
due to the inclusion of Force since its acquisition in November 1996.
Gross profit margins on Force's products are significantly higher than
those of the rest of the Company. Without Force's contribution, gross
20
<PAGE>
margins for fiscal 1997 would have been 10.4%. In addition to the impact
of Force, the improved gross margin percentage in fiscal 1997 reflects a
shift in product mix toward the higher margin workstation and networking
and data communications market segments, projects with a higher than
normal consignment content and increased manufacturing efficiencies at
the Dunfermline, Scotland and Austin, Texas sites.
For the foreseeable future, Solectron's gross margin is expected to
depend primarily on product mix, production efficiencies, utilization of
manufacturing capacity, start-up and integration costs of new and
acquired businesses, the percentage of sales derived from turnkey
manufacturing and pricing within the electronics industry. Over time,
gross margins at the individual sites and for the Company as a whole may
continue to fluctuate. Consignment projects typically have higher gross
margin percentages than turnkey projects. Increases in turnkey business,
additional costs associated with new projects and price erosion within
the electronics industry could adversely affect the Company's gross
margin. Additionally, changes in product mix could cause the Company's
gross margin to fluctuate. Also, while the availability of raw materials
appears adequate to meet the Company's current revenue projections for
the foreseeable future, component availability is still subject to lead
time and other constraints that could possibly limit the Company's
revenue growth. Because of these factors and others discussed under
"Trends and Uncertainties" below, there can be no assurance that the
Company's gross margin will not fluctuate or decrease in future periods.
Selling, General and Administrative Expenses
In absolute dollars, selling, general and administrative (SG&A) expenses
increased 72.4% in fiscal 1997 over fiscal 1996 and 36.3% in fiscal 1996
over fiscal 1995. The inclusion of Force since its acquisition in
November 1996 and the Austin, Texas site for the full year of fiscal
1997 accounts for approximately half of the fiscal 1997 increase. The
remainder of the increase in fiscal 1997 and the fiscal 1996 increase
over fiscal 1995 is due primarily to investment in infrastructure such
as personnel and related departmental expenses at all manufacturing
locations as well as continuing investment in information systems to
support the increased size and complexity of the Company's business. The
addition in fiscal 1997 and 1996 of new sites in Malaysia (Johor),
California (Fine Pitch Technologies), China, Massachusetts and, most
recently, Mexico, has also contributed to the growth in SG&A expenses.
As a percentage of net sales, SG&A expenses were 4.7%, 3.6% and 3.6% in
fiscal 1997, 1996 and 1995, respectively. The most significant reasons
for the fiscal 1997 increase in SG&A expenses as a percentage of net
sales are the inclusion of Force, which has a more sales-intensive
operating structure, the costs associated with investments in starting
up new sites and investments in the Company's information systems. The
Company anticipates SG&A expenses will continue to increase in terms of
absolute dollars in the future, and may possibly increase as a
percentage of revenue, as the Company continues to build the
infrastructure necessary to support its current and prospective
business.
Research and Development Expenses
With the exception of its Force Computers operation, the Company's
research and development (R&D) activities have been focused primarily on
the development of prototype and engineering design capabilities, fine
pitch interconnecting technologies (which include ball-grid array, tape-
automated bonding, multichip modules, chip-on-flex, chip-on-board and
21
<PAGE>
flip chip), high reliability environmental stress test technology and
the implementation of environmentally-friendly assembly processes, such
as VOC-free and no-clean. Force's R&D efforts are concentrated on new
product development and improvement of product designs through
improvements in functionality and support of next generation
microprocessors. Research and development expenses, in absolute dollars
and as a percentage of net sales, respectively, were $15.0 million and
0.4% in fiscal 1997, $6.7 million and 0.2% in fiscal 1996 and $4.8
million and 0.2% in fiscal 1995. The increase in R&D expenses in fiscal
1997 compared to fiscal 1996 is due to the acquisition of Force in
November 1996. The Company expects that R&D expenses will increase in
absolute dollars in the future and may increase as a percentage of net
sales as Force continues to invest in its R&D efforts and additional R&D
projects are undertaken at certain of the Company's Asian sites.
Acquisition Costs
A one time charge for acquisition costs of approximately $4.0 million
was incurred as a result of the acquisition of Force Computers during
the quarter ended November 30, 1996.
Net Interest Income (Expense)
Net interest income was $2.0 million in fiscal 1997 compared to net
interest expense of $2.3 million in fiscal 1996 and $2.9 million in
fiscal 1995. The Company issued convertible subordinated notes in
February 1996 and senior notes in March 1996. Interest expense on the
debt is approximately $24.9 million annually and, in fiscal 1997, has
been offset by interest earned on undeployed cash and investments. Net
interest expense was lower in fiscal 1996 than in fiscal 1995 because
the higher interest expense resulting from the two debt offerings was
offset by higher interest income on the undeployed cash realized from
the offerings. Solectron expects to utilize more of the undeployed cash
during fiscal 1998 in order to fund anticipated future growth. See
"Trends and Uncertainties -- Management of Growth" and "Potential
Fluctuations in Operating Results."
Income Taxes
Income taxes increased to $80.3 million in 1997 from $58.8 million in
fiscal 1996 and $41.0 million in fiscal 1995, primarily due to increased
income before income taxes. Solectron's effective income tax rate
decreased slightly to 33.7% in fiscal 1997 from 34% in both fiscal 1996
and 1995.
In general, the effective income tax rate is largely a function of the
balance between income from domestic and international operations.
Solectron's international operations, taken as a whole, have been taxed
at a lower rate than in the United States, primarily due to the tax
holiday granted to the Company's Penang, Malaysia site. The Malaysian
tax holiday is effective through January 31, 2002, subject to certain
conditions. The Company has also been granted various tax holidays in
China, which are effective for various terms and are subject to certain
conditions.
Liquidity and Capital Resources
Working capital was $932 million at August 31, 1997 compared to $786
million at the end of fiscal 1996. In fiscal 1997, increases in working
22
<PAGE>
capital from cash generated from operations were augmented by working
capital resulting from the acquisition of new sites. A major component
of working capital at August 31, 1997 continues to be undeployed cash
from the proceeds of the two debt offerings during fiscal 1996. As
Solectron continues to grow, it is expected that the Company will
require greater amounts of working capital to support its operations.
The Company believes that its current level of working capital, together
with cash generated from operations and the Company's available credit
facilities, will provide adequate working capital for the foreseeable
future.
Inventory levels fluctuate directly with the volume of the Company's
manufacturing. Changes or significant fluctuations in product market
demands can cause fluctuations in inventory levels which may result in
changes in levels of inventory turns and liquidity. Historically, the
Company has been able to manage its inventory levels with regard to
these fluctuations. However, should material fluctuations occur in
product demand, the Company could experience slower turns and reduced
liquidity.
During fiscal 1997, the Company invested approximately $188 million in
capital expenditures. The largest component of these expenditures
related to the purchase of new equipment-primarily surface mount
assembly and test equipment-to meet current and expected production
levels, as well as to replace or upgrade older equipment that was
retired or sold. In addition, significant expenditures were made for the
acquisition of land and buildings for the Company's new manufacturing
sites, principally in China and Mexico. The Company expects capital
expenditures in fiscal 1998 to be in the range of $125 million to $165
million.
In addition to working capital as of August 31, 1997, which included
cash and cash equivalents of $225 million and short-term investments of
$258 million, the Company has available a $100 million unsecured
multicurrency revolving credit facility, subject to financial covenants.
The Company also has approximately $77.9 million in available foreign
credit facilities. In September 1997, the Company entered into a $120
asset securitization arrangement, which is subject to certain financial
covenants and management representations. No borrowings have been made
against this facility.
Trends and Uncertainties
Customer Concentration; Dependence on the Electronics Industry
In fiscal 1997, 1996 and 1995, the Company's ten largest customers
accounted for at least 64% of consolidated net sales. The Company is
dependent upon continued revenues from its top ten customers. Any
material delay, cancellation or reduction of orders from these or other
significant customers could have an adverse material effect on the
Company's results of operations. During fiscal 1997, HP and Bay
Networks, Inc. accounted for 13.5% and 10.4%, respectively, of net
sales, compared to 10.7% and less than 10%, respectively, during fiscal
1996. There can be no assurance that the Company will continue to do
business with HP, Bay Networks or any other customer.
The percentage of the Company's sales to its major customers may
fluctuate from period to period. Significant reductions in sales to any
of these customers would have an adverse material effect on the
23
<PAGE>
Company's results of operations. The Company has no firm long-term
volume purchase commitments from its customers, and over the past few
years has experienced reduced lead-times in customer orders. In
addition, customer contracts can be canceled and volume levels can be
changed or delayed. The timely replacement of canceled, delayed or
reduced contracts with new business cannot be assured. These risks are
increased because a majority of the Company's sales are to customers in
the electronics industry, which is subject to rapid technological change
and product obsolescence. The factors affecting the electronics
industry in general, or any of the Company's major customers in
particular, could have an adverse material effect on the Company's
results of operations.
There can be no assurance that sales to customers within any particular
market segment will not experience decreases that could have an adverse
effect on the Company's sales.
Management of Growth; Geographic Expansion
The Company has experienced substantial growth over the last five fiscal
years, with net sales increasing from $836 million in fiscal 1993 to
$3.7 billion in fiscal year 1997. In recent years, the Company has
acquired or established facilities in many locations. During fiscal
1997, the Company announced the establishment of new manufacturing
facilities in Suzhou, China and Guadalajara, Mexico; began operations at
its manufacturing facility in Westborough, Massachusetts; and, in
November 1996, acquired Force Computers Inc., which has operations in
California and Germany. In September 1997, the Company announced the
opening of its Asia/Pacific headquarters office in Taipei, Taiwan. In
addition, the Company established a manufacturing facility near Sao
Paolo, Brazil, and intends to open a New Product Introduction center in
Sweden, as further discussed in "Pending Acquisition of Ericsson
Manufacturing Operation and Related Transactions." The Company
continually evaluates growth and acquisition opportunities and may
pursue additional opportunities over time. There can be no assurance
that the Company's historical revenue growth will continue or that the
Company will successfully manage the integration of Force Computers, the
facilities in China and Mexico, the partnership with and acquisitions
from Ericsson or any other business it may acquire in the future. As
the Company manages its existing operations and expands geographically,
it may experience certain inefficiencies as it integrates new operations
and manages geographically dispersed operations. In addition, the
Company's results of operations could be adversely affected if its new
facilities do not achieve growth sufficient to offset increased
expenditures associated with geographic expansion. The completion of
the proposed transactions with Ericsson will increase the Company's
expenses and working capital requirements. Should the Company increase
its expenditures in anticipation of a future level of sales that does
not materialize, its profitability would be adversely affected. On
occasion, customers may require rapid increases in production that can
place an excessive burden on the Company's resources.
Acquisition of Force Computers, Inc.
The acquisition of Force Computers, Inc. has created a number of
challenges, including managing the integration of the operations,
retaining key employees at Force Computers and managing an
increasingly larger and more geographically disparate business.
In addition, Solectron has no significant prior experience in
managing and operating a computer platform design business. There
24
<PAGE>
can be no assurance the Company will successfully manage this
business or obtain the anticipated business synergy. In the event
that Solectron is unsuccessful in managing and integrating the
Force Computers business, the acquisition could require
significant additional management attention. If the Company is
unsuccessful in integrating and managing the Force Computers
business, Solectron's results of operations could be materially
adversely affected.
Pending Acquisition of Ericsson Manufacturing Operation and Related
Transactions
In March 1997, Solectron entered into a memorandum of understanding with
Ericsson Telecom AB's Business Area Infocom Systems (Ericsson) to set up
a New Product Introduction Center in Norrkoping and Stockholm, Sweden,
transfer a portion of production from certain Ericsson plants to
Solectron manufacturing sites and purchase an existing Ericsson printed
circuit board assembly operation. In July 1997, Solectron and Ericsson
signed certain definitive agreements regarding these transactions. In
October 1997, Solectron acquired certain assets, primarily inventory and
equipment, of Ericsson's Brazil operation and hired approximately 370
persons formerly associated with the printed circuit board assembly
operations of Ericsson Telcomunicacoes S.A. as employees of Solectron's
newly-formed subsidiary, Solectron Brasil Ltda. Under the terms of the
agreement, Ericsson will contract for Solectron's services from
Solectron Brasil Ltda. through September 1999. Thereafter, Solectron
will bear the risk of filling the manufacturing capacity at the site
with renewed business from Ericsson or new business from other
customers. Additional agreements related to the New Product Introduction
center and the transfer of certain other assets are being negotiated.
These transactions are expected to undergo multiple closings though
January 1998, subject to the successful negotiation of additional
definitive agreements and various closing conditions.
The proposed transactions with Ericsson entail a number of risks,
including successfully managing the integration of the operations,
retention of key employees, integrating purchasing operations and
information systems, managing an increasingly larger and more
geographically disparate business and renewing the Ericsson business or
replacing it with new business after expiration of the Ericsson
commitment. In addition, the completion of the transactions with
Ericsson will increase Solectron's expenses and working capital
requirements and there is no assurance that Solectron will achieve
sufficient revenue to offset the increased expenses. There can be no
assurance the remaining transactions contemplated by the memorandum of
understanding will close completely or that Solectron will successfully
manage the risks of these transactions.
International Operations
As a result of its international sales and facilities, the Company's
operations are subject to risks of doing business abroad, including but
not limited to, fluctuations in the value of currency, export duties,
changes to import and export regulations (including quotas), possible
restrictions on the transfer of funds, employee turnover, labor unrest,
longer payment cycles, greater difficulty in collecting accounts
receivable, the burdens and costs of compliance with a variety of
foreign laws and, in certain parts of the world, political instability.
While to date these factors have not had an adverse material impact on
the Company's results of operations, there can be no assurance that
25
there will not be such an impact in the future. In particular, the
current instability in Southeast Asia's currencies, economy and
political situation could adversely affect the Company's operations in
Malaysia.
The Company has been granted a tax holiday for its Penang, Malaysia
site, which is effective through January 31, 2002, subject to certain
conditions. The Company has also been granted various tax holidays in
China. These tax holidays are effective for various terms and are
subject to certain conditions. There is no assurance that any future
tax holidays that the Company may seek will be granted. If additional
tax holidays are not granted in the future, the Company's effective
income tax rate would likely increase.
Availability of Components
A substantial portion of the Company's net sales are derived from
turnkey manufacturing in which the Company provides both materials
procurement and assembly. In turnkey manufacturing, the Company
potentially bears the risk of component price increases, which could
adversely affect the Company's gross profit margins. At various times
there have been shortages of components in the electronics industry. If
significant shortages of components should occur, the Company may be
forced to delay manufacturing and shipments, which could have an adverse
material effect on the Company's results of operations.
Potential Fluctuations in Operating Results
The Company's operating results are affected by a number of factors,
including the mix of turnkey and consignment projects, capacity
utilization, price competition, the degree of automation that can be
used in the assembly process, the efficiencies that can be achieved by
the Company in managing inventories and fixed assets, the timing of
orders from major customers, fluctuations in demand for customer
products, the timing of expenditures in anticipation of increased sales,
customer product delivery requirements and increased costs and shortages
of components or labor. Turnkey manufacturing currently represents a
substantial portion of Solectron's sales. Turnkey projects, in which
Solectron procures some or all of the components necessary for
production, typically generate higher net sales and higher gross profits
with lower gross profit percentages than consignment projects due to the
inclusion in Solectron's operating results of sales and costs associated
with the purchase and sale of components. Solectron assembles products
with varying degrees of material content, which may cause Solectron's
gross margin to fluctuate. In addition, the degree of startup costs and
inefficiencies associated with new sites and new customer projects may
affect Solectron's gross margin. All of these factors can cause
fluctuations in the Company's operating results.
Competition
The electronics manufacturing services industry is comprised of a large
number of companies, several of which have achieved substantial market
share. The Company also faces competition from current and prospective
customers that evaluate Solectron's capabilities against the merits of
manufacturing products internally. Solectron competes with different
companies depending on the type of service or geographic area. Certain
competitors may have greater manufacturing, financial, research and
development and marketing resources than the Company. The Company
believes that the primary basis of competition in its targeted markets
26
<PAGE>
is manufacturing technology, quality, responsiveness, the provision of
value-added services and price. To be competitive, the Company must
provide technologically advanced manufacturing services, high product
quality levels, flexible delivery schedules and reliable delivery of
finished products on a timely and price competitive basis. The Company
currently may be at a competitive disadvantage as to price when compared
to manufacturers with lower cost structures, particularly with respect
to manufacturers with established facilities where labor costs are
lower.
Intellectual Property Protection
The Company's ability to compete may be affected by its ability to
protect its proprietary information. The Company holds a limited number
of U.S. patents related to the process and equipment used in its surface
mount technology. In addition, the Company's subsidiary, Force
Computers, holds a number of patents related to VME technology. The
Company believes these patents are valuable. However, there can be no
assurance that these patents will provide meaningful protection for the
Company's manufacturing process and equipment innovations or Force's
technology.
There can be no assurance that third parties will not assert
infringement claims against the Company or its customers in the future.
In the event a third party does assert an infringement claim, the
Company may be required to expend significant resources to develop a
non-infringing manufacturing process or technology or to obtain licenses
to the manufacturing process or technology that is the subject of
litigation. There can be no assurance that the Company would be
successful in such development or that any such licenses would be
available on commercially acceptable terms, if at all. In addition, such
litigation could be lengthy and costly and could have an adverse
material effect on the Company's financial condition regardless of the
outcome of such litigation.
Environmental Compliance
The Company is subject to a variety of environmental regulations
relating to the use, storage, discharge and disposal of hazardous
chemicals used during its manufacturing process. Any failure by the
Company to comply with present and future regulations could subject it
to future liabilities or the suspension of production. In addition,
such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or
to incur other significant expenses to comply with environmental
regulations.
Dependence on Key Personnel and Skilled Employees
The Company's continued success depends to a large extent upon the
efforts and abilities of key managerial and technical employees. The
loss of services of certain key personnel could have an adverse material
effect on the Company. The Company's business also depends upon its
ability to continue to attract and retain senior managers and skilled
employees. Failure to do so could adversely affect the Company's
operations.
27
<PAGE>
Possible Volatility of Market Price of Common Stock
The trading price of the common stock is subject to significant
fluctuations in response to variations in quarterly operating results,
general conditions in the electronics industry and other factors. In
addition, the stock market is subject to price and volume fluctuations
that affect the market price for many high technology companies in
particular, and that often are unrelated to operating performance.
28
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by item 8 of form 10-K is presented here in the
following order:
Page
--------
Unaudited Quarterly Financial Information 29
Consolidated Balance Sheets 30
Consolidated Statements of Income 31
Consolidated Statements of Stockholders' Equity 32
Consolidated Statements of Cash Flows 33-34
Notes to Consolidated Financial Statements 35-49
Independent Auditors' Report 50
Unaudited Quarterly Financial Information
For each fiscal quarter during the two fiscal years ended August 31,
1997 (in thousands, except percentages and per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- ---------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $807,725 $858,698 $983,222 $1,044,740
Gross profit $ 86,148 $102,198 $115,877 $ 124,056
Gross margin 10.7% 11.9% 11.8% 11.9%
Operating income $ 48,286 $ 55,563 $ 62,619 $ 69,954
Operating margin 6.0% 6.5% 6.4% 6.7%
Net income $ 31,475 $ 37,565 $ 41,537 $ 47,482
Primary net income
per share (1) $ 0.29 $ 0.32 $ 0.36 $ 0.40
Fully diluted net
income per share (1) $ 0.29 $ 0.32 $ 0.35 $ 0.40
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- ---------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $690,624 $657,176 $680,554 $788,837
Gross profit $ 66,346 $ 65,361 $ 71,793 $ 78,878
Gross margin 9.6% 9.9% 10.5% 10.0%
Operating income $ 40,803 $ 41,944 $ 44,701 $ 47,977
Operating margin 5.9% 6.4% 6.6% 6.1%
Net income $ 27,347 $ 27,650 $ 27,720 $ 31,515
Primary net income
per share (1) $ 0.27 $ 0.27 $ 0.26 $ 0.30
Fully diluted net
income per share (1) $ 0.26 $ 0.26 $ 0.26 $ 0.29
</TABLE>
(1) Adjusted to reflect two-for-one stock split effective August 4,
1997.
29
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except
per share data)
<CAPTION>
As of August 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 225,073 $ 228,830
Short-term investments 257,829 181,520
Accounts receivable, less allowances of
$4,049 and $2,992, respectively 418,682 341,200
Inventories 494,622 368,862
Prepaid expenses and other current assets 79,426 24,312
---------- ----------
Total current assets 1,475,632 1,144,724
Net property and equipment 326,361 249,570
Other assets 50,426 57,904
---------- ----------
Total assets $1,852,419 $1,452,198
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest and current portion of
long-term debt $ 1,464 $ 14,094
Accounts payable 415,896 280,840
Accrued employee compensation 56,218 38,216
Accrued expenses 24,787 9,280
Other current liabilities 45,577 15,939
---------- ----------
Total current liabilities 543,942 358,369
Long-term debt 385,850 386,927
Other long-term liabilities 3,558 6,333
---------- ----------
Total liabilities 933,350 751,629
---------- ----------
Stockholders' equity:
Preferred stock, $.001 par value; 1,200
shares authorized; no shares issued -- --
Common stock, $.001 par value; 200,000
shares authorized; 114,546 and 105,022
shares issued and outstanding,
respectively 115 105
Additional paid-in capital 451,093 378,214
Retained earnings 478,612 320,553
Cumulative translation adjustment (10,751) 1,697
---------- ----------
Total stockholders' equity 919,069 700,569
---------- ----------
Commitments
Total liabilities and stockholders'
equity $1,852,419 $1,452,198
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<CAPTION>
Years Ended August 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $3,694,385 $2,817,191 $2,065,559
Cost of sales 3,266,106 2,534,813 1,863,729
---------- ---------- ----------
Gross profit 428,279 282,378 201,830
Operating expenses:
Selling, general and
administrative 172,872 100,260 73,554
Research and development 14,985 6,693 4,842
Acquisition costs 4,000 -- --
---------- ---------- ----------
Operating income 236,422 175,425 123,434
Interest income 28,536 13,302 6,611
Interest expense (26,551) (15,650) (9,551)
---------- ---------- ----------
Income before income taxes 238,407 173,077 120,494
Income taxes 80,348 58,845 40,968
---------- ---------- ----------
Net income $ 158,059 $ 114,232 $ 79,526
========== ========== ==========
Net income per share:
Primary $ 1.37 $ 1.10 $ 0.91
Fully diluted $ 1.36 $ 1.08 $ 0.81
Weighted average number of shares:
Primary 115,321 104,254 87,546
Fully diluted 123,581 110,353 105,165
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Common Stock Additional Cumulative Total
---------------- Paid-In Retained Translation Stockholders'
Shares Amount Capital Earnings Adjustment Equity
------- ------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances as of August 31, 1994 82,604 $ 83 $ 206,174 $126,795 $ (2,263) $ 330,789
Options exercised 1,146 1 7,857 -- -- 7,858
Stock issued under employee
purchase plan 262 -- 2,901 -- -- 2,901
Conversion of long-term debt 15,156 15 110,900 -- -- 110,915
Tax benefit associated with
exercise of stock options -- -- 1,334 -- -- 1,334
Net income -- -- -- 79,526 -- 79,526
Cumulative translation
adjustment -- -- -- -- 4,818 4,818
------- ------- ---------- -------- ----------- ------------
Balances as of August 31, 1995 99,168 99 329,166 206,321 2,555 538,141
Options exercised 1,238 1 10,163 -- -- 10,164
Stock issued under employee
purchase plan 278 -- 4,339 -- -- 4,339
Conversion of long-term debt 3,946 4 30,398 -- -- 30,402
Stock issued in business
combination 392 1 1,667 -- -- 1,668
Tax benefit associated with
exercise of stock options -- -- 2,481 -- -- 2,481
Net income -- -- -- 114,232 -- 114,232
Cumulative translation
adjustment -- -- -- -- (858) (858)
------- ------- ---------- -------- ----------- ------------
Balances as of August 31, 1996 105,022 105 378,214 320,553 1,697 700,569
Options exercised 3,008 3 31,316 -- -- 31,319
Stock issued under employee
purchase plan 325 1 6,758 -- -- 6,759
Stock issued in business
combination 6,191 6 24,012 -- -- 24,018
Tax benefit associated with
exercise of stock options -- -- 10,793 -- -- 10,793
Net income -- -- -- 158,059 -- 158,059
Cumulative translation
adjustment -- -- -- -- (12,448) (12,448)
------- ------- ---------- -------- ----------- ------------
Balances as of August 31, 1997 114,546 $ 115 $ 451,093 $478,612 $ (10,751) $ 919,069
======= ======= ========== ======== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Years Ended August 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 158,059 $ 114,232 $ 79,526
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 104,590 84,804 61,416
Interest accretion on zero-
coupon subordinated notes -- 1,173 8,240
Interest accrual on
long-term debt 19 12,507 --
Tax benefit associated with the
exercise of stock options 10,793 2,481 1,334
Other 3,504 5,629 3,763
Changes in operating assets
and liabilities:
Accounts receivable (66,293) (32,379) (64,906)
Inventories (115,560) (27,053) (63,654)
Prepaid expenses and other
current assets (48,947) (234) (4,566)
Accounts payable 135,287 (56,784) 63,681
Accrued expenses and other
current liabilities 31,124 6,272 1,889
--------- --------- ---------
Net cash provided by
operating activities 212,576 110,648 86,723
--------- --------- ---------
Cash flows from investing activities:
Purchases of short-term investments (274,160) (781,266) (183,299)
Sales and maturities of short-term
investments 197,851 658,436 218,805
Purchase of facilities -- (131,893) --
Capital expenditures (188,171) (115,446) (113,613)
Other 16,637 9,806 (426)
--------- --------- ---------
Net cash used in investing
activities (247,843) (360,363) (78,533)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from bank lines of credit -- 6,340 4,366
Proceeds from long-term debt -- 380,000 --
Debt acquisition costs -- (7,808) --
Repayments of long-term debt
and capital lease obligations (3,079) (4,796) (3,484)
Net proceeds from sale of
common stock 38,078 14,503 10,759
--------- --------- ---------
Net cash provided by financing
activities 34,999 388,239 11,641
--------- --------- ---------
</TABLE>
(continued)
33
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
<CAPTION>
Years Ended August 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Effect of exchange rate changes on
cash and cash equivalents (3,489) 347 2,222
--------- ---------- ---------
Net increase in cash and
cash equivalents (3,757) 138,871 22,053
Cash and cash equivalents at
beginning of year 228,830 89,959 67,906
--------- --------- ---------
Cash and cash equivalents at
end of year $ 225,073 $ 228,830 $ 89,959
========= ========= =========
Cash paid:
Interest $ 38,306 $ 517 $ 482
Income taxes 93,420 54,937 44,429
Non-cash investing and financing
activities:
Issuance of common stock upon
conversion of long-term debt -- 30,402 110,915
Issuance of common stock for
business combination 24,018 1,668 --
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1997 and 1996
Note 1: Summary of Significant Accounting Policies
(a) Description of Operations and Principles of Consolidation:
Solectron Corporation (the Company) is an independent provider of
customized manufacturing services to original equipment manufacturers in
the electronics industry and operates in this one industry segment. The
Company's primary services include materials procurement, materials
management and the manufacture and testing of printed circuit board
assemblies. In addition, the Company provides consultation on board
design and manufacturability, as well as system level assembly and test,
flexible cable assembly, refurbishment, packaging and remanufacturing
services. These services include turnkey services, where the Company
procures certain or all of the materials required for product assembly,
and consignment services, where the customer supplies the materials
necessary for product assembly. Turnkey services include material
procurement and warehousing in addition to manufacturing, and involve
greater resource investment than consignment services. The Company has
manufacturing operations located in North America, Europe and Asia.
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries after elimination of intercompany
accounts and transactions.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(b) Reincorporation: On February 25, 1997, the Company was
reincorporated in the State of Delaware. In connection with the
reincorporation, as approved by the stockholders, the number of
authorized shares of the Company's Common Stock was increased to two
hundred million (200,000,000) and each share of Common Stock was
assigned a par value of $.001. The accompanying financial statements
have been restated to give effect to the reincorporation.
(c) Cash Equivalents and Short-Term Investments: Cash equivalents are
highly liquid investments purchased with an original maturity of less
than three months. Short-term investments are investment grade short-
term debt instruments with original maturities greater than three
months.
Investments in debt securities are classified as "available-for-sale."
Such investments are recorded at fair value, as determined from quoted
market prices, and the cost of securities sold is determined based on
the specific identification method. If material, unrealized gains and
losses are reported as a component of stockholders' equity. See Note 2.
(d) Inventories: Inventories are stated at the lower of weighted
average cost or market. See Note 3.
35
<PAGE>
(e) Property and Equipment: Property and equipment are recorded at
cost. Depreciation and amortization are computed based on the shorter of
the estimated useful lives or the related lease terms, using the
straight-line method. Estimated useful lives are presented below. See
Note 4.
Machinery and equipment 2 - 5 years
Furniture and fixtures 3 - 5 years
Leasehold improvements Lease term
Buildings 6 -50 years
(f) Other Assets: Other assets include goodwill and debt issuance
costs. Debt issuance costs are amortized using the straight-line method,
which does not differ materially from the interest method, over the debt
term (ten years). Goodwill is also amortized using the straight-line
method over ten years.
(g) Accounting for Long-Lived Assets: The Company reviews 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 comparison of
its carrying amount, including the unamortized portion of goodwill
allocated to the property and equipment, to future net cash flows the
property and equipment are expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the property and
equipment, including the allocated goodwill, if any, exceeds its fair
market value. The Company assesses the recoverability of enterprise
level goodwill by determining whether the unamortized goodwill balance
can be recovered through undiscounted future results of the acquired
operation. The amount of enterprise level goodwill impairment, if any,
is measured based on projected discounted future results using a
discount rate reflecting the Company's average cost of funds. To date,
the Company has made no adjustments to the carrying value of its long-
lived assets.
(h) Income Taxes: The Company uses the asset and liability method of
accounting for income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. When necessary, a valuation allowance is recorded to reduce
tax assets to an amount whose realization is more likely than not. See
Note 10.
(i) Net Income Per Share: Primary net income per share is computed
using the weighted average number of common shares and dilutive common
equivalent shares outstanding during the related period. Common
equivalent shares consist of stock options which are computed using the
treasury stock method. Fully diluted net income per share assumes full
conversion of the Company's outstanding convertible notes.
(j) Revenue Recognition: The Company recognizes revenue upon shipment
of product to its customers.
(k) Employee Stock Plans: The Company accounts for its stock option
plans and its employee stock purchase plan using the intrinsic value
method. See Note 11.
36
<PAGE>
(l) Foreign Currency: Assets and liabilities of foreign subsidiaries
where the local currency is the functional currency are translated at
year-end exchange rates. The effects of these translation adjustments
are reported as a separate component of stockholders' equity. Exchange
gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved and
remeasurement adjustments for foreign operations where the United States
dollar is the functional currency are included in income. To date, the
effect on income of such amounts has been immaterial.
(m) Derivatives: Gains and losses on foreign currency forward exchange
contracts designated as hedges of assets and liabilities are included in
income concurrently with the offsetting losses and gains on the related
balance sheet item. Gains and losses on hedges of firm commitments and
anticipated transactions are deferred and included in the basis of the
transaction when it occurs. See Note 7.
(n) Year-End: The Company's financial reporting year consists of either
52-week or 53-week periods ending on the last Friday in August. Fiscal
years 1997 and 1995 each contained 52 weeks, and fiscal year 1996
contained 53 weeks. For purposes of presentation in the accompanying
financial statements and notes thereto, the Company has indicated its
accounting years as ending on August 31.
The Company's subsidiary, Solectron Texas, Inc. (Texas), has a fiscal
year end of July 31. The Company's consolidated financial position as of
August 31, 1997 and 1996 includes the financial position of the Texas
operations as of July 31, 1997 and 1996, respectively. Similarly, the
Company's consolidated results of operations and cash flows for the
years ended August 31, 1997 and 1996 include the results of operations
and cash flows of the Texas operations for the year ended July 31, 1997
and the four-month period since its acquisition ended July 31, 1996,
respectively.
(o) Recent Accounting Pronouncements: In February 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings per
Share." SFAS No. 128 establishes a different method of computing net
income per share than is currently required under the provisions of
Accounting Principles Board Opinion No. 15. Under SFAS No. 128, the
Company will be required to present both basic net income per share and
diluted net income per share. Basic net income per share is expected to
be higher than the currently presented primary net income per share as
the effect of dilutive stock options will not be considered in computing
basic net income per share. Diluted net income per share is expected to
be comparable to the currently presented fully diluted net income per
share.
Solectron will adopt SFAS No. 128 in its fiscal quarter ending February
27, 1998 and at that time all historical net income per share data
presented will be restated to conform to the provisions of SFAS No. 128.
37
<PAGE>
Note 2: Cash, Cash Equivalents and Short-Term Investments
Cash, cash equivalents and short-term investments consisted of the
following at August 31:
<TABLE>
<CAPTION>
Cash and Cash Short-Term
Equivalents Investments
------------- -----------
(in thousands)
<S> <C> <C>
1997
- -------
Cash $ 39,725 $ --
Money market funds 81,350 --
Certificates of deposit 9,822 23,249
Municipal market auction securities 7,723 --
Corporate market auction securities 14,206 --
U.S. government securities 6,685 173,304
Corporate obligations 58,422 51,542
Municipal obligations 7,140 --
Other -- 9,734
-------- --------
$225,073 $257,829
======== ========
1996
- -------
Cash $ 30,865 $ --
Money market funds 76,595 --
Certificates of deposit 31,779 12,308
U.S. government securities 44,922 139,202
Corporate obligations 34,680 29,179
Municipal obligations 9,989 --
Other -- 831
-------- --------
$228,830 $181,520
======== ========
</TABLE>
As of August 31, 1997 and 1996, unrealized gains and losses were not
material. As of August 31, 1997, all of the Company's short-term
investments mature within two years.
Note 3: Inventories
Inventories as of August 31, 1997 and 1996 consisted of:
1997 1996
-------- --------
(in thousands)
Raw materials $365,630 $253,646
Work-in-process 128,992 115,216
-------- --------
$494,622 $368,862
======== ========
38
<PAGE>
Note 4: Property and Equipment
Property and equipment as of August 31, 1997 and 1996 consisted of:
1997 1996
-------- --------
(in thousands)
Land, buildings and improvements $ 64,511 $ 37,872
Machinery and equipment 432,963 344,812
Furniture and fixtures 76,485 55,591
Leasehold improvements 41,647 27,749
Construction-in-progress 33,171 773
-------- --------
648,777 466,797
Less accumulated depreciation
and amortization 322,416 217,227
-------- --------
Net property and equipment $326,361 $249,570
======== ========
Note 5: Lines of Credit
The Company has available a $100 million unsecured multicurrency
revolving line of credit which expires April 30, 2002. Borrowings under
the credit facility bear interest, at the Company's option, at either
the bank's prime rate, the London interbank offering rate (LIBOR) plus a
margin, or the bank's certificate of deposit (CD) rate plus a margin.
The margin under the LIBOR or CD rate options will vary depending on the
Company's Standard & Poor's Corporation and/or Moody's Investor
Services, Inc. rating for its long-term senior unsecured debt and was
0.4375% at August 31, 1997. Under the agreement, the Company must meet
certain financial covenants. As of August 31, 1997, there were no
borrowings outstanding under this line of credit and as of August 31,
1996, there were no borrowings outstanding under the previous $100
million unsecured domestic revolving line of credit, which expired April
30, 1997.
The Company also has $86.5 million in foreign lines of credit and other
bank facilities. Borrowings are payable on demand. The interest rates
range from the bank's prime lending rate to the bank's prime rate plus
2.0%. As of August 31, 1997, borrowings and guaranteed amounts under
these lines of credit were $8.6 million.
39
<PAGE>
Note 6: Long-Term Debt
Long-term debt at August 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
6% subordinated notes due 2006, face value
$230,000, fair value of $318,274 in 1997
and $209,875 in 1996. Convertible into
6,804 shares of common stock $230,000 $236,976
7 3/8% senior notes due 2006, face value
$150,000, fair value of $149,300 in 1997
and $143,082 in 1996 149,745 155,257
Other, fair value of $7,569 in 1997 and
$8,788 in 1996 7,569 8,788
-------- --------
Total long-term debt 387,314 401,021
Less current portion of long-term debt 1,464 14,094
-------- --------
$385,850 $386,927
======== ========
</TABLE>
In February 1996, the Company issued convertible, subordinated notes for
an aggregate principal amount of $230 million. These notes are in
denominations of and have a maturity value of $1,000 each, payable on
March 1, 2006. Interest is payable semi-annually at 6%. The notes are
subordinated to all existing and future senior indebtedness of the
Company. Each note is convertible at any time by the holder into shares
of common stock at a conversion price of $33.81 per share. Beginning on
March 3, 1999, the notes are redeemable for cash at the option of the
Company, in whole or in part, at redemption prices ranging from 104.2%
of the principal amount in 1999, to 100% of the principal amount in year
2006. Upon a change in control of the Company, each holder of the notes
has the right to require the Company to repurchase the notes for 100% of
the principal amount.
In March 1996, the Company issued $150 million aggregate principal
amount of senior notes. The notes are in denominations of and have a
maturity value of $1,000 each and are due on March 1, 2006. The notes
pay interest at 7 3/8% semi-annually. The notes may not be redeemed
prior to maturity.
As of August 31, 1995, approximately 95,000 zero-coupon, subordinated
notes were outstanding. In May 1996, the remainder of these notes were
converted into approximately 3.9 million shares of common stock.
Note 7: Financial Instruments
Fair Value of Financial Instruments
The fair value of the Company's cash, cash equivalents, accounts
receivable and accounts payable approximates the carrying amount due to
the relatively short maturity of these items. The fair value of the
Company's short-term investments (see Note 2) is determined based on
quoted market prices. The fair value of the Company's long-term debt
(see Note 6) is determined based on broker trading prices.
40
<PAGE>
Derivatives
The Company enters into forward exchange contracts to hedge foreign
currency exposures on a continuing basis for periods consistent with its
committed exposures. These transactions generally do not subject the
Company to risk of accounting loss because gains and losses on these
contracts offset losses and gains on the assets, liabilities and
transactions being hedged. The Company is exposed to credit-related
losses in the event of non-performance by the parties in these
contracts. However, because these contracts have maturities of less than
six months, the amounts of unrealized gains and losses are immaterial.
The Company had $75.6 million and $36.7 million of aggregate foreign
currency forward exchange contracts outstanding at the end of fiscal
years 1997 and 1996, respectively, primarily for the purchase and sale
of European currencies, the Malaysian ringgit and the U.S. dollar by the
Company's international subsidiaries.
Business and Credit Concentrations
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash, cash equivalents, short-
term investments and trade accounts receivable. The Company's cash, cash
equivalents and short-term investments are managed by recognized
financial institutions which follow the Company's investment policy. The
Company's investments are comprised of investment grade short-term debt
instruments, and the Company's investment policy limits the amount of
credit exposure in any one issue. Concentrations of credit risk in
accounts receivable resulting from sales to major customers are
discussed in Note 13. The Company generally does not require collateral
for sales on credit. The Company closely monitors extensions of credit
and has not experienced significant credit losses in the past.
Note 8: Commitments
The Company leases various facilities under operating lease agreements.
The facility leases expire at various dates through 2006. Substantially
all leases require the Company to pay property taxes, insurance and
normal maintenance costs. All of the Company's leases have fixed minimum
lease payments except the lease for certain facilities in Milpitas,
California. Payments under this lease are periodically adjusted based on
LIBOR rates. This lease provides the Company with the option at the end
of the lease of either acquiring the property at its original cost or
arranging for the property to be acquired. In May 1997, the Company
modified the terms of this lease to extend the lease term through April
2002 and remove the requirement for collateral for its obligation under
the lease. The Company is contingently liable under a first loss clause
for a decline in market value of the leased facilities up to $52.1
million in the event the Company does not purchase the property at the
end of the lease term. The Company must also maintain compliance with
financial covenants similar to its credit facilities.
Future minimum payments related to lease obligations are $17.0 million,
$11.8 million, $9.0 million, $6.5 million and $4.2 million in each of
the years in the five-year period ending August 31, 2002 and an
aggregate $1.1 million for periods after that date. Rent expense was
$22.9 million, $17.0 million and $10.8 million for the years ended
August 31, 1997, 1996 and 1995, respectively.
41
<PAGE>
Note 9: Retirement Plans
The Company has various retirement plans which cover a significant
number of its employees. The major pension plans are defined
contribution plans, which provide pension benefits in return for
services rendered, provide an individual account for each participant,
and have terms that specify how contributions to the participant's
account are to be determined rather than the amount of pension benefits
the participant is to receive. Contributions to these plans are based on
varying percentages of each participant's base salary. The Company's
expense for the defined contribution plans totaled $3.0 million, $2.3
million and $1.0 million, in 1997, 1996 and 1995, respectively.
Note 10: Income Taxes
The components of income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended August 31,
---------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $71,957 $51,004 $34,922
State 12,377 7,445 4,370
Foreign 5,944 4,204 4,346
------- ------- -------
90,278 62,653 43,638
Deferred:
Federal (8,808) (2,579) (3,474)
State (1,067) (233) 15
Foreign (55) (996) 789
------- ------- -------
Total $80,348 $58,845 $40,968
======= ======= =======
</TABLE>
The overall effective income tax rate (expressed as a percentage of
financial statement income before income taxes) differs from the
expected U.S. income tax rate as follows:
<TABLE>
<CAPTION>
Years Ended August 31,
--------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Federal tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
tax benefit 3.1 2.8 2.4
Tax exempt interest -- (0.1) (0.7)
Income of international subsidiaries
taxed at different rates (3.6) (4.5) (4.2)
Other (0.8) 0.8 1.5
---- ---- ----
Effective income tax rate 33.7% 34.0% 34.0%
==== ==== ====
</TABLE>
42
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are as follows (in
thousands):
As of August 31,
-----------------------
1997 1996
-------- --------
Deferred tax assets:
Accruals, allowances and reserves $ 14,240 $ 11,949
State income tax 3,054 --
Pre-operating costs 15 234
Acquired intangible assets 2,039 875
Net undistributed profits of
subsidiaries 1,635 --
Plant and equipment 1,778 --
Other 2,976 1,181
-------- --------
Total deferred tax assets 25,737 14,239
-------- --------
Deferred tax liabilities:
Plant and equipment -- (1,496)
State income tax -- (469)
Other (1,083) (616)
-------- --------
Total deferred tax liabilities (1,083) (2,581)
-------- --------
Net deferred tax assets $ 24,654 $ 11,658
======== ========
Based on the Company's historical operating income, management believes
it is more likely than not that the Company will realize the benefit of
the deferred tax assets recorded and, accordingly, has established no
valuation allowance.
Worldwide income before income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Years Ended August 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
U.S. $198,029 $140,900 $ 91,537
Non-U.S. 40,378 32,177 28,957
-------- -------- --------
Total $238,407 $173,077 $120,494
======== ======== ========
During the fiscal year ended August 31, 1997, the Company adopted a
change regarding undistributed earnings of its German subsidiaries,
which previously were deemed to be permanently reinvested. The effect of
this change is the recognition of net deferred tax assets of
approximately $1.6 million for foreign tax credit utilization.
Cumulative undistributed earnings of the international subsidiaries
amounted to $133.0 million as of August 31, 1997, of which approximately
$122.8 million is intended to be permanently reinvested. The amount of
income tax liability that would result had such earnings been
repatriated is estimated to be approximately $28.0 million.
43
<PAGE>
The Company has been granted a tax holiday for its Penang, Malaysia site
which is effective through January 31, 2002, subject to certain
conditions. The Company has also been granted various tax holidays in
China, which are effective for various terms and are subject to certain
conditions.
Note 11: Stockholders' Equity
Stock Split
Effective August 4, 1997, the Company completed a two-for-one stock
split effected as a stock dividend. All share and per-share data has
been retroactively adjusted to reflect the stock split.
Pro Forma Fair Value Disclosures
The Company accounts for its employee stock plans, consisting of fixed
stock option plans and an employee stock purchase plan, using the
intrinsic value method. Accordingly, no compensation expense related to
these plans has been recognized in the Company's financial statements.
The table below sets out the pro forma amounts of net income and net
income per share that would have resulted if the Company accounted for
its employee stock plans under the fair value recognition provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation."
Years Ended August 31,
----------------------
1997 1996
-------- --------
(in thousands, except
per share data)
Net income As reported $158,059 $114,232
Pro forma $144,786 $108,905
Net income per share:
Primary As reported $ 1.37 $ 1.10
Pro forma $ 1.27 $ 1.05
Fully diluted As reported $ 1.36 $ 1.08
Pro forma $ 1.27 $ 1.04
For purposes of computing pro forma net income, the fair value of each
option grant and Employee Stock Purchase Plan purchase right is
estimated on the date of grant using the Black-Scholes option pricing
model. The assumptions used to value the option grants and purchase
rights are stated below.
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Expected life of options 4.3 years 4.3 to 4.7 years
Expected life of purchase rights 3 months 3 months
Volatility 40% 40%
Risk-free interest rate 5.21% to 6.46% 5.12% to 6.71%
Dividend yield zero zero
Options vest over several years and new option grants are generally made
each year. Because of this and because the provisions of SFAS No. 123
are effective only for fiscal years 1996 and 1997, the pro forma amounts
44
<PAGE>
shown above may not be representative of the pro forma effect on
reported net income in future years.
Stock Option Plans
The Company's stock option plans provide for grants of options to
employees to purchase common stock at the fair market value of such
shares on the grant date. The options vest over a four-year period
beginning generally on the grant date. The term of the options is five
years for options granted prior to November 17, 1993 and seven years for
options granted thereafter. In connection with the acquisition of Force
Computers, Inc. (see Note 14), the Company assumed all options
outstanding under the Force option plan, after the application of the
exchange ratio. Options under the Force plan generally vest over a
four-year period beginning on the grant date and have a ten year term.
No further options may be granted under the Force plan.
A summary of stock option activity under the plans follows:
</TABLE>
<TABLE>
<CAPTION>
Years Ended August 31,
--------------------------------------------------------
1997 1996 1995
------------------ ------------------ ------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beg. of year 9,431,576 $14.82 7,983,680 $11.69 8,134,286 $10.55
Granted 3,403,074 $26.82 3,173,878 $20.10 1,556,500 $14.18
Assumed from
Force plan 839,264 $ 2.20 -- -- -- --
Exercised (3,007,754) $ 9.76 (1,237,774) $ 8.22 (1,145,560) $ 6.85
Canceled (436,650) $21.03 (488,208) $15.07 (561,546) $11.96
---------- ---------- ----------
Outstanding,
end of year 10,229,510 $18.99 9,431,576 $14.82 7,983,680 $11.69
========== ========== ==========
Exercisable
at year-end 5,181,725 $15.85 5,023,686 $12.48 3,848,058 $10.16
========== ========== ==========
Weighted-average
fair value of
options granted
during the year $11.23 $ 8.47
</TABLE>
45
<PAGE>
Information regarding the stock options outstanding at August 31, 1997
is summarized in the table below.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ---------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Shares Contractual Exercise Shares Exercise
Prices Outstanding Life Price Exercisable Price
- ------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 1.32-$ 5.14* 305,502 7.81 years $ 3.27 65,314 $ 2.55
$ 7.38-$11.84 1,136,512 .69 years $11.02 1,136,512 $11.02
$13.31-$17.63 3,062,548 3.12 years $14.41 2,393,992 $14.29
$18.69-$22.31 2,541,658 5.25 years $20.20 1,006,493 $19.93
$23.94-$29.63 2,988,840 6.18 years $26.12 571,800 $26.04
$37.16 194,450 6.86 years $37.16 7,614 $37.16
---------- ---------
$ 1.32-$37.16 10,229,510 4.48 years $18.99 5,181,725 $15.85
========== =========
</TABLE>
*Options in this range of exercise prices represent the options assumed
in connection with the acquisition of Force.
A total of 15,277,670 shares of common stock remain reserved for
issuance under the plans as of August 31, 1997.
On December 1 of each year, each independent member of the Company's
Board of Directors is granted an option to purchase 12,000 shares of
common stock at the then current fair market value. Such options vest
over one year.
Employee Stock Purchase Plan
Under the Company's Employee Stock Purchase Plan (the Purchase Plan),
employees meeting specific employment qualifications are eligible to
participate and can purchase shares quarterly through payroll deductions
at the lower of 85% of the fair market value of the stock at the
commencement or end of the offering period. The Purchase Plan permits
eligible employees to purchase common stock through payroll deductions
for up to 10% of qualified compensation. As of August 31, 1997,
2,453,384 shares remain available for issuance under the Purchase Plan.
The weighted-average fair value of the purchase rights granted in fiscal
1997 and 1996 was $5.92 and $4.72, respectively.
46
<PAGE>
Note 12: Geographic Information
Information about the Company's operations in different geographic
regions is presented in the table below:
<TABLE>
<CAPTION>
Operating Identifiable
Net Sales Income Assets
---------- --------- ------------
(in thousands)
<S> <C> <C> <C>
Fiscal 1997
United States $2,862,941 $200,664 $1,333,189
Europe 580,486 22,157 312,552
Asia 250,958 13,601 206,678
---------- -------- ----------
$3,694,385 $236,422 $1,852,419
========== ======== ==========
Fiscal 1996
United States $1,981,788 $142,470 $1,117,875
Europe 490,606 7,775 224,172
Asia 344,797 25,180 110,151
---------- -------- ----------
$2,817,191 $175,425 $1,452,198
========== ======== ==========
Fiscal 1995
United States $1,280,397 $ 94,078 $ 609,245
Europe 534,038 15,316 213,996
Asia 251,124 14,040 117,614
---------- --------- ----------
$2,065,559 $ 123,434 $ 940,855
========== ========= ==========
</TABLE>
Net sales and operating income reflect the destination of the product
shipped.
Note 13: Major Customers
Net sales to major customers as a percentage of consolidated net sales
were as follows (* represents sales less than 10%):
Years Ended August 31,
--------------------------
1997 1996 1995
------ ------ ------
Hewlett-Packard Corporation 14% 11% *
Bay Networks, Inc. 10% * *
IBM Corporation * * 21%
As a result of sales to these and other of the Company's significant
customers, the Company does have concentrations of credit risk. This
situation is intensified due to the fact that the majority of the
Company's customers are in the same industry. The Company believes its
reserves for bad debt are adequate considering its concentrations of
credit risk.
47
<PAGE>
Note 14: Acquisitions
On November 26, 1996, the Company exchanged approximately 6.2 million
shares of common stock for all of the outstanding stock of Force
Computers, Inc. (Force) and assumed all of the outstanding options of
Force after giving effect to the exchange ratio. Force is a designer and
provider of computer platforms for the embedded market. This transaction
was accounted for under the pooling of interests method. The results of
operations of Force prior to its acquisition were not material to the
Company's consolidated results of operations. Accordingly, the Company's
historical financial statements have not been restated to reflect the
financial position and results of operations of Force, and pro-forma
financial information has not been disclosed. The Company incurred
transaction expenses of $4.0 million directly related to the acquisition
of Force.
In March 1996, the Company exchanged common stock and common stock
options for all of the outstanding stock and options of Fine Pitch
Technology, Inc., a provider of prototype services. This transaction was
accounted for under the pooling-of-interests method. The results of
operations of Fine Pitch prior to its acquisition were not material to
the Company's consolidated results of operations. Accordingly, the
Company's historical financial statements have not been restated to
reflect the financial position and results of operations of Fine Pitch,
and pro-forma financial information has not been disclosed.
In March 1996, the Company completed its purchase of Texas Instruments
Incorporated's Custom Manufacturing Services (CMS) business. This
business, principally located in Austin, Texas, was acquired for
approximately $132 million. Under the terms of the agreement, Solectron
purchased the CMS business in Austin, Texas and certain assets of the
CMS business in Kuala Lumpur, Malaysia (collectively the CMS
operations). The Company subsequently has moved the CMS business in
Kuala Lumpur to Solectron's Penang, Malaysia operations. This
transaction was accounted for under the purchase method of accounting.
The acquisition resulted in goodwill of approximately $38 million, which
is being amortized on a straight-line basis over 10 years.
The following pro forma financial information gives effect to the
acquisition of the CMS operations on a purchase accounting basis for the
years ended August 31, 1996 and 1995 as if the CMS operations had been
acquired at the beginning of the periods presented. The preparation of
this financial information requires the use of management's estimates.
This pro forma financial information includes certain adjustments for
goodwill amortization, increased depreciation expense, a decrease in
interest income (related to the assumed liquidation of certain current
investments for the purchase of the CMS operations) and the related
income tax effects.
This pro forma combined information is not purported to be indicative of
the results that would have actually been obtained if the combination
had been in effect during the periods indicated, or that may be obtained
in the future. In addition, it does not reflect the effects of any
synergy that might be achieved from the newly combined operations.
48
<PAGE>
Pro forma financial information:
Years Ended August 31,
-----------------------
1996 1995
---------- ----------
(in thousands, except
per share data)
Net sales $3,152,962 $2,492,530
Net income $ 115,085 $ 79,651
Net income per share:
Primary $ 1.10 $ 0.91
Fully diluted $ 1.09 $ 0.81
49
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Solectron Corporation:
We have audited the accompanying consolidated balance sheets of
Solectron Corporation and subsidiaries as of August 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended
August 31, 1997. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement
schedule as of August 31, 1997 and for each of the years in the three-
year period ended August 31, 1997, as listed in the Index at Item
14(a)(2). These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Solectron Corporation and subsidiaries as of August 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the
years in the three-year period ended August 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Palo Alto, California
September 11, 1997
50
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable
51
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Solectron's executive officers and directors and their ages as of August
31, 1997 are as follows:
Name Age Position
- ---------------------------- ------ -------------------------------
Koichi Nishimura, Ph.D. 59 President, Chief Executive
Officer and Chairman of the
Board
David Kynaston 56 Vice President and President
Solectron Europe
Stephen T. Ng 42 Senior Vice President and
Chief Materials Officer
Leslie T. Nishimura 53 Senior Vice President and
President Solectron
Washington, Inc.
Ken Tsai 54 Senior Vice President and
President Solectron Asia
Susan S. Wang 46 Senior Vice President, Chief
Financial Officer and
Secretary
Walter W. Wilson 53 Senior Vice President and
President Solectron Americas
Saeed Zohouri, Ph.D. 46 Senior Vice President, Chief
Technology Officer and
President Solectron California
Corporation
Winston H. Chen, Ph.D. (3) 56 Director
Richard A. D'Amore (1) 44 Director
Charles A. Dickinson (3) 74 Director
Heinz Fridrich (1) 64 Director
Kenneth E. Haughton, Ph.D. (2) 69 Director
Paul R. Low, Ph.D. (1) 64 Director
W. Ferrell Sanders (2) 60 Director
Osamu Yamada (3) 68 Director
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
52
<PAGE>
Dr. Koichi Nishimura has served as a director since 1991, Chairman of
the Board since September 1996, Chief Executive Officer since 1992 and
President since 1990. He was Co-Chief Executive Officer from 1991 to
1992 and Chief Operating Officer from 1988 to 1991. From 1964 to 1988,
Dr. Nishimura was employed by International Business Machines
Corporation (IBM) in various technology and management positions. He
also serves as a director of Merix Corporation.
Mr. David Kynaston joined Solectron in February 1996 as Vice President
and President of Solectron Europe. Mr. Kynaston worked for Philips
Electronics for the previous 15 years in various capacities, including
Managing Director of Philips Mullard Ltd. subsidiary, Managing Director
of the Business Communications Systems Division and most recently,
Managing Director of the Private Mobile Radio Division. Mr. Kynaston has
also held senior technical management positions at EMI Medical Ltd. and
Cambridge Scientific Instruments Ltd.
Mr. Stephen T. Ng joined Solectron in September 1989 as Vice President,
Worldwide Material Purchasing and is currently Senior Vice President and
Chief Materials Officer of Solectron. Prior to joining Solectron, Mr. Ng
had 11 years experience in materials management in various capacities
with Xerox Corporation. His last position prior to joining Solectron was
Manager, Material Operations at Xerox Corporation.
Mr. Leslie T. Nishimura is a founder of the Company and President of
Solectron Washington, Inc. He has served as Senior Vice President of
Solectron since 1989, President of Solectron Asia from 1991 to 1993,
Secretary of Solectron from 1989 to 1992 and Vice President,
Manufacturing Technology of Solectron from 1978 to 1989. Mr. Nishimura's
prior experience includes various materials, production control and
inventory control supervisory positions at Ritter Co., Burndy
Corporation and the Norden Division of United Technologies, Inc.
Mr. Ken Tsai is President of Solectron Asia and has served as Senior
Vice President of Solectron since May 1995. Mr. Tsai was Vice President
of Solectron from 1990 to 1995. He served as Director of Manufacturing
for Solectron from 1989 to 1990 and in various manufacturing and other
positions from 1984 to 1989. Prior to joining Solectron, Mr. Tsai served
in various management and business planning positions at American
Cyanamid Company from 1968 to 1984.
Ms. Susan S. Wang has served as Senior Vice President and Chief
Financial Officer of Solectron since 1990 and as Secretary since 1992.
She was Vice President, Finance and Chief Financial Officer of Solectron
from 1986 to 1990 and Director of Finance of Solectron from 1984 to
1986. Prior to joining Solectron, Ms. Wang held various accounting and
finance positions with Xerox Corporation. Ms. Wang also held accounting
and auditing positions with Westvaco Corp. and Price Waterhouse & Co.
She is a certified public accountant.
Mr. Walter W. Wilson has served as President, Solectron Americas since
April 1997, President, Solectron North America from September 1995 to
March 1997, President Solectron California Corporation from March 1992
to February 1996 and Senior Vice President of Solectron since 1990. From
1989 to 1990 he served as an operational Vice President of Solectron.
From 1965 to 1989 Mr. Wilson was employed by IBM in manufacturing and
product development. During his IBM tenure, he held management positions
in the United States, West Germany and Japan.
54
<PAGE>
Dr. Saeed Zohouri is Senior Vice President and Chief Technology Officer
since 1994 and President Solectron California Corporation since March
1996. Dr. Zohouri joined Solectron in 1980; he has held various
management positions and has also served as Director of Technology. His
prior experience includes teaching chemistry at a major international
university.
Dr. Winston H. Chen is a founder of the Company and has served as a
director of Solectron since 1978, Chairman of the Board from 1990 to
1994, President from 1979 to 1990, Chief Executive Officer from 1984 to
1991 and as Co-Chief Executive Officer from 1991 through 1992. Dr. Chen
is currently Chairman of the Paramitas Foundation. From 1970 to 1978,
Dr. Chen served as Process Technology and Development Manager of IBM. He
also serves as a director of Intel Corporation and Edison International.
Mr. Richard A. D'Amore has served as a director of Solectron since 1985.
Mr. D'Amore has been a general partner of various venture capital funds
affiliated with Hambro International Venture Funds since 1982 and a
general partner of North Bridge Venture Partners since 1992. He also
serves as a director of Math Soft, Inc., VEECO and Xionics Instruments.
Mr. Charles A. Dickinson has served as a director of Solectron since
1984, and as Chairman of the Board of Directors from 1986 to 1990 and
from 1994 to September 1996. He served as an independent consultant to
Solectron from 1991 to 1993 and is currently serving in that capacity.
He served as President, Solectron Europe from September 1993 to February
1996. From 1986 to 1990, he was Chairman of the Board of Directors,
President and Chief Executive Officer of Vermont Micro Systems, Inc. He
also serves as a director of Trident Microsystems, Inc. and of Aavid
Thermal Technologies, Inc.
Mr. Heinz Fridrich has served as a director of the Company since April
1996. Mr. Fridrich is currently a member of the faculty of the
University of Florida. From 1950 to 1993, Mr. Fridrich held a number of
manufacturing and operations management positions in Europe and the
United States with IBM. He currently serves as a director of Central
Hudson Gas & Electric Company in Poughkeepsie, New York.
Dr. Kenneth E. Haughton has served as a director of Solectron since
1985. Dr. Haughton is currently an independent consultant. From 1990 to
1991, he was Vice President of Engineering at Da Vinci Graphics, a
computer graphics firm. From 1989 to 1990, Dr. Haughton was an
independent consultant and from 1982 to 1989, he served as Dean of
Engineering at Santa Clara University. He also serves as a director of
Seagate Technology.
Dr. Paul R. Low has served as a director of Solectron since 1993 and is
currently the President of PRL Associates. Prior to founding PRL
Associates, Dr. Low worked for IBM from 1957 to 1992. Dr. Low held
senior management and executive positions with successively increasing
responsibility, including President, General Technology Division and IBM
Corporate Vice President; President of General Products Division; and
General Manager, Technology Products business line, also serving on
IBM's corporate management board. He also serves as a director of
Applied Materials, Inc., VEECO, Number Nine, NCD, XION and IPAC.
54
<PAGE>
Mr. W. Ferrell Sanders has served as a director of Solectron since 1986.
Since 1987, Mr. Sanders has been a general partner of Asset Management
Associates Venture Fund, a venture capital management firm. From 1981 to
1987, he was an independent management consultant. He also serves as a
director of Adaptec, Inc.
Mr. Osamu Yamada has served as a director of Solectron since 1994. From
1990 to 1991, he was Chairman and Chief Executive Officer of BankCal
Tri-State Corporation, a wholly owned subsidiary of The Mitsubishi Bank,
Limited. From 1987 to 1990, he was Senior Managing Director of The
Mitsubishi Bank, Limited, and in an overlapping period from 1985 to
1990, he was also Chairman, President and Chief Executive Officer of
Bank of California. Prior to that, he held a number of key management
positions with The Mitsubishi Bank, Limited organization. Mr. Yamada
currently serves on a number of boards of major universities and
cultural centers. He also serves as a director of PictureTel.
There is no family relationship among any of the foregoing individuals.
ITEM 11: EXECUTIVE COMPENSATION
The information required by item 11 of Form 10-K is incorporated by
reference to the information contained in the section captioned
"Executive Officer Compensation" of the Registrant's definitive Proxy
Statement (Notice of Annual Meeting of Stockholders) for the fiscal year
ended August 31, 1997 to be held on January 14, 1998 which the Company
will file with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this report.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information regarding this item is incorporated herein by reference from
the section entitled "Security Ownership of Certain Beneficial Owners
and Management" of the Registrant's definitive Proxy Statement (Annual
Meeting of Stockholders) for the fiscal year ended August 31, 1997.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated herein by
reference from the section entitled "Certain Transactions" of the
Registrant's definitive Proxy Statement (Annual Meeting of Stockholders)
for the fiscal year ended August 31, 1997.
55
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements. The financial statements listed in
Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, above are
filed as part of this Annual Report on Form 10-K, beginning on
page 29.
2. Financial Statement Schedule. The financial statement
Schedule II - VALUATION AND QUALIFYING ACCOUNTS is filed as
part of this annual report on Form 10-K, at page 58.
3. Exhibits. The exhibits listed in the accompanying Index to
Exhibits are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K. During the fiscal quarter ended
August 31, 1997 no current reports on Form 8-K were filed.
56
<PAGE>
SIGNATURES
Pursuant to the requirements 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, thereunto duly authorized.
SOLECTRON CORPORATION
(Registrant)
Date: November 6, 1997 By /s/ Koichi Nishimura
(Koichi Nishimura, President,
Chief Executive Officer and
Chairman of the Board)
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.
Name Title Date
- -------------------------- --------------------- -----------------
/s/ Koichi Nishimura President, Chief
Koichi Nishimura, Ph.D. Executive Officer,
and Chairman of the
Board November 6, 1997
/s/ Susan Wang Chief Financial
Susan S. Wang Officer (Principal
Financial and
Accounting Officer),
Senior Vice
President and
Secretary November 6, 1997
/s/ Winston H. Chen Director November 6, 1997
Winston H. Chen, Ph.D.
/s/ Richard A. D'Amore Director November 6, 1997
Richard A. D'Amore
/s/ Charles A. Dickinson Director November 6, 1997
Charles A. Dickinson
/s/ Heinz Fridrich Director November 6, 1997
Heinz Fridrich
/s/ Kenneth E. Haughton Director November 6, 1997
Kenneth E. Haughton, Ph.D.
/s/ Paul R. Low Director November 6, 1997
Paul R. Low, Ph.D.
/s/ W. Ferrell Sanders Director November 6, 1997
W. Ferrell Sanders
/s/Osamu Yamada Director November 6, 1997
Osamu Yamada
57
<PAGE>
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Amounts
Balance at Charged Balance at
Beginning To End
Description of Period Operations (Deductions) Of Period
- ---------------------- --------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Year ended August 31, 1995:
Allowance for doubtful
accounts receivable $2,459 $1,602 $ (560) $3,501
Year ended August 31, 1996:
Allowance for doubtful
accounts receivable $3,501 $1,651 $(2,160) $2,992
Year ended August 31, 1997:
Allowance for doubtful
accounts receivable $2,992 $2,319 $(1,262) $4,049
58
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ----------- ----------------------------------------------------------
2.1 [B] Agreement and Plan of Reorganization, by and among the
Company, Force Acq. Corp. and Force Computers, Inc. as
amended.
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
10.1 [A] Preferred Stock Purchase Agreement dated September 29,
1983, together with amendments thereto dated February 28,
1984 and June 23, 1988.
10.2 Form of Indemnification Agreement between the Company and
its officers, directors and certain other key employees.
10.3 [D] 1983 Incentive Stock Option Plan, as amended August 13,
1991.
10.4 [E] 1988 Employee Stock Purchase Plan, as amended October 1992.
10.5 [H] Amended and Restated 1992 Stock Option Plan.
10.6 [C]+ Asset Purchase Agreement dated as of January 29, 1996, as
amended and restated as of March 29, 1996 by and among
Solectron Texas, L.P., the Company and Texas Instruments,
Incorporated.
10.7 [F] Stock Acquisition Agreement dated August 28, 1993, between
the Company and Solectron California Corporation.
10.8 [G] Lease Agreement between BNP Leasing Corporation, as
Landlord, and the Company, as Tenant, Effective September
6, 1994.
10.9 [G] Purchase Agreement, by and between the Company and BNP
Leasing Corporation, dated September 6, 1994.
10.10 [G] Pledge and Security Agreement, by and between the Company,
as Debtor, and BNP Leasing Corporation, as Secured Party,
dated September 6, 1994.
10.11 [G] Assignment and Assumption Agreement between the Company and
Solectron California Corporation, dated November 9, 1994.
10.12 [G] Custodial Agreement by and between the Company, Banque
Nationale De Paris and BNP Leasing Corporation, dated
September 6, 1994.
10.13 Modification Agreement (First Amemdment ot Purchase
Agreement and Second Amendment to Lease Agreement) by and
between the Company and BNP Leasing Corporation, dated
May 1, 1997.
10.14 Credit Agreement between the Company and Bank of America
National Trust and Savings Association, as Agent and
Issuing Bank, dated April 30, 1997.
10.15a Purchase and Sale Agreement among Solectron Corporation, as
Originator, Servicer and Guarantor, Solectron California
Corporation, as Originator, and Solectron Funding
Corporation, as the Initial Purchaser, dated September 17,
1997
10.15b Receivables Purchase Agreement, among Solectron Funding
Corporation, as Seller, Solectron Corporation, individually
and as Servicer, Receivables Capital Corporation, as Issuer
and Bank of America National Trust and Savings Association,
as Administrator, dated September 17, 1997.
11.1 Statement re: Computation of Net Income Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule
59
<PAGE>
INDEX TO EXHIBITS (Continued)
Footnotes Description
[A] Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-1 (File No. 33-22840).
[B] Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-4 as amended, filed
November 20, 1996. (File No. 333-15983).
[C] Incorporated by reference to the Exhibits of the Company's
Form 10-Q for the quarter ended February 29, 1996.
[D] Incorporated by reference to the Exhibits to Company's
Registration Statement on Form S-8 (File No. 33-46686).
[E] Incorporated by reference to the Exhibits to Company's Form
10-K for the year ended August 31, 1992.
[F] Incorporated by reference to the Exhibits to Company's Form
10-K for the year ended August 31, 1993.
[G] Incorporated by reference to the Exhibits to Company's Form
10-K for the year ended August 31, 1994.
[H] Incorporated by reference to the Exhibits to Company's
Registration Statement on Form S-8 filed March 31, 1997
(File No. 333-24293).
+ Confidential treatment has been granted for certain portions
of these documents.
60
</TABLE>
EXHIBIT 3.1
CORRECTED
CERTIFICATE OF INCORPORATION
OF
SOLECTRON CORPORATION
FIRST:
The name of the Corporation is Solectron Corporation (the
"Corporation").
SECOND:
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH:
This corporation is authorized to issue two classes of shares: Common
Stock and Preferred Stock. The total number of shares which this
corporation is authorized to issue is two hundred one million two
hundred thousand (201,200,000) shares. The number of shares of Common
Stock authorized is two hundred million (200,000,000) shares, $.001 par
value. The number of shares of Preferred Stock authorized is
one million two hundred thousand (1,200,000) shares, $.001 par value.
The shares of Preferred Stock authorized by this Certificate of
Incorporation may be issued from time to time in one or more series.
For any wholly unissued series of Preferred Stock, the Board of
Directors is hereby authorized to fix and alter the dividend rights,
dividend rates, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption prices,
liquidation preferences, the number of shares constituting any such
series and the designation thereof, or any of them.
For any series of Preferred Stock having issued and outstanding shares,
the Board of Directors is hereby authorized to increase or decrease the
number of shares of such series when the number of shares of such series
was originally fixed by the Board of Directors, but such increase or
decrease shall be subject to the limitations and restrictions stated in
the resolution of the Board of Directors originally fixing the number of
shares of such series.
If the number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status that they had prior
to the adoption of the resolution originally fixing the number of shares
of such series.
FIFTH:
The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
Susan Wang Solectron Corporation
847 Gibraltar Drive, Building 5
Milpitas, CA 95035
SIXTH:
The Corporation is to have perpetual existence.
SEVENTH:
Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before
voting begins.
EIGHTH:
A. At each annual meeting of stockholders, directors of the Corporation
shall be elected to hold office until the expiration of the term for
which they are elected, and until their successors have been duly
elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholders' meeting called
and held in accordance with the Delaware General Corporation Law.
B. Vacancies occurring on the Board of Directors may be filled by vote
of a majority of the remaining members of the Board of Directors,
although less than a quorum, at a meeting of the Board of Directors. A
person so elected by the Board of Directors to fill a vacancy shall hold
office until the next succeeding annual meeting of stockholders of the
Corporation at which the directorship is to be elected and until his or
her successor shall have been duly elected and qualified.
NINTH:
The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
TENTH:
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ELEVENTH:
A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as it may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
B. Neither any amendment nor repeal of this Article, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article in
respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
TWELFTH:
At the election of directors of the Corporation, each holder of stock of
any class or series shall be entitled to as many votes as shall equal
the number of votes which (except for such provision as to cumulative
voting) he would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of directors to
be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for
any two or more of them as he may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior to the
voting and the stockholder, or any other holder of the same class or
series of stock, has given notice at the meeting prior to the voting of
the intention to cumulate votes.
THIRTEENTH:
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside of
the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the
Corporation.
FOURTEENTH:
Stockholders of the Corporation may not take action by written consent
in lieu of a meeting but must take any actions at a duly called annual
or special meeting.
FIFTEENTH:
Advance notice of stockholder nomination for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in
the Bylaws of the Corporation.
SIXTEENTH:
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
SOLECTRON CORPORATION
The undersigned, being Secretary of Solectron Corporation hereby
certifies that Article II, Section 2.3; Article III, Section 3.3;
Article III, Section 3.4; and Article III, Section 3.16 of the Bylaws of
this Corporation were each amended effective November 5, 1997 by the
Board of Directors to provide in their entirety as follows:
"2.3 SPECIAL MEETINGS
"A special meeting of the stockholders may be called at any time by
the Board of Directors, the Chairman of the Board, the President, the
Secretary, or holders of shares entitled to cast not less than ten (10)
percent of the votes at the meeting. Except as next provided, notice
shall be given as for the annual meeting.
"Upon receipt of a written request addressed to the Chairman,
President, or Secretary, mailed or delivered personally to such officer
by any person (other than the Board) entitled to call a special meeting
of stockholders, such officer shall cause notice to be given, to the
stockholders entitled to vote, that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
twenty five nor more than sixty days after the receipt of such request."
"3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
"Except as provided in Section 3.4 of these bylaws, at each annual
meeting of stockholders, directors of the corporation shall be elected
to hold office until the expiration of the term for which they are
elected, and until their successors have been duly elected and
qualified; except that if any such election shall not be so held, such
election shall take place at a stockholders' meeting called and held in
accordance with the Delaware General Corporation Law. The term of
office of a director shall begin immediately after election.
"Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other
qualifications for directors may be prescribed. Election of directors
need not be by written ballot unless a stockholder demands election by
written ballot at the meeting and before voting begins."
"3.4 RESIGNATION AND VACANCIES
"Any director may resign at any time upon written notice to the
corporation. Any vacancy occurring in the Board of Directors because of
resignation or death of a director may be filled by a majority of the
remaining members of the Board of Directors, although such majority is
less than a quorum, or by a sole remaining director, and each director
so elected shall hold office until his successor is elected at the next
succeeding annual meeting of stockholders at which the class to which
the directorship belongs is to be elected or at a special meeting called
for that purpose.
"Unless otherwise provided in the certificate of incorporation or
these bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum,
or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so
elected.
"If at any time, by reason of death or resignation or other cause,
the corporation should have no directors in office, then any officer or
any stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for
the person or estate of a stockholder may apply to the Court of Chancery
for a decree summarily ordering an election as provided in Section 211
of the General Corporation Law of Delaware.
"If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a
majority of the whole board (as constituted immediately prior to any
such increase), then the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten (10) percent of the
total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the
General Corporation Law of Delaware as far as applicable."
"3.16 REMOVAL OF DIRECTORS
"Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire Board of
Directors may be removed with or without cause by the holders of a
majority of the shares then entitled to vote at an election of
directors; provided, however, that, so long as stockholders of the
corporation are entitled to cumulative voting, no individual director
may be removed without cause (unless the entire board is removed) if the
number of votes cast against such removal would be sufficient to elect
the director if then cumulatively voted at an election of the class of
directors of which the director is a part. Whenever the holders of any
class or series are entitled to elect one or more directors by the
certificate of incorporation, such director or directors may be removed
without cause only if there are sufficient votes by the holders of the
outstanding shares of that class or series. A vacancy created by the
removal of a director may be filled only by the approval of the
stockholders.
"No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such
director's term of office."
Dated: November 5, 1997
/s/ Susan Wang
Susan Wang, Secretary
<PAGE>
BYLAWS
OF
SOLECTRON CORPORATION
ARTICLE I
CORPORATE OFFICES
I.1 REGISTERED OFFICE
The registered office of the corporation in the State of Delaware
shall be in the City of Wilmington, County of New Castle, State of
Delaware. The name of the registered agent of the corporation at such
location is CT Corporation.
I.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at
any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
II.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at the principal executive
office of the corporation, within or outside the State of Delaware,
unless some other appropriate and convenient location be designated for
that purpose from time to time by the Board of Directors.
II.2 ANNUAL MEETING
Annual meetings of the Stockholders shall be held, each year, at
the time and on the day as designated by resolution of the Board of
Directors.
At the annual meeting, the stockholders shall elect a Board of
Directors, consider reports of the affairs of the corporation and
transact such other business as may be properly brought before the
meeting.
II.3 SPECIAL MEETINGS
A special meeting of the stockholders may be called at any time by
the Board of Directors, the Chairman of the Board, the President, or the
Secretary. Except as next provided, notice shall be given as for the
annual meeting.
Upon receipt of a written request addressed to the Chairman,
President, or Secretary, mailed or delivered personally to such officer
by any person (other than the Board) entitled to call a special meeting
of stockholders, such officer shall cause notice to be given, to the
stockholders entitled to vote, that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
twenty five nor more than sixty days after the receipt of such request.
II.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.6 of these
bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such
meeting. The notice shall specify the place, date, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called.
Notice of meetings, annual or special, shall be given in writing
not less than ten (10) nor more than sixty (60) days before the date of
the meeting, to stockholders entitled to vote thereat by the Secretary
or an assistant secretary, or if there be no such officer, or in the
case of his neglect or refusal, by any director or stockholder.
Such notices or any reports shall be given personally or by mail or
other means of written communication and shall be sent to the
stockholder's address appearing on the books of the corporation, or
supplied by him to the corporation for the purpose of notice.
Notice of any meeting of stockholders shall specify the place, the
day and the hour of meeting, and (1) in case of a special meeting, the
general nature of the business to be transacted and no other business
may be transacted, or (2) in the case of an annual meeting, those
matters which the Board at date of mailing, intends to present for
action by the stockholders. At any meetings where directors are to be
elected, notice shall include the names of the nominees, if any,
intended at date of Notice to be presented by management for election.
If a shareholder supplies no address, notice shall be deemed to
have been given to him if mailed to the place where the principal
executive office of the Company, inside or outside the State of
Delaware, is situated, or published at least once in some newspaper of
general circulation in the County of said principal office.
II.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For such nominations or other business to be considered
properly brought before the meeting by a stockholder such stockholder
must have given timely notice and in proper form of his intent to bring
such business before such meeting. To be timely, such stockholder's
notice must be delivered to or mailed and received by the Secretary of
the corporation not less than ninety (90) days prior to the meeting;
provided, however, that in the event that less than one-hundred (100)
days notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. To be in proper form, a
stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may be,
the name and address of the person or persons to be nominated or the
nature of the business to be proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and,
if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice or introduce the
business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, or the matter been proposed, or
intended to be proposed by the Board of Directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the
nomination of any person or the proposal of any business not made in
compliance with the foregoing procedure.
II.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of the
corporation. An affidavit of the Secretary or an assistant secretary or
of the transfer agent of the corporation that the notice has been given
shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
II.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by
the certificate of incorporation. If, however, such quorum is not
present or represented at any meeting of the stockholders, then the
stockholders entitled to vote thereat, present in person or represented
by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have
been transacted at the meeting as originally noticed.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum, if any action taken is
approved by a majority of the stockholders required initially to
constitute a quorum.
When a quorum is present or represented at any meeting, the vote of
the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before
such meeting, unless the question is one upon which, by express
provisions of the statutes or of the certificate of incorporation, a
different vote is required, in which case such express provision shall
govern and control the decision of the question.
II.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the
corporation may transact any business that might have been transacted at
the original meeting. If the adjournment is for more than forty-five
(45) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
II.9 VOTING
The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.12
and Section 2.14 of these bylaws, subject to the provisions of Sections
217 and 218 of the General Corporation Law of Delaware (relating to
voting rights of fiduciaries, pledgers and joint owners of stock and to
voting trusts and other voting agreements).
Except as may otherwise be provided in the certificate of
incorporation or the last paragraph of this Section 2.9, each
stockholder shall be entitled to one vote for each share of capital
stock held by such stockholder.
At a stockholders' meeting at which directors are to be elected, or
at elections held under special circumstances, a stockholder shall be
entitled to cumulate votes (i.e., cast for any candidate a number of
votes greater than the number of votes which such stockholder normally
is entitled to cast). Each holder of stock of any class or series who
elects to cumulate votes shall be entitled to as many votes as equals
the number of votes which (absent this provision as to cumulative
voting) he would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of directors to
be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for
any two or more of them, as he may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior to the
voting and the stockholder, or any other holder of the same class or
series of stock, has given notice at the meeting prior to the voting of
the intention to cumulate votes.
II.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the
person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of
notice unless so required by the certificate of incorporation or these
bylaws.
II.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
The stockholders of the corporation may not take action by written
consent without a meeting but must take any such actions at a duly
called annual or special meeting.
II.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to express consent or dissent to
corporate action in writing without a meeting (if otherwise permitted by
these bylaws and the corporation's certificate of incorporation), or
entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a
record date, which shall be not more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If the Board of Directors does not so fix a record date, the fixing
of such record date shall be governed by the provisions of Section 213
of the General Corporation Law of Delaware.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
II.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy,
signed by the stockholder and filed with the Secretary, but no such
proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period. A proxy shall be deemed
signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by
the stockholder or the stockholder's attorney-in-fact. The revocability
of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation
Law of Delaware.
II.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger, the
list of stockholders or the books of the corporation, or to vote in
person or by proxy at any meeting of stockholders and of the number of
shares held by each such stockholder.
II.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the Chairman of
the Board, if any, or in his absence by the President, or in his absence
by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting. The
chairman of any meeting of stockholders shall determine the order of
business and the procedures at the meeting, including such matters as
the regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
III.1 POWERS
Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or
these bylaws relating to action required to be approved by the
stockholders or by the outstanding shares, the business and affairs of
the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the
best interests of the corporation, and with such care, including
reasonable inquiry, using ordinary prudence, as a person in a like
position would use under similar circumstances.
III.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of nine (9) members. The
number of directors may be changed by an amendment to this bylaw, duly
adopted by the Board of Directors or by the stockholders, or by a duly
adopted amendment to the certificate of incorporation.
III.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, at each annual
meeting of stockholders, directors of the corporation shall be elected
to hold office until the expiration of the term for which they are
elected, and until their successors have been duly elected and
qualified; except that if any such election shall not be so held, such
election shall take place at a stockholders' meeting called and held in
accordance with the Delaware General Corporation Law. The term of
office of a director shall begin immediately after election. Commencing
with the first annual meeting of stockholders after calendar year 1997
(the "First Annual Meeting"), the directors of the corporation shall be
divided into three classes as nearly equal in size as is practicable,
hereby designated Class I, Class II and Class III. For the purposes
hereof, the initial Class I, Class II and Class III directors shall be
those directors so designated and elected at the First Annual Meeting.
The term of office of the initial Class I directors shall expire at the
next succeeding annual meeting of stockholders, the term of office of
the initial Class II directors shall expire at the second succeeding
annual meeting of stockholders and the term of office of the initial
Class III directors shall expire at the third succeeding annual meeting
of stockholders. At each annual meeting after the annual meeting of
stockholders scheduled to be held thereafter, directors to replace those
of a Class office whose terms expire at such annual meeting shall be
elected to hold office until the third succeeding annual meeting and
until their respective successors shall have been duly elected and
qualified. If the number of directors is hereafter changed, any newly
created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other
qualifications for directors may be prescribed. Election of directors
need not be by written ballot unless a stockholder demands election by
written ballot at the meeting and before voting begins.
III.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. Stockholders may remove directors with cause. Any vacancy
occurring in the Board of Directors because of resignation or death of a
director may be filled by a majority of the remaining members of the
Board of Directors, although such majority is less than a quorum, or by
a sole remaining director, and each director so elected shall hold
office until his successor is elected at the next succeeding annual
meeting of stockholders at which the class to which the directorship
belongs is to be elected or at a special meeting called for that
purpose.
Unless otherwise provided in the certificate of incorporation or
these bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum,
or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so
elected.
If at any time, by reason of death or resignation or other cause,
the corporation should have no directors in office, then any officer or
any stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for
the person or estate of a stockholder may apply to the Court of Chancery
for a decree summarily ordering an election as provided in Section 211
of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a
majority of the whole board (as constituted immediately prior to any
such increase), then the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten (10) percent of the
total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the
General Corporation Law of Delaware as far as applicable.
III.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware, at
such place as is designated in the notice of the meeting.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the
meeting.
Accurate minutes of any meeting of the Board of Directors or any
committee thereof shall be maintained by the Secretary or other office
designated for that purpose.
III.6 FIRST MEETINGS
The first meeting of each newly elected Board of Directors shall be
held immediately following the adjournment of the annual meetings of the
stockholders.
III.7 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without
notice at the corporate offices or such other place, within or without
the State of Delaware, at such time and place as the Board designates.
III.8 SPECIAL MEETINGS; NOTICE
Special meetings of the Board may be called at any time by the
President or, if he is absent or unable or refuses to act, by any vice
president or the Secretary or by any two directors, or by one director
if only one is provided.
At least forty-eight (48) hours notice of the time and place of
special meetings shall be delivered personally to the directors or
personally communicated to them by a corporate officer by telephone or
telegraph. If the notice is sent to a director by letter, it shall be
addressed to him at his address as it is shown upon the records of the
corporation (or if it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the directors are
regularly held). In case such notice is mailed, it shall be deposited
in the United States mail, postage prepaid, in the place in which the
principal executive office of the corporation is located, at least four
(4) days prior to the time of the holding of the meeting. Such mailing,
telegraphing, telephoning or delivery as above provided shall be due,
legal and personal notice to such director.
When all of the directors are present at any directors' meeting,
however called or noticed, and either (i) sign a written consent thereto
on the records of such meeting, or (ii) if a majority of the directors
is present and if those not present sign a waiver of notice of such
meeting or a consent to holding the meeting or an approval of the
minutes thereof, whether prior to or after the holding of such meeting,
which said waiver, consent or approval shall be filed with the Secretary
of the corporation or (iii) if a director attends a meeting without
notice, but without protesting, prior thereto or at its commencement,
the lack of notice to him, then the transactions thereof are as valid as
if had at a meeting regularly called and noticed.
III.9 QUORUM
A majority of the number of directors as fixed by the certificate
of incorporation or bylaws, shall be necessary to constitute a quorum
for the transaction of business, and the action of a majority of the
directors present at any meeting at which there is a quorum, when duly
assembled, is valid as a corporate act; provided that a minority of the
directors, in the absence of a quorum, may adjourn from time to time,
but may not transact any business. A meeting at which a quorum is
initially present may continue to transact business, notwithstanding the
withdrawal of directors, if any action taken is approved by a majority
of the required quorum for such meeting.
III.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the
person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the directors, or members of a committee of directors, need
be specified in any written waiver of notice unless so required by the
certificate of incorporation or these bylaws.
III.11 ADJOURNED MEETING; NOTICE
Notice of the time and place of holding an adjourned meeting need
not be given to absent directors if the time and place be fixed at the
meeting adjourned and held within twenty-four (24) hours, but if
adjourned more than twenty-four (24) hours, notice shall be given to all
directors not present at the time of the adjournment.
III.12 CONDUCT OF BUSINESS
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting. The
chairman of any meeting shall determine the order of business and the
procedures at the meeting.
III.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
III.14 FEES AND COMPENSATION OF DIRECTORS
Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board, a fixed sum and expense of
attendance, if any, may be allowed for attendance at each regular and
special meeting of the Board; provided that nothing herein contained
shall be construed to preclude any director from serving the Company in
any other capacity and receiving compensation therefor.
III.15 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of,
or otherwise assist any officer or other employee of the corporation or
of its subsidiary, including any officer or employee who is a director
of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected
to benefit the corporation. The loan, guaranty or other assistance may
be with or without interest and may be unsecured, or secured in such
manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing in
this section shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any
statute.
III.16 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire Board of
Directors may be removed with cause by the holders of a majority of the
shares then entitled to vote at an election of directors; provided,
however, that, so long as stockholders of the corporation are entitled
to cumulative voting, no individual director may be removed (unless the
entire board is removed) if the number of votes cast against such
removal would be sufficient to elect the director if then cumulatively
voted at an election of the class of directors of which the director is
a part. A vacancy created by the removal of a director may be filled
only by the approval of the stockholders.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such
director's term of office.
III.17 ADVISORY DIRECTORS
The Board of Directors from time to time may elect one or more
persons to be Advisory Directors who shall not by such appointment be
members of the Board of Directors. Advisory Directors shall be
available from time to time to perform special assignments specified by
the President, to attend meetings of the Board of Directors upon
invitation and to furnish consultation to the Board. The period during
which the title shall be held may be prescribed by the Board of
Directors. If no period is prescribed, the title shall be held at the
pleasure of the Board.
ARTICLE IV
COMMITTEES
IV.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, with each committee
to consist of two or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the bylaws of the
corporation, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of
the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall
have the power or authority to (i) amend the certificate of incorpora-
tion (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors as provided in Section 151(a) of the
General Corporation Law of Delaware, fix any of the preferences or
rights of such shares relating to dividends, redemption, dissolution,
any distribution of assets of the corporation or the conversion into, or
the exchange of such shares for, shares of any other class or classes or
any other series of the same or any other class or classes of stock of
the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware,
(iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets (iv)
recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation;
and, unless the board resolution establishing the committee, the bylaws
or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership
and merger pursuant to Section 253 of the General Corporation Law of
Delaware.
IV.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
IV.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held
and taken in accordance with, the provisions of Article III of these
bylaws, Section 3.5 (place of meetings and meetings by telephone),
Section 3.7 (regular meetings), Section 3.8 (special meetings and
notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section
3.11 (adjournment and notice of adjournment), Section 3.12 (conduct of
business) and Section 3.13 (action without a meeting), with such changes
in the context of those bylaws as are necessary to substitute the
committee and its members for the Board of Directors and its members;
provided, however, that the time of regular meetings of committees may
also be called by resolution of the Board of Directors and that notice
of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of
any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
V.1 OFFICERS
The officers of the corporation shall be chairman of the board or a
president or both, a secretary, and a chief financial officer. The
corporation may also have, at the discretion of the Board of Directors,
one or more vice presidents, one or more assistant secretaries, and any
such other officers as may be appointed in accordance with the
provisions of Section 5.2 of these bylaws. Any number of offices may be
held by the same person.
V.2 ELECTION OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of
the corporation shall be chosen annually by the Board of Directors, and
each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
The Board of Directors may appoint such officers and agents of the
business as the corporation may require, each of whom shall hold office
for such period, have such authority, and perform such duties as are
provided in these bylaws or as the Board of Directors may from time to
time determine. Any vacancy occurring in any office of the corporation
shall be filled in the manner prescribed in the Bylaws for regular
appointments to such office.
V.3 REMOVAL AND RESIGNATION OF OFFICERS
Any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any
regular or special meeting of the Board or, except in the case of an
officer chosen by the Board of Directors, by any officer upon whom such
power of removal may be conferred by the Board of Directors or, in the
case of an officer appointed by the President, by the President.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice;
and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective.
V.4 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and
perform such other powers and duties as may from time to time be
assigned to him by the Board of Directors or as may be prescribed by
these bylaws.
V.5 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an
officer, the President, unless otherwise determined by the Board of
Directors, shall be the chief executive officer of the corporation and
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a chairman of the board, at all
meetings of the Board of Directors. He shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these bylaws.
V.6 VICE PRESIDENTS
In the absence or disability of the President, the Vice Presidents,
if any, in order of their rank as fixed by the Board of Directors or, if
not ranked, a Vice President designated by the Board of Directors, shall
perform all the duties of the President and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them
respectively by the Board of Directors, these bylaws, the President or
the Chairman of the Board.
V.7 SECRETARY
The Secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall
show the time and place of each meeting, whether regular or special
(and, if special, how authorized and the notice given), the names of
those present at directors' meetings or committee meetings, the number
of shares present or represented at stockholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the
corporation's transfer agent or registrar, as determined by resolution
of the Board of Directors, a share register, or a duplicate share
register, showing the names of all stockholders and their addresses, the
number and classes of shares held by each, the number and date of
certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to
be given by law or by these bylaws. He shall keep the seal of the
corporation, if one be adopted, in safe custody and shall have such
other powers and perform such other duties as may be prescribed by the
Board of Directors or by these bylaws.
V.8 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained in accordance with generally accepted accounting
principles, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account
shall at all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the President and directors, whenever they
request it, an account of all of his transactions as Chief Financial
Officer and of the financial condition of the corporation, and shall
have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these bylaws.
ARTICLE VI
INDEMNITY
VI.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of
its directors and officers against expenses (including attorneys' fees),
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the
fact that such person is or was an agent of the corporation. For
purposes of this Section 6.1, a "director" or "officer" of the
corporation includes any person (i) who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, including,
without limitation, any direct or indirect subsidiary of the
corporation, or (iii) who was a director or officer of a corporation
which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
VI.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the
manner permitted by the General Corporation Law of Delaware, to
indemnify each of its employees and agents (other than directors and
officers) against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred
in connection with any proceeding, arising by reason of the fact that
such person is or was an agent of the corporation. For purposes of this
Section 6.2, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (i) who is or was an employee
or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including,
without limitation, any direct or indirect subsidiary of the
corporation, or (iii) who was an employee or agent of a corporation
which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
VI.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of the General Corporation Law of Delaware and this Section
6.
VI.4 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section
6.1, or for which indemnification is permitted pursuant to Section 6.2
following authorization thereof by the Board of Directors, may be paid
by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the
indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified
as authorized in this Section 6.
VI.5 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Section 6 shall not be deemed
exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office,
to the extent that such additional rights to indemnification are
authorized in the certificate of incorporation.
VI.6 CONFLICTS
No indemnification or advance shall be made under this Section 6,
except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the
certificate of incorporation, these bylaws, a resolution of the
stockholders or an agreement in effect at the time of the accrual of the
alleged cause of the action asserted in the proceeding in which the
expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
VII.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or
at such place or places as designated by the Board of Directors, keep a
record of its stockholders listing their names and addresses and the
number and class of shares held by each stockholder, a copy of these
bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper
purpose the corporation's stock ledger, a list of its stockholders, and
its other books and records and to make copies or extracts therefrom. A
proper purpose shall mean a purpose reasonably related to such person's
interest as a stockholder. In every instance where an attorney or other
agent is the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing
that authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation
at its registered office in Delaware or at its principal place of
business.
VII.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's
stock ledger, a list of its stockholders, and its other books and
records for a purpose reasonably related to his position as a director.
The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought.
The Court may summarily order the corporation to permit the director to
inspect any and all books and records, the stock ledger, and the stock
list and to make copies or extracts therefrom. The Court may, in its
discretion, prescribe any limitations or conditions with reference to
the inspection, or award such other and further relief as the Court may
deem just and proper.
VII.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, the President, any Vice President, the
Chief Financial Officer, the Secretary, or any other person authorized
by the Board of Directors or the President or a Vice President, is
authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation.
The authority granted herein may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
VII.4 SUBSIDIARY CORPORATIONS
Shares of this corporation owned by a subsidiary shall not be
entitled to vote on any matter. A subsidiary for these purposes is
defined as a corporation, the shares of which possessing more than 25%
of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
ARTICLE VIII
GENERAL MATTERS
VIII.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Notwithstanding the
adoption of such a resolution by the Board of Directors, every holder of
stock represented by certificates and, upon request, every holder of
uncertificated shares, shall be entitled to have a certificate signed
by, or in the name of the corporation by the Chairman of the Board of
Directors, or the President or Vice President, and by the Chief
Financial Officer or the secretary of such corporation representing the
number of shares registered in certificate form. Any or all of the
signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration
to be paid therefor. Upon the face or back of each stock certificate
issued to represent any such partly paid shares, or upon the books and
records of the corporation in the case of uncertificated partly paid
shares, the total amount of the consideration to be paid therefor and
the amount paid thereon shall be stated. Upon the declaration of any
dividend on fully paid shares, the corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of
the percentage of the consideration actually paid thereon.
VIII.2 LOST CERTIFICATES
Except as provided in this Section 8.2, no new certificates for
shares shall be issued to replace a previously issued certificate unless
the latter is surrendered to the corporation and canceled at the same
time. The corporation may issue a new certificate of stock or
uncertificated shares in the place of any certificate theretofore issued
by it, alleged to have been lost, stolen or destroyed, and the
corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the corporation a bond
sufficient to indemnity it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated
shares.
VIII.3 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Delaware General
Corporation Law shall govern the construction of these bylaws. Without
limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
VIII.4 DIVIDENDS
The directors of the corporation, subject to any restrictions
contained in the certificate of incorporation, may declare and pay
dividends upon the shares of its capital stock pursuant to the General
Corporation Law of Delaware. Dividends may be paid in cash, in
property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves
for any proper purpose and may abolish any such reserve.
VIII.5 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
VIII.6 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to
be impressed or affixed or in any other manner reproduced.
VIII.7 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate, and record the
transaction in its books.
VIII.8 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of
the corporation of any one or more classes owned by such stockholders in
any manner not prohibited by the General Corporation Law of Delaware.
VIII.9 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, shall be entitled to hold liable
for calls and assessments the person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
VIII.10 EXECUTION OF CONTRACTS
The Board of Directors, except as in the Bylaws otherwise provided,
may authorize any officer or officers, agent or agents, to enter into
any contract or execute and instrument in the name of and on behalf of
the corporation. Such authority may be general or confined to specific
instances. Unless so authorized by the Board of Directors, no officer,
agent or employee shall have any power or authority to bind the
corporation by any contract or agreement, or to pledge its credit, or to
render it liable for any purpose or to any amount, except as provided in
Sec. 142 of Delaware General Corporation Law.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by a majority of the stockholders entitled to vote;
provided, however, that the corporation may, in its certificate of
incorporation, confer the power to adopt, amend or repeal bylaws upon
the directors. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit
their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied
in the book of bylaws with the original bylaws, in the appropriate
place. If any bylaw is repealed, the fact of repeal with the date of
the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of
Directors of the corporation that the corporation should be dissolved,
the Board, after the adoption of a resolution to that effect by a
majority of the whole Board at any meeting called for that purpose,
shall cause notice to be mailed to each stockholder entitled to vote
thereon of the adoption of the resolution and of a meeting of
stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation
entitled to vote thereon votes for the proposed dissolution, then a
certificate stating that the dissolution has been authorized in
accordance with the provisions of Section 275 of the General Corporation
Law of Delaware and setting forth the names and residences of the
directors and officers shall be executed, acknowledged, and filed and
shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such certificate's becoming effective
in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
XI.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon
qualification of their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the
required vote for action by the Board of Directors cannot be obtained
and the stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
XI.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware,
but the authority of the custodian shall be to continue the business of
the corporation and not to liquidate its affairs and distribute its
assets, except when the Court of Chancery otherwise orders and except in
cases arising under Sections 226(a)(3) or 352(a)(2) of the General
Corporation Law of Delaware.
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
SOLECTRON CORPORATION
ADOPTION BY INCORPORATOR
The undersigned person appointed in the Certificate of Incorpo-
ration to act as the Incorporator of Solectron Corporation hereby
adopts the foregoing bylaws, comprising twenty-three (23) pages, as the
Bylaws of the corporation.
Executed this 27th day of January 1997.
/s/ Susan Wang
Susan Wang, Incorporator
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
The undersigned hereby certifies that she is the duly elected,
qualified, and acting Secretary of Solectron Corporation and that the
foregoing Bylaws, comprising twenty-three (23) pages, were adopted as
the Bylaws of the corporation on January 27, 1997, by the person
appointed in the Certificate of Incorporation to act as the Incorporator
of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and
affixed the corporate seal this 27th day of January 1997.
/s/ Susan Wang
Susan Wang, Secretary
<PAGE>
EXHIBIT C
BYLAWS
OF
SOLECTRON CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I CORPORATE OFFICES 1
1.1 REGISTERED OFFICE 1
1.2 OTHER OFFICES 1
ARTICLE II MEETINGS OF STOCKHOLDERS 1
2.1 PLACE OF MEETINGS 1
2.2 ANNUAL MEETING 1
2.3 SPECIAL MEETINGS 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND
STOCKHOLDER BUSINESS 3
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE 4
2.7 QUORUM 4
2.8 ADJOURNED MEETING; NOTICE 4
2.9 VOTING 5
2.10 WAIVER OF NOTICE 5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING 5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS 6
2.13 PROXIES 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE 6
2.15 CONDUCT OF BUSINESS 7
ARTICLE III DIRECTORS 7
3.1 POWERS 7
3.2 NUMBER OF DIRECTORS 7
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS 7
3.4 RESIGNATION AND VACANCIES 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE 9
3.6 FIRST MEETINGS 9
3.7 REGULAR MEETINGS 9
3.8 SPECIAL MEETINGS; NOTICE 9
3.9 QUORUM 10
3.10 WAIVER OF NOTICE 10
3.11 ADJOURNED MEETING; NOTICE 11
3.12 CONDUCT OF BUSINESS 11
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING 11
3.14 FEES AND COMPENSATION OF DIRECTORS 11
3.15 APPROVAL OF LOANS TO OFFICERS 11
3.16 REMOVAL OF DIRECTORS 12
3.17 ADVISORY DIRECTORS 12
ARTICLE IV COMMITTEES 12
4.1 COMMITTEES OF DIRECTORS 12
4.2 COMMITTEE MINUTES 13
4.3 MEETINGS AND ACTION OF COMMITTEES 13
ARTICLE V OFFICERS 13
5.1 OFFICERS 13
5.2 ELECTION OF OFFICERS 14
5.3 REMOVAL AND RESIGNATION OF OFFICERS 14
5.4 CHAIRMAN OF THE BOARD 14
5.5 PRESIDENT 14
5.6 VICE PRESIDENTS 15
5.7 SECRETARY 15
5.8 CHIEF FINANCIAL OFFICER 15
ARTICLE VI INDEMNITY 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS 16
6.2 INDEMNIFICATION OF OTHERS 16
6.3 INSURANCE 16
6.4 PAYMENT OF EXPENSES IN ADVANCE 17
6.5 INDEMNITY NOT EXCLUSIVE 17
6.6 CONFLICTS 17
ARTICLE VII RECORDS AND REPORTS 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS 17
7.2 INSPECTION BY DIRECTORS 18
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS 18
7.4 SUBSIDIARY CORPORATIONS 18
ARTICLE VIII GENERAL MATTERS 19
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES 19
8.2 LOST CERTIFICATES 19
8.3 CONSTRUCTION; DEFINITIONS 19
8.4 DIVIDENDS 20
8.5 FISCAL YEAR 20
8.6 SEAL 20
8.7 TRANSFER OF STOCK 20
8.8 STOCK TRANSFER AGREEMENTS 20
8.9 REGISTERED 20
8.10 EXECUTION OF CONTRACTS 21
ARTICLE IX AMENDMENTS 21
ARTICLE X DISSOLUTION 21
ARTICLE XI CUSTODIAN 22
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES 22
11.2 DUTIES OF CUSTODIAN 22
EXHIBIT 10.2
SOLECTRON CORPORATION
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is entered into as of
the ___ day of _____________________, 1997 by and between Solectron
Corporation, a Delaware corporation (the "Company") and ________________
("Indemnitee").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for its directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors,
officers, employees, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of liability
insurance has been severely limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company
may not be willing to continue to serve in such capacities without
additional protection.
D. The Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company
and, in part, in order to induce Indemnitee to continue to provide
services to the Company, wishes to provide for the indemnification and
advancing of expenses to Indemnitees to the maximum extent permitted by
law.
E. In view of the considerations set forth above, the Company
desires that Indemnitee be indemnified by the Company as set forth
herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) INDEMNIFICATION OF EXPENSES. The Company shall indemnify
to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or are threatened
to be made a party to or witness or other participant in, any
threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation
that Indemnitee in good faith believe might lead to the institution of
any such action, suit, proceeding or alternative dispute resolution
mechanism, whether civil, criminal, administrative, investigative or
other (hereinafter a "Claim") by reason of (or arising in part out of)
any event or occurrence related to the fact that Indemnitee is or was a
director, officer, employee, agent or fiduciary of the Company, or any
subsidiary of the Company, or is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while
serving in such capacity (hereinafter an "Indemnifiable Event") against
any and all expenses (including attorneys' fees and all other costs,
expenses and obligations incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal),
or preparing to defend, be a witness in or participate in, any such
action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld) of such
Claim and any federal, state, local or foreign taxes imposed on
Indemnitees as a result of the actual or deemed receipt of any payments
under this Agreement (collectively, hereinafter "Expenses"), including
all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses. Such payment of
Expenses shall be made by the Company as soon as practicable but in any
event no later than twenty days after written demand by Indemnitees
therefor is presented to the Company.
(b) REVIEWING PARTY. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e)
hereof) shall not have determined (in a written opinion, in any case in
which the Independent Legal Counsel referred to in Section 1(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified
under applicable law, and (ii) the obligation of the Company to make an
advance payment of Expenses to Indemnitee pursuant to Section 2(a) (an
"Expense Advance") shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company
shall be entitled to be reimbursed by Indemnitee (who hereby agree to
reimburse the Company) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commence legal
proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable
law, any determination made by the Reviewing Party that Indemnitee would
not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company
for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have
been exhausted or lapsed). The Indemnitee's obligation to reimburse the
Company for any Expense Advance shall be unsecured and no interest shall
be charged thereon. If there has not been a Change in Control (as
defined in Section 10(c) hereof), the Reviewing Party shall be selected
by the Board of Directors, and if there has been such a Change in
Control (other than a Change in Control which has been approved by a
majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall
be the Independent Legal Counsel referred to in Section 1(c) hereof. If
there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively would not be
permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an
initial determination by the court or challenging any such determination
by the Reviewing Party or any aspect thereof, including the legal or
factual bases therefor, and the Company hereby consents to service of
process and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on the Company
and Indemnitee.
(c) CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which
has been approved by a majority of the Company's Board of Directors who
were directors immediately prior to such Change in Control) then, with
respect to all matters thereafter arising concerning the rights of
Indemnitees to payments of Expenses and Expense Advances under this
Agreement or any other agreement or under the Company's Certificate of
Incorporation or Bylaws as now or hereafter in effect, Independent Legal
Counsel (as defined in Section 10(d) hereof) shall be selected by
Indemnitees and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render
its written opinion to the Company and Indemnitee as to whether and to
what extent Indemnitee would be permitted to be indemnified under
applicable law and the Company agrees to abide by such opinion. The
Company agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel against
any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
(d) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than Section 8 hereof, to the extent
that Indemnitee has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without
prejudice, in defense of any action, suit, proceeding, inquiry or
investigation referred to in Section (1)(a) hereof or in the defense of
any claim, issue or matter therein, Indemnitee shall be indemnified
against all Expenses incurred by Indemnitee in connection therewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder
shall be paid by the Company to Indemnitee as soon as practicable but in
any event no later than twenty days after written demand by Indemnitee
therefor to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of
any Claim made against Indemnitee for which indemnification will or
could be sought under this Agreement. Notice to the Company shall be
directed to the Chief Executive Officer of the Company at the address
shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition,
Indemnitee shall give the Company such information and cooperation as it
may reasonably require and as shall be within Indemnitee's power.
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea
of NOLO CONTENDERE, or its equivalent, shall not create a presumption
that Indemnitee did not meet any particular standard of conduct or have
any particular belief or that a court has determined that
indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a determination
as to whether Indemnitee has met any particular standard of conduct or
had any particular belief, nor an actual determination by the Reviewing
Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under applicable law, shall be a defense to Indemnitee's
claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief. In
connection with any determination by the Reviewing Party or otherwise as
to whether Indemnitee is entitled to be indemnified hereunder, the
burden of proof shall be on the Company to establish that Indemnitee is
not so entitled.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the
Company has liability insurance in effect which may cover such Claim,
the Company shall give prompt notice of the commencement of such Claim
to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee,
all amounts payable as a result of such action, suit, proceeding,
inquiry or investigation in accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company shall
be entitled to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld, upon the
delivery to Indemnitee of written notice of its election so to do.
After delivery of such notice, approval of such counsel by Indemnitee
and the retention of such counsel by the Company, the Company will not
be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same Claim;
provided that, (i) Indemnitee shall have the right to employ
Indemnitee's counsel in any such Claim at Indemnitee's expense and
(ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there is a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall
not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall have the right to conduct such defense as it
sees fit in its sole discretion, including the right to settle any claim
against Indemnitee without the consent of the Indemnitee.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify Indemnitee
to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions
of this Agreement, the Company's Certificate of Incorporation, the
Company's Bylaws or by statute. In the event of any change after the
date of this Agreement in any applicable law, statute or rule which
expands the right of a Delaware corporation to indemnify a member of its
Board of Directors or an officer, employee, agent or fiduciary, it is
the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of
any change in any applicable law, statute or rule which narrows the
right of a Delaware corporation to indemnify a member of its Board of
Directors or an officer, employee, agent or fiduciary, such change, to
the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder except as set forth in Section
8(a) hereof.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws,
any agreement, any vote of stockholders or disinterested directors, the
General Corporation Law of the State of Delaware, or otherwise. The
indemnification provided under this Agreement shall continue as to
Indemnitee for any action Indemnitee took or did not take while serving
in an indemnified capacity even though Indemnitee may have ceased to
serve in such capacity.
4. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim
made against Indemnitee to the extent Indemnitee has otherwise actually
received payment (under any insurance policy, Certificate of
Incorporation, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some
or a portion of Expenses incurred in connection with any Claim, but not,
however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such Expenses to
which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public
policy may prohibit the Company from indemnifying its directors,
officers, employees, agents or fiduciaries under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination
of the Company's right under public policy to indemnify Indemnitee.
7. LIABILITY INSURANCE. The Company shall, from time to time,
make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance
with reputable insurance companies providing the officers and directors
of the Company with coverage for losses from wrongful acts, or to ensure
the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs
of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability
insurance, Indemnitee shall be named as an insured in such a manner as
to provide Indemnitee the same rights and benefits as are accorded to
the most favorably insured of the Company's directors, if Indemnitee is
a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key
employees, if Indemnitee is not an officer or director but is a key
employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate
to the amount of coverage provided, if the coverage provided by such
insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by
a subsidiary or parent of the Company.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which
Indemnitee is prohibited from receiving indemnification under this
Agreement or applicable law;
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (i) with
respect to actions or proceedings brought to establish or enforce a
right to indemnification under this Agreement or any other agreement or
insurance policy or under the Company's Certificate of Incorporation or
Bylaws now or hereafter in effect relating to Claims for Indemnifiable
Events, (ii) in specific cases if the Board of Directors has approved
the initiation or bringing of such Claim, or (iii) as otherwise required
under Section 145 of the Delaware General Corporation Law, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the
case may be;
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding
instituted by Indemnitee to enforce or interpret this Agreement, if a
court of competent jurisdiction determines that each of the material
assertions made by Indemnitee in such proceeding was not made in good
faith or was frivolous; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale
by Indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor
statute.
9. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company
against Indemnitee, Indemnitee's estate, spouse, heirs, executors or
personal or legal representatives after the expiration of two years from
the date of accrual of such cause of action, and any claim or cause of
action of the Company shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year
period; PROVIDED, HOWEVER, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period
shall govern.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence
had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary
of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the
same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect
to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee,
agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with
respect to an employee benefit plan, its participants or its
beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of
the Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred IF, ON OR AFTER THE DATE OF THIS AGREEMENT,
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended), other than a trustee
or other fiduciary holding securities under an employee benefit plan of
the Company acting in such capacity or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly
or indirectly, of securities of the Company representing more than 50%
of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the begin-
ning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 80% of the total
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of (in one transaction or a series of related
transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in
accordance with the provisions of Section 1(c) hereof, who shall not
have otherwise performed services for the Company or Indemnitees within
the last three years (other than with respect to matters concerning the
rights of Indemnitees under this Agreement, or of other indemnitees
under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of
the Company's Board of Directors or any other person or body appointed
by the Board of Directors who is not a party to the particular Claim for
which Indemnitee are seeking indemnification, or Independent Legal
Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election
of directors.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, assigns, including any
direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of
the Company, spouses, heirs, and personal and legal representatives.
The Company shall require and cause any successor (whether direct or
indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets
of the Company, by written agreement in form and substance satisfactory
to Indemnitee, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This
Agreement shall continue in effect with respect to Claims relating to
Indemnifiable Events regardless of whether Indemnitee continues to serve
as a director, officer, employee, agent or fiduciary of the Company or
of any other enterprise at the Company's request.
13. ATTORNEYS' FEES. In the event that any action is instituted
by Indemnitee under this Agreement or under any liability insurance
policies maintained by the Company to enforce or interpret any of the
terms hereof or thereof, Indemnitee shall be entitled to be paid all
Expenses incurred by Indemnitee with respect to such action, regardless
of whether Indemnitee is ultimately successful in such action, and shall
be entitled to the advancement of Expenses with respect to such action,
unless, as a part of such action, a court of competent jurisdiction over
such action determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous. In the event of an action instituted by or in the name of
the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all
Expenses incurred by Indemnitee in defense of such action (including
costs and expenses incurred with respect to Indemnitee's counterclaims
and cross-claims made in such action), and shall be entitled to the
advancement of Expenses with respect to such action, unless, as a part
of such action, a court having jurisdiction over such action determines
that each of Indemnitee's material defenses to such action was made in
bad faith or was frivolous.
14. NOTICE. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given,
and shall in any event be deemed to be given (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service,
if delivered by first class mail, postage prepaid, (b) upon delivery, if
delivered by hand, (c) one business day after the business day of
deposit with Federal Express or similar overnight courier, freight
prepaid, or (d) one day after the business day of delivery by facsimile
transmission, if delivered by facsimile transmission, with copy by first
class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee's address as set forth beneath Indemnitee's signature to
this Agreement and if to the Company at the address of its principal
corporate offices (attention: Secretary) or at such other address as
such party may designate by ten days' advance written notice to the
other party hereto.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the
State of Delaware for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree
that any action instituted under this Agreement shall be commenced,
prosecuted and continued only in the Court of Chancery of the State of
Delaware in and for New Castle County, which shall be the exclusive and
only proper forum for adjudicating such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a
court of competent jurisdiction to be invalid, void or otherwise
unenforceable, and the remaining provisions shall remain enforceable to
the fullest extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including, without
limitations, each portion of this Agreement containing any provision
held to be invalid, void or otherwise unenforceable, that is not itself
invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the
State of Delaware, as applied to contracts between Delaware residents,
entered into and to be performed entirely within the State of Delaware,
without regard to the conflict of laws principles thereof.
18. SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of
the rights of recovery of Indemnitee who shall execute all documents
required and shall do all acts that may be necessary to secure such
rights and to enable the Company effectively to bring suit to enforce
such rights.
19. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless
it is in writing signed by both the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth
the entire understanding between the parties hereto and supersedes and
merges all previous written and oral negotiations, commitments,
understandings and agreements relating to the subject matter hereof
between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be
retained in the employ of the Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SOLECTRON CORPORATION,
a Delaware corporation
By: ______________________________
Title: ______________________________
Address: ______________________________
______________________________
______________________________
AGREED TO AND ACCEPTED BY:
______________________________
Address: ______________________________
______________________________
______________________________
EXHIBIT 10.13
MODIFICATION AGREEMENT
(FIRST AMENDMENT TO PURCHASE AGREEMENT
AND SECOND AMENDMENT TO LEASE AGREEMENT)
This MODIFICATION AGREEMENT (FIRST AMENDMENT TO PURCHASE AGREEMENT
AND SECOND AMENDMENT TO LEASE AGREEMENT) (this "Agreement") is dated
effective the 1st day of May, 1997, by and between BNP LEASING
CORPORATION, a Delaware corporation ("BNPLC") and SOLECTRON
CORPORATION, a California corporation ("Solectron").
R E C I T A L S
A. BNPLC and Solectron executed a Lease Agreement dated effective
as of September 6, 1994, evidenced by a Short Form of Lease dated as of
September 6, 1994, recorded on September 6, 1994, as Series No. 12640158
of the Official Records of Santa Clara County, California. Such Lease
Agreement, as previously amended by a letter agreement dated October 20,
1994, is hereinafter called the "Lease." Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings given
to them in the Lease.
B. BNPLC and Solectron also executed a Purchase Agreement dated
September 6, 1994 (the "Purchase Agreement"), pursuant to which
Solectron has agreed to purchase or arrange for the purchase of the
Leased Property as more particularly provided therein.
C. BNPLC and Solectron now desire to modify and amend the Purchase
Agreement and the Lease, as more particularly set forth below.
D. In connection with the Lease and Purchase Agreement, BNPLC
executed Participation Agreements (herein so called), dated as of
September 6, 1994, with Banque Nationale de Paris, ABN Amro Bank, N.V.,
The Fuji Bank Limited, San Francisco Agency, Bank of America National
Trust and Savings Association, and The Industrial Bank of Japan, Limited
(collectively, "Participants"). Section 6.1.1 of the Participation
Agreements requires the Participants' consent to this Agreement.
NOW, THEREFORE, in consideration of the above recitals and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, BNPLC and Solectron agree as follows:
1. AMENDMENT TO PURCHASE AGREEMENT. The term "Closing Deadline" and
its definition set forth in numbered paragraph 1(b) of the Purchase
Agreement are deleted and replaced with the following:
"Closing Deadline" means May 1, 2002, or if May 1, 2002 is not a
Business Day, then the next following Business Day.
2. AMENDMENTS TO LEASE.
a. PRIOR REDUCTION OF STIPULATED LOSS VALUE. By reason of a
Qualified Payment heretofore received by Landlord, the Stipulated Loss
Value under the Lease is:
$51,860,000.
Future adjustments to Stipulated Loss Value may be made in
accordance with the express terms of the Lease.
b. NEW DEFINITIONS. The following new definitions are added to and
made a part of Section 1 of the Lease:
APPROVED CREDIT AGREEMENT SUPPLEMENTS. "Approved Credit
Agreement Supplements" means such amendments to the Existing Credit
Agreement as Landlord (and, to the extent required under the
Participation Agreements, the Participants) may approve in writing from
time to time.
CREDIT AGREEMENT COVENANTS. "Credit Agreement Covenants" means
the requirements set forth in Article VI of the Existing Credit
Agreement or any similar types of requirements (including those that may
be added to other Articles of the Existing Credit Agreement) imposed by
future Approved Credit Agreement Supplements.
EXISTING CREDIT AGREEMENT. "Existing Credit Agreement" means
the Credit Agreement dated as of [April 29,] 1997, among Tenant as
Borrower, Bank of America National Trust and Savings Association, as
Agent and Issuing Bank, and other financial institutions named therein,
and as such agreement is modified from time to time by Approved Credit
Agreement Supplements.
UNSECURED MARGIN. The "Unsecured Margin" shall be determined on
any date by reference to the stated (or published, implied) rating by
Standard and Poor's Corporation ("S&P") or by Moody's Investor Service,
Inc. ("Moody's") applicable to Tenant's senior, unsecured debt on that
date (the "Index Debt"). The Unsecured Margin shall be set at the Level
in the pricing grid below which corresponds to the rating of S&P and
Moody's, respectively, applicable to the Index Debt; PROVIDED that (a)
if either Moody's or S&P shall not have in effect a rating (stated or
published, implied) for the Index Debt, then the Unsecured Margin shall
be determined solely with reference to the available rating by the
rating agency that still rates the Index Debt; (b) if the ratings
established by Moody's and S&P for the Index Debt shall indicate two
different but consecutive Levels, the Unsecured Margin shall be based on
the more favorable to Solectron of the two Levels; (c) if the ratings
established by Moody's and S&P for the Index Debt shall indicate two
different but nonconsecutive Levels, the Unsecured Margin shall be the
average of the Unsecured Margins corresponding to such Levels; (d) if
the rating established by Moody's or S&P for the Index Debt shall be
changed (other than as a result of a change in the rating system of
Moody's or S&P), such change shall be effective on the date on which it
is first announced by the applicable rating agency; (e) notwithstanding
anything to the contrary in (a) through (d) above, and subject to (f)
below, if either the rating established by Moody's for the Index Debt is
below Ba2 or the rating established by S&P for the Index Debt is below
BB, the Unsecured Margin shall be 80.0 basis points; and (f)
notwithstanding the foregoing, on any date where an Event of Default has
occurred and is continuing, the Unsecured Margin shall equal the Default
Rate less the Effective Rate.
<TABLE>
<CAPTION>
Levels S & P Rating Moody's Rating Margin
- --------- ---------------- ---------------- ------------------
<S> <C> <C> <C>
Level I BBB+ (or better) Baa1 (or better) 32.5 basis points
Level II BBB Baa2 40.0 basis points
Level III BBB- Baa3 48.75 basis points
Level IV BB+ Ba1 67.5 basis points
Level V BB Ba2 80.0 basis points
All determinations of the Unsecured Margin by Landlord shall, in
the absence of clear and demonstrable error, be binding and conclusive
for purposes of this Lease. Further Landlord may, but shall not be
required, to rely on the determination of the Unsecured Margin set forth
in any certificate delivered by Tenant pursuant to
subparagraph 8(w)(iii) below, and no reduction in the Spread will be
effective because of an improvement in the S&P Rating or the Moody's
Rating before the date that Tenant has notified Landlord thereof by
delivery of such a certificate.
c. EFFECTIVE RATE. The definition of the term "Effective Rate" set
forth in Section 1(u) of the Lease is deleted in its entirety and
replaced with the following:
EFFECTIVE RATE. "Effective Rate" means, for each Base Rental
Period, the per annum rate determined by dividing (A) LIBOR for such
Base Rental Period by (B) 100% minus the Eurodollar Rate Reserve
Percentage for such Base Rental Period. When "LIBOR" or the "Eurodollar
Rate Reserve Percentage" changes upon the commencement of a new Base
Rental Period in accordance with the definitions of those terms herein,
then the Effective Rate shall be automatically increased or decreased,
as the case may be, upon the commencement of such Base Rental Period.
If for any reason Landlord determines that it is impossible or
impractical to determine the Effective Rate with respect to a given Base
Rental Period in accordance with the preceding sentences, then the
"Effective Rate" for that Base Rental Period shall be equal to any
published index or per annum interest rate determined in good faith by
Landlord's Lender to be comparable to LIBOR at the beginning of the
first day of that period. A comparable interest rate might be, for
example, the then existing yield on short term United States Treasury
obligations (as compiled by and published in the then most recently
published United States Federal Reserve Statistical Release H.15(519) or
its successor publication), plus or minus a fixed adjustment based on
Landlord's Parent's comparison of past Eurodollar market rates to past
yields on such Treasury obligations. Any determination by Landlord's
Parent of the Effective Rate hereunder shall, in the absence of clear
and demonstrable error, be conclusive and binding.
d. EXCLUDED TAXES. The definition of the term "Excluded Taxes" set
forth in Section 1(ag) of the Lease is amended to add after the phrase
"the Upfront Fee" in line 2 thereof, the phrase ", any Administrative
Fee".
e. SPREAD. The first sentence of the definition of the term
"Spread" set forth in Section 1(bo) of the Lease is deleted in its
entirety and replaced with the following:
"Spread" means, for each period beginning on and including a
Base Rental Date and ending on, but not including, the next Base Rental
Date, the sum of:
(1)(a) the Average Daily Unsecured Margin for such period
(calculated in the manner described below), times (b) one minus the
Collateral Percentage (as defined below) in effect for such period, plus
(2)(a) twenty-five basis points (25/100 of 1%) times (b) such
Collateral Percentage.
The "Average Daily Unsecured Margin" shall be calculated for
each period by adding together the Unsecured Margins determined daily
for such period and dividing the sum by the number of days in such
period. For example, assume that in a 60 day period, the Unsecured
Margin during the first 10 days is 32.5 basis points. Assume also that
on the 11th day of the period, the rating of Index Debt changes, causing
the Unsecured Margin to increase to 40 basis points, and it remains at
40 basis points throughout the remainder of the period. The Average
Daily Unsecured Margin for such period equals:
[(32.5 basis points x 10 days) + (40 basis points x 50 days)] /60 days =
38.75 basis points.
f. STIPULATED LOSS VALUE. The definition of the term "Stipulated
Loss Value" set forth in Section 1(bp) of the Lease is amended to add
after the phrase "the Upfront Fee" in the penultimate line thereof, the
phrase "or any Administrative Fee".
g. TERM. The first sentence of Section 2 of the Lease is deleted
in its entirety and replaced with the following:
The term of this Lease (herein called the "Term") shall commence
on and include the effective date hereof, and end at 8:00 A.M. on May 1,
2002 (or the next following Business Day if May 1, 2002 is not a
Business Day), unless sooner terminated as herein provided.
h. CALCULATION OF BASE RENT. Section 3(b) of the Lease is deleted
in its entirety and replaced with the following:
(b) CALCULATION OF BASE RENT. Payments of Base Rent shall be
calculated and become due as follows:
(i) for all Base Rental Periods subject to a LIBOR Period
Election of 30 days, 60 days, or 90 days, all Base Rent shall be due on
the Base Rental Date upon which the Base Rental Period ends. The Base
Rent for each such Base Rental Period shall equal (A) Stipulated Loss
Value on the first day of such Base Rental Period, times (B) the sum of
(1) the Effective Rate with respect to such Base Rental Period plus (2)
the Spread in effect during such Base Rental Period, times (C) the
number of days in such Base Rental Period, divided by (D) three hundred
sixty (360).
(ii) For Base Rental Periods subject to a LIBOR Period
Election of greater than 90 days, Base Rent shall be payable in two or
more installments, with an installment becoming due on (1) each Base
Rental Date that occurs during the Base Rental Period (other than the
Base Rental Date upon which the Base Rental Period begins) and (2) the
Base Rental Date upon which the Base Rental Period ends. The amount of
each such installment shall be equal to (A) Stipulated Loss Value on the
first day of such Base Rental Period, times (B) the sum of (1) the
Effective Rate with respect to such Base Rental Period plus (2) the
Spread in effect during the period from and including the preceding Base
Rental Date to but not including the Base Rental Date upon which the
installment is due, times (C) the number of days in the period from and
including the preceding Base Rental Date to but not including the Base
Rental Date upon which the installment is due, divided by (D) three
hundred sixty (360).
Assume, only for the purpose of illustration: that a
hypothetical Base Rental Period contains exactly sixty days; that on the
first day of such Base Rental Period, after deducting a total of
$12,000,000 of Qualified Payments received by Landlord, the resulting
Stipulated Loss Value is $40,000,000; that the Effective Rate computed
with respect to the applicable Base Rental Period is 5.5%; and that the
Spread computed with respect to the applicable Base Rental Period is
0.5%. Under such assumptions, the Base Rent for the hypothetical Base
Rental Period will equal:
$40,000,000 x (5.5% + 0.5%) x 60/360, or $400,000.
i. REQUIREMENTS OF EXISTING CREDIT AGREEMENT. Section 8(ae) of the
Lease is deleted in its entirety and replaced with the following:
REQUIREMENTS OF THE EXISTING CREDIT AGREEMENT. So long as
Tenant shall continue to have any obligations under this Lease or the
Purchase Documents, Tenant shall comply with each and every requirement
set forth in the Credit Agreement Covenants; provided, however, to the
extent that any of the requirements set forth in other provisions of
this Lease or in the Purchase Documents are more stringent, in
Landlord's opinion, than the requirements set forth in Credit Agreement
Covenants, the more stringent requirements set forth herein or in the
Purchase Documents shall control; and provided, further, for purposes of
determining Tenant's compliance with requirements established in this
Lease by reference to the Credit Agreement Covenants, the Existing
Credit Agreement shall be construed as if (1) the Existing Credit
Agreement had been amended from time to time by, and only by, Approved
Credit Agreement Supplements, (2) the Existing Credit Agreement was
continuing after any expiration or termination thereof, and (3) no
consents or approvals had been given for anything requiring a consent or
approval by the terms of the Existing Credit Agreement, other than
consents or approvals incorporated into Approved Credit Agreement
Supplements. Further, though one or more Affiliates of Landlord may
grant or be bound by modifications, waivers, approvals or consents as a
Bank under the Existing Credit Agreement or for other purposes, Landlord
will not itself be so bound as the landlord hereunder or as the seller
or secured party under the Purchase Documents unless the applicable
modification, waiver, approval or consent constitutes an Approved Credit
Agreement Supplement.
j. ADMINISTRATIVE FEE. The following new subsection is added to
and made a part of Section 8 of the Lease:
(af) ADMINISTRATIVE FEE. Tenant shall pay to Landlord an
annual administrative fee (each an "Administrative Fee") in the amount
set forth in the letter dated February 28, 1997, from Landlord to Tenant
on May 1, 1997, and on or before May 1 of each subsequent year during
the term of this Lease; provided that if any of such dates does not fall
on a Business Day, the payment of the Administrative Fee otherwise then
due shall become due on the next following Business Day; and provided,
further, if any Administrative Fees shall have accrued and remain unpaid
on the Designated Payment Date, such accrued unpaid Administrative Fees
shall be due on the Designated Payment Date.
k. EVENTS OF DEFAULT. The following subsections are added to and
made a part of Section 14(a) of the Lease:
(xii) There is no S&P rating for the Index Debt of Tenant
(express or published, implied) and there is no Moody's rating for the
Index Debt of Tenant (express or published, implied).
(xiii) S&P's rating for the Index Debt of Tenant (express or
published, implied) is below BB and Moody's rating for the Index Debt of
Tenant (express or published, implied) is below Ba2.
3. RATIFICATION; PRIOR CALCULATIONS. The Lease and Purchase
Agreement, as amended by this Agreement, are hereby ratified and
confirmed in all respects. To the extent that Base Rent or other
amounts have accrued (or will accrue) under the Lease on or prior to May
1, 1997, the calculation of such amounts shall not be affected by
anything in Section 2 above.
4. ENTIRE AGREEMENT. The Lease, as previously modified and as
modified by this Agreement, and the documents and agreements referred to
in the Lease set forth the entire agreement between the parties
concerning the subject matter of the Lease. The Purchase Agreement, as
modified by this Agreement, and the documents and agreements referred to
in the Purchase Agreement set forth the entire agreement between the
parties concerning the subject matter of the Purchase Agreement. No
further amendment or modification of the Lease, the Purchase Agreement
or this Agreement shall be binding or valid unless expressed in a
writing executed by BNPLC and Solectron.
5. SUCCESSORS AND ASSIGNS. All of the covenants, agreements, terms
and conditions to be observed and performed by the parties hereto shall
be applicable to and binding upon their respective heirs, personal
representatives, successors and, to the extent assignment is permitted
under the Lease, their respective assigns.
6. REFERENCES TO THE LEASE AND PURCHASE AGREEMENT. From and after the
date of this Agreement, all references to the "Lease" or the "Purchase
Agreement" in other documents related to the transactions contemplated
therein are intended to mean the Lease or Purchase Agreement, as
modified by this Agreement, unless the context shall otherwise require.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
BNP LEASING CORPORATION, a
Delaware corporation
By: /s/ Lloyd G. Cox
Lloyd G. Cox, Vice President
[signatures continued on following pages]
<PAGE>
[Continuation of signature pages to Modification Agreement (First
Amendment to Purchase Agreement and Second Amendment to Lease Agreement)
dated effective May 1, 1997]
SOLECTRON CORPORATION, a California
corporation
By: /s/ Richard D. Gilpin
Name: Richard D. Gilpin
Title: V.P. Finance
<PAGE>
CONSENT OF PARTICIPANTS
Each of the undersigned, as a party to a Participation Agreement
between it and BNPLC dated as of September 6, 1994, evidencing its
agreement to participate with BNPLC in certain of the risks and rewards
to BNPLC of the Lease and Purchase Agreement, is entitled to require its
prior written consent to this Agreement. Accordingly, each of the
undersigned hereby grants its consent to this Agreement.
BANQUE NATIONALE DE PARIS
By: /s/ Raphael C. Lumanlan
Name: Raphael C. Lumanlan
Title: Vice President
By: /s/ Charles H. Day
Name: Charles H. Day
Title: Assistant Vice President
<PAGE>
[Continuation of signature pages to Consent of Participants attached to
Modification Agreement (First Amendment to Purchase Agreement and Second
Amendment to Lease Agreement) dated effective May 1, 1997]
ABN AMRO BANK N.V., acting through its
San Francisco International Branch
By: ABN AMRO NORTH AMERICA, INC.,
as its Agent
By: /s/ Thomas R. Wagner
Name: Thomas R. Wagner
Title: Group Vice President
By: /s/ Robin S. Yim
Name: Robin S. Yim
Title: Group Vice President
<PAGE>
[Continuation of signature pages to Consent of Participants attached to
Modification Agreement (First Amendment to Purchase Agreement and Second
Amendment to Lease Agreement) dated effective May 1, 1997]
THE FUJI BANK LIMITED,
SAN FRANCISCO AGENCY
By: /s/ Keiichi Ozawa
Name: Keiichi Ozawa
Title: Joint General Manager
<PAGE>
[Continuation of signature pages to Consent of Participants attached to
Modification Agreement (First Amendment to Purchase Agreement and Second
Amendment to Lease Agreement) dated effective May 1, 1997]
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Roger J. Fleishmann
Name: Roger J. Fleishmann, Sr.
Title: Vice President
<PAGE>
[Continuation of signature pages to Consent of Participants attached to
Modification Agreement (First Amendment to Purchase Agreement and Second
Amendment to Lease Agreement) dated effective May 1, 1997]
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
SAN FRANCISCO AGENCY
By: /s/ Haruhiko Masuda
Name: Haruhiko Masuda
Title: Deputy General Manager
</TABLE>
EXHIBIT 10.14
CREDIT AGREEMENT
dated as of
April 30, 1997
among
SOLECTRON CORPORATION,
The Banks Party Hereto
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
Agent and Issuing Bank
BANCAMERICA SECURITIES, INC.
as Arranger
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. Definitions 1
SECTION 1.01 Defined Terms 1
SECTION 1.02 Classification of Loans and Borrowings 14
SECTION 1.03 Terms Generally 14
SECTION 1.04 Accounting Terms; GAAP 14
ARTICLE II. The Credits 14
SECTION 2.01 Amounts and Terms of Commitments 14
(a) The Revolving Credit 14
(b) Additional Borrowers 15
SECTION 2.02 Loan Accounts 15
SECTION 2.03 Procedure for Borrowing 15
SECTION 2.04 Conversion and Continuation Elections 16
SECTION 2.05 Utilization of Revolving Commitments in Offshore
Currencies 17
SECTION 2.06 Voluntary Termination or Reduction of Total
Commitment 19
SECTION 2.07 Prepayments 19
SECTION 2.08 Repayment 20
SECTION 2.09 Interest 20
SECTION 2.10 The Letter of Credit Subfacility 21
SECTION 2.11 Issuance, Amendment and Renewal of Letters of Credit 22
SECTION 2.12 Participations, Drawings and Reimbursements 24
SECTION 2.13 Automatic Renewals 25
SECTION 2.14 Repayment of Participations 25
SECTION 2.15 Role of the Issuing Bank 26
SECTION 2.16 Obligations Absolute 26
SECTION 2.17 Cash Collateral Pledge 27
SECTION 2.18 Letter of Credit Fees 28
SECTION 2.19 The Borrowers' Agent 28
SECTION 2.20 Uniform Customs and Practice 29
SECTION 2.21 Other Fees 29
(a)Arrangement Fee; Agency Fee 29
(b)Commitment Fees 29
(c)Fees Nonrefundable 29
SECTION 2.22 Computation of Fees and Interest 29
SECTION 2.23 Payments by the Borrowers 30
SECTION 2.24 Payments by the Banks to the Agent 31
SECTION 2.25 Sharing of Payments, Etc. 31
SECTION 2.26 Taxes 32
SECTION 2.27 Illegality 34
SECTION 2.28 Increased Costs and Reduction of Return 34
SECTION 2.29 Funding Losses 35
SECTION 2.30 Inability to Determine Rates 35
SECTION 2.31 Certificates of Banks 35
SECTION 2.32 Substitution of Banks 36
ARTICLE III Representations and Warranties 36
SECTION 3.01 Existence and Power 36
SECTION 3.02 Binding Effect 36
SECTION 3.03 Corporate Authorization; No Conflict 36
SECTION 3.04 Subsidiaries 36
SECTION 3.05 Financial Condition 36
SECTION 3.06 Litigation 37
SECTION 3.07 Governmental Authorization 37
SECTION 3.08 Title to Properties 37
SECTION 3.09 ERISA Compliance 37
SECTION 3.10 Use of Proceeds; Margin Regulations 37
SECTION 3.11 Taxes 37
SECTION 3.12 Environmental Matters 38
SECTION 3.13 Copyrights, Patents, Trademarks and Licenses, Etc. 38
SECTION 3.14 Full Disclosure 38
SECTION 3.15 Regulated Entities 38
SECTION 3.16 Insurance 38
ARTICLE IV Conditions 38
SECTION 4.01 Closing Date 38
SECTION 4.02 Each Credit Event 39
ARTICLE V Affirmative Covenants 40
SECTION 5.01 Financial Statements and Other Information 40
SECTION 5.02 Notices of Material Events 41
SECTION 5.03 Existence; Conduct of Business 41
SECTION 5.04 Payment of Obligations 41
SECTION 5.05 Maintenance of Properties; Insurance 41
SECTION 5.06 Books and Records; Inspection Rights 41
SECTION 5.07 Compliance with Laws 42
SECTION 5.08 Use of Proceeds and Letters of Credit 42
SECTION 5.09 Accession by Subsidiary 42
ARTICLE VI Negative Covenants 42
SECTION 6.01 Subsidiary Indebtedness 42
SECTION 6.02 Liens 43
SECTION 6.03 Sale and Leaseback Transactions 44
SECTION 6.04 Fundamental Changes 44
SECTION 6.05 Margin Stock; Unfriendly Acquisitions 45
SECTION 6.06 Fiscal Year 45
SECTION 6.07 Restrictive Agreements 45
SECTION 6.08 Distributions 46
SECTION 6.09 Adjusted Leverage Ratio 46
SECTION 6.10 Consolidated Tangible Net Worth 46
ARTICLE VII Events of Default 46
ARTICLE VIIIThe Agent 48
SECTION 8.01 Appointment and Authorization 48
SECTION 8.02 Delegation of Duties 49
SECTION 8.03 Liability of Agent and Issuing Bank 49
SECTION 8.04 Reliance by Agent 49
SECTION 8.05 Notice of Default 49
SECTION 8.06 Credit Decision 50
SECTION 8.07 Indemnification 50
SECTION 8.08 Agent in Individual Capacity 51
SECTION 8.09 Successor Agent 51
ARTICLE IX Miscellaneous 51
SECTION 9.01 Notices 51
SECTION 9.02 Waivers; Amendments 52
SECTION 9.03 Expenses; Indemnity; Damage Waiver 52
SECTION 9.04 Successors and Assigns 53
SECTION 9.05 Survival 55
SECTION 9.06 Counterparts; Integration; Effectiveness 55
SECTION 9.07 Severability 56
SECTION 9.08 Automatic Debits of Fees 56
SECTION 9.09 Right of Setoff 56
SECTION 9.10 Governing Law; Jurisdiction; Consent to Service of
Process 56
SECTION 9.11 WAIVER OF JURY TRIAL 57
SECTION 9.12 Headings 57
SECTION 9.13 Confidentiality 57
SECTION 9.14 Interest Rate Limitation 58
SECTION 9.15 Judgment Currency 58
SECTION 9.16 No Third Parties Benefited 58
SECTION 9.17 Entire Agreement 58
SCHEDULES:
Schedule 2.01 Commitments
Schedule 3.04 Borrower's Subsidiaries
Schedule 3.05 Liabilities
Schedule 3.06 Litigation
Schedule 3.09 ERISA Matters
Schedule 3.13 Intellectual Property
Schedule 6.01 Indebtedness
Schedule 6.02 Liens
Schedule 6.07 Restrictions
Schedule 9.01 Addresses for Notices; Lending Offices
EXHIBITS:
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Compliance Certificate
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Conversion/Continuation
Exhibit E Form of Additional Borrower Notice
Exhibit F Form of Legal Opinion of Borrower's Counsel
Exhibit G Form of Additional Borrower Request and Assumption Agreement
Exhibit H Form of Continuing Guaranty (Multicurrency)
<PAGE>
CREDIT AGREEMENT dated as of April 30, 1997, among SOLECTRON
CORPORATION, a Delaware corporation, the BANKS party hereto, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and Issuing
Bank.
The Company (such term and each other capitalized term used but not
otherwise defined herein having the meaning assigned to it in Article I)
has requested the Banks to establish the credit facilities provided for
herein to be used for the general corporate purposes of the Borrowers
and the Subsidiaries. The Banks are willing to establish such credit
facilities upon the terms and subject to the conditions set forth
herein. Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1. DEFINED TERMS. As used in this Agreement, the following terms have
the meanings specified below:
"ABR," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"ADDITIONAL BORROWER" has the meaning specified in subsection
2.01(b).
"ADDITIONAL BORROWER NOTICE" has the meaning specified in subsection
2.01(b).
"ADDITIONAL BORROWER REQUEST AND ASSUMPTION AGREEMENT" has the
meaning specified in Section 5.09.
"ADJUSTED LEVERAGE RATIO" means, in respect of the Company and its
Subsidiaries on a consolidated basis at the end of any fiscal quarter,
the ratio of (a) (without duplication) (i) Consolidated Funded Debt PLUS
(ii) Guarantee obligations PLUS (iii) Indebtedness with respect to
synthetic leases and securitized assets PLUS (iv) Indebtedness in
respect of letters of credit (including the Letters of Credit) MINUS (v)
Permitted Subordinated Indebtedness, to (b) (i) operating income PLUS
(ii) depreciation and amortization charges, in each case, for the period
of four fiscal quarters ended on the applicable date of determination.
"ADJUSTED LIBO RATE" means, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO
Rate for such Interest Period multiplied by (b) the Eurocurrency Reserve
Percentage.
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under Control with the Person
specified.
"AGENT" means BofA, in its capacity as agent for the Banks
hereunder.
"AGENT/IB-RELATED PERSONS" means BofA as Agent and Issuing Bank, and
any successor Agent arising under Section 8.09, together with their
respective Affiliates, and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"AGGREGATE L/C COMMITMENT" means the combined L/C Commitments of the
Banks, in the initial aggregate amount of $25,000,000, as such amount
may be reduced from time to time pursuant to this Agreement. The
Aggregate L/C Commitment is a part of the Total Commitment rather than a
separate, independent commitment.
"AGREED ALTERNATE CURRENCY" has the meaning specified in
subsection 2.05(e).
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal to
the greater of (a) the Reference Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus one-half of 1%.
Any change in the Alternate Base Rate due to a change in the Reference
Rate or the Federal Funds Effective Rate shall be effective from and
including the effective date of such change in the Reference Rate or the
Federal Funds Effective Rate, respectively.
"APPLICABLE MARGIN" means, for any day, with respect to any
Eurocurrency Loan, CD Rate Loan or ABR Loan or with respect to the
commitment fees and letter of credit fees payable hereunder, as the case
may be, the applicable margin or fee set forth in the pricing grid
attached as Annex I, as determined in accordance with the parameters for
calculation and adjustment of such margin or fee also set forth on
Annex I.
"APPLICABLE PERCENTAGE" means, with respect to any Bank, the
percentage of the Total Commitment represented by such Bank's
Commitment. If the Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Commitments
most recently in effect, giving effect to any assignments.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Bank and an assignee (with the consent of any party
whose consent is required by Section 9.04), and accepted by the Agent,
in substantially the form of EXHIBIT A or any other form approved by the
Agent.
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
cost of internal legal services and all disbursements of internal
counsel, PROVIDED that "Attorney Costs" shall mean and include ALL fees
and disbursements of any law firm or other external counsel, the
allocated cost of internal legal services and all disbursements of
internal counsel if incurred by the Agent, the Issuing Bank or any Bank
in connection with the enforcement or protection of its rights under
this Agreement or any other Loan Document.
"AVAILABILITY PERIOD" means the period from and including the
Closing Date to but excluding the Maturity Date.
"BANKS" means the Persons listed on SCHEDULE 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Acceptance. References to "Banks"
shall include BofA, including in its capacity as Issuing Bank; for
purposes of clarification only, to the extent that BofA may have any
rights or obligations in addition to those of the Banks due to its
status as Issuing Bank, its status as such will be specifically
referenced.
"BOARD" means the Board of Governors of the Federal Reserve System
of the United States of America.
"BofA" means Bank of America National Trust and Savings Association.
"BORROWERS" means the Company and each Additional Borrower.
"BORROWERS' AGENT" means the Company, and any successor agent for
the Borrowers pursuant to Section 2.19.
"BORROWING" means Revolving Loans of the same Type made, converted
or continued on the same date and, in the case of Eurocurrency Loans or
CD Rate Loans, as to which a single Interest Period is in effect.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are
authorized or required by law to remain closed: PROVIDED that, when used
in connection with a Eurocurrency Loan, the term "BUSINESS DAY" shall
also exclude any day on which banks are not open for dealings in Dollar
deposits in the London interbank market, and with respect to any
disbursement and payments in calculations pertaining to any Offshore
Currency Loan, a day on which commercial banks are open for foreign
exchange business in London, England, and on which dealings in the
relevant Offshore Currency are carried on in the applicable offshore
foreign exchange interbank market in which disbursements of or payments
in such Offshore Currency will be made or received hereunder.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP, and the amount of such obligations shall be the capitalized amount
thereof determined in accordance with GAAP.
"CD RATE" means, for each Interest Period in respect of CD Rate
Loans comprising a part of the same Borrowing, the rate of interest
(rounded upward to the nearest 1/100th of 1%) as determined by the Agent
pursuant to the following formula:
CD Rate = Certificate of Deposit Rate
--------------------------- + Assessment Rate
1.00 - Reserve Percentage
Where:
"Assessment Rate" means the maximum net annual assessment rate
(whether or not applicable to any Bank) determined by the Agent to be in
effect on the first day of such Interest Period payable by banks to the
Federal Deposit Insurance Corporation, or any successor, for insuring
time deposits made in Dollars at the offices of banks in the United
States.
"Certificate of Deposit Rate" means for any Interest Period
for CD Rate Loans the rate of interest per annum determined by the Agent
to be the arithmetic mean (rounded upward to the nearest 1/100th of 1%)
of the rates notified to the Agent as the rates of interest bid by two
or more certificate of deposit dealers of recognized standing selected
by the Agent for the purchase at face value of Dollar certificates of
deposit issued by major United States banks, for a maturity comparable
to such Interest Period and in the approximate amount of BofA's CD Rate
Loan, at the time selected by the Agent on the first day of such
Interest Period.
"Reserve Percentage" means for any Interest Period for CD Rate
Loans the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%), as determined by the Agent, in
effect on the first day of such Interest Period (including any ordinary,
marginal, emergency, supplemental, special and other reserve
percentages) prescribed by the Board for determining the maximum
reserves to be maintained by member banks of the Federal Reserve System
with deposits exceeding $1,000,000,000 for new non-personal time
deposits for a period comparable to such Interest Period and in an
amount of $100,000 or more.
"CD RATE LOAN" means a Revolving Loan that bears interest based on
the CD Rate.
"CHANGE IN CONTROL" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within
the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date
hereof) other than an employee benefit plan or related trust of the
Company or of the Company and any Subsidiaries, of shares representing
more than 35% of the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Company; or (b) occupation
of a majority of the seats (other than vacant seats) on the board of
directors of the Company by Persons who were neither (i) nominated by
the board of directors of the Borrower nor (ii) appointed by directors
so nominated.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law,
rule or regulation or in the interpretation or application thereof by
any Governmental Authority after the date of this Agreement or (c)
compliance by any Bank or the Issuing Bank (or by any lending office of
such Bank or by such Bank's or the Issuing Bank's holding company, if
any) with any request, guideline or directive (whether or not having the
force of law) of any Governmental Authority made or issued after the
date of this Agreement.
"CLASS," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are
Eurocurrency Loans, CD Rate Loans or ABR Loans.
"CLOSING DATE" means the date on which the conditions specified in
Section 4.01 and 4.02 are satisfied (or waived in accordance with
Section 9.02).
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" means, with respect to each Bank, the commitment of
such Bank to make Revolving Loans and to acquire participations in
Letters of Credit hereunder, as such Commitment may be (a) reduced from
time to time pursuant to Section 2.06 and (b) reduced or increased from
time to time pursuant to assignments by or to such Bank pursuant to
Section 9.04. The initial amount of each Bank's Commitment is set forth
on SCHEDULE 2.01, or in the Assignment and Acceptance pursuant to which
such Bank shall have assumed its Commitment, as applicable.
"COMPANY" means Solectron Corporation, a California corporation.
"COMPLIANCE CERTIFICATE" means a certificate in the form of
EXHIBIT B.
"COMPUTATION DATE" has the meaning specified in subsection 2.05(a).
"CONSOLIDATED FUNDED DEBT" means, as of the last day of any fiscal
quarter, the sum for the Company and its Subsidiaries as of such day,
of, without duplication, (a) the aggregate outstanding principal amount
of the Loans, (b) the aggregate outstanding principal amount of
Indebtedness for borrowed money and (c) the aggregate outstanding
capitalized amount of Capital Lease Obligations, all as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, as of the last day of any
fiscal quarter, all tangible assets on the consolidated balance sheet of
the Company and its Subsidiaries, as determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means, as of the last day of any
fiscal quarter, (a) total shareholders' equity of the Company and its
Subsidiaries MINUS (b) the aggregate amount of all intangible assets on
the consolidated balance sheet of the Company and its Subsidiaries, all
as determined on a consolidated basis in accordance with GAAP.
"CONTRACTUAL OBLIGATIONS" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or
any of its property is bound.
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by
contract or otherwise. "CONTROLLING" and "CONTROLLED" have meanings
correlative thereto.
"CONVERSION DATE" means any date on which the Borrowers' Agent on
behalf of itself or another Borrower elects to convert an ABR Loan to a
CD Rate Loan or a Eurocurrency Loan in Dollars; a CD Rate Loan to a
Eurocurrency Loan in Dollars or an ABR Loan; or a Eurocurrency Loan in
Dollars to a CD Rate Loan or an ABR Loan.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured
or waived, becomes an Event of Default.
"DOLLARS" or "$" refers to lawful money of the United States of
America.
"EFFECTIVE AMOUNT" means (a) with respect to any Revolving Loans on
any date the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Revolving
Loans occurring on such date; and (b) with respect to any outstanding
L/C Obligations on any date the amount of such L/C Obligations on such
date after giving effect to any issuances, amendments and renewals of
Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any
Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date. For
purposes of determining the Effective Amount in respect of any Offshore
Currency Loans to be made as part of a Borrowing or of any outstanding
Offshore Currency Loans, the amount of any such Offshore Currency Loans
shall be the Equivalent Amount in Dollars thereof, and for purposes of
determining the Effective Amount in respect of any Letters of Credit to
be issued in an Offshore Currency or any Offshore Currency L/C
Obligations outstanding, the amount of any such Letters of Credit and
other Offshore Currency L/C Obligations shall be the Equivalent Amount
in Dollars thereof, in each case based upon the calculation thereof as
of the most recent Computation Date therefor pursuant to
subsection 2.05(a). Additionally, for purposes of Section 2.07, the
Effective Amount shall be determined without giving effect to any
mandatory prepayments to be made under subsection 2.07(b) or 2.07(c),
until such payments are made.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c) a
Person that is primarily engaged in the business of commercial banking
and that is (i) a subsidiary of a Bank, (ii) a subsidiary of a Person of
which a Bank is a subsidiary, or (iii) a Person of which a Bank is a
subsidiary.
"ENVIRONMENTAL LAWS" means all (a) laws, rules, regulations, codes
and ordinances and (b) all orders, decrees, injunctions or binding
agreements issued, promulgated or entered into by any Governmental
Authority and by or affecting the Borrower, in each case relating in any
way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any
Hazardous Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any
Subsidiary directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or
(e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the
foregoing.
"EQUIVALENT AMOUNT" means (a) whenever this Agreement requires or
permits a determination on any date of the equivalent in Dollars of an
amount expressed in an Offshore Currency, the equivalent amount in
Dollars of an amount expressed in an Offshore Currency as determined by
the Agent on such date on the basis of the Spot Rate for the purchase of
such Offshore Currency with Dollars on the relevant Computation Date
provided for hereunder; or (b) whenever this Agreement requires or
permits a determination on any date of the equivalent in an Offshore
Currency of an amount expressed in Dollars, the equivalent amount in an
Offshore Currency of an amount expressed in Dollars as determined by the
Agent on such date on the basis of the Spot Rate for the purchase of
Dollars with such Offshore Currency on the relevant Computation Date
provided for hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event," as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect
to a Plan (other than an event for which the 30-day notice period is
waived); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section
302 of ERISA), whether or not waived; (c) the filing pursuant to Section
412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (d) the
incurrence by the Company or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by the Company or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any
Plan; (f) the incurrence by the Company or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by the Company
or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Company or any ERISA Affiliate of any
notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA.
"EUROCURRENCY," when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Adjusted LIBO
Rate.
"EUROCURRENCY RESERVE PERCENTAGE" for any day for any Interest
period the reserve percentage applicable during such Interest Period
under regulations issued from time to time by the Board or any successor
and, in the case of Offshore Currency Loans denominated in pounds
sterling, the reserve percentage applicable during such Interest Period
under regulations issued from time to time by the Bank of England or any
successor and, in the case of Offshore Currency Loans denominated in
other foreign currencies, the reserve percentage applicable during such
Interest Period under regulations issued from time to time by such other
foreign central bank or any successors thereto (or, in each case, if
different percentages shall be applicable during different periods
within such Interest Period, the daily average of such percentages
during such Interest Period) for determining the maximum reserve
percentage (expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to any Bank and
including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to
as "Eurocurrency liabilities").
"EVENT OF DEFAULT" has the meaning assigned to such term in Article
VII.
"EXISTING FACILITY" means the $100,000,000 credit facility under
that certain Multicurrency Credit Agreement dated as of June 30, 1993,
among the Company and certain of its Subsidiaries, the financial
institutions from time to time party thereto, and BofA as "Agent" and
"Issuing Bank" thereunder (as the same may have been amended, modified
or otherwise supplemented).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New York
(including any such successor, "H.15(519)") on the preceding Business
Day opposite the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such preceding
Business Day, the rate for such day will be the arithmetic mean as
determined by the Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time)
on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"FINANCIAL OFFICER" means the chief financial officer, Vice
President-Finance, principal accounting officer, treasurer or controller
of the Company.
"FURTHER TAXES" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges (including, without limitation, net income taxes and franchise
taxes), and all liabilities with respect thereto, imposed by any
jurisdiction on account of amounts payable or paid pursuant to Section
2.26.
"GAAP" means generally accepted accounting principles in the United
States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States
of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other
obligation of any other Person (the "PRIMARY OBLIGOR") in any matter,
whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof (b) to purchase or
lease property, securities or services for the purpose of assuring the
owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial
statement condition or liquidity of the primary obligor so as to enable
the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; PROVIDED
that the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes regulated pursuant to any Environmental
Law.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily
paid (excluding deferred compensation obligations owed to current and
former directors, officers and employees), (d) all obligations of such
Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable, measured in accordance
with GAAP, incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise to be
secured by) any Lien on property owned or acquired by such Person,
whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital
Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty supporting Indebtedness, (j) all
obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances, and (k) all obligations, contingent or otherwise,
with respect to synthetic leases or securitized assets. The
Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of
such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that
such Person is not liable therefor.
"INDEX DEBT" means senior, unsecured, long-term indebtedness for
borrowed money of the Borrower that is not guaranteed by any other
Person or subject to any other credit enhancement.
"INTEREST PAYMENT DATE" means, with respect to any CD Rate Loan or
Eurocurrency Loan, the last day of each Interest Period applicable to
such Loan and, with respect to ABR Loans, the last Business Day of each
calendar quarter and each date an ABR Loan is converted into a
Eurocurrency Loan or a CD Rate Loan; PROVIDED, HOWEVER, that if any
Interest Period for a CD Rate Loan or a Eurocurrency Loan exceeds 90
days or three months, respectively, interest shall also be paid on the
date which falls 90 days or three months after the beginning of such
Interest Period.
"INTEREST PERIOD" means, (a) with respect to any Eurocurrency Loan,
the period commencing on the Business Day the Eurocurrency Loan is
disbursed or continued or on the Conversion Date on which a Loan is
converted to the Eurocurrency Loan and ending on the date one, two,
three or six months thereafter, as selected by the Borrowers' Agent on
behalf of itself or another Borrower in its Notice of Borrowing or
Notice of Conversion/Continuation, or on the date one week thereafter,
in the case of any Eurocurrency Loans made on the date of a drawing
under a Letter of Credit as provided in Section 2.12 (whether as part of
any Borrowing of Offshore Currency Loans or as part of any L/C
Borrowing) and (b) with respect to any CD Rate Loan, the period
commencing on the Business Day the CD Rate Loan is disbursed or
continued or on the Conversion Date on which a Loan is converted to the
CD Rate Loan and ending on the date 30, 60, 90 or 180 days thereafter,
as selected by the Borrowers' Agent on behalf of itself or another
Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; PROVIDED that: (i) if any Interest Period
pertaining to a Eurocurrency Loan or CD Rate Loan would otherwise end on
a day which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a
Eurocurrency Loan, the result of such extension would be to carry such
Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period pertaining to a Eurocurrency Loan that begins
on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the ending calendar month
of such Interest Period) shall end on the last Business Day of the
ending calendar month of such Interest Period; and (iii) no Interest
Period for any Loan shall extend beyond the Maturity Date.
"ISSUING BANK" means BofA, in its capacity as issuer of Letters of
Credit hereunder, and its successors in such capacity. The Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of such Issuing Bank, in which case the term
"Issuing Bank" shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
"L/C ADVANCE" means each Bank's participation in any L/C Borrowing
in accordance with its Applicable Percentage.
"L/C AMENDMENT APPLICATION" means an amendment application form for
amendments of outstanding performance or standby letters of credit as
shall at any time be in use at BofA, as BofA shall request.
"L/C APPLICATION" means an application form for issuances of standby
letters of credit as shall at any time be in use at BofA, as BofA shall
request.
"L/C BORROWING" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
under subsection 2.12(b).
"L/C COMMITMENT" means for each Bank the commitment to participate
in Letters of Credit issued or outstanding pursuant to Article II and to
make L/C Advances, in an aggregate amount not to exceed on any date the
amount set forth with respect to such date opposite the Bank's name in
SCHEDULE 2.01) under the heading "L/C Commitment," as the same shall be
reduced as a result of a reduction in the Aggregate L/C Commitment
pursuant to Section 2.06 or as a result of any assignment pursuant to
Section 9.04; PROVIDED that each Bank's L/C Commitment is a part of its
Commitment rather than a separate, independent commitment.
"L/C OBLIGATIONS" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit, PLUS (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all L/C
Borrowings.
"L/C-RELATED DOCUMENTS" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other consents,
waivers and other agreements and instruments entered into by any
Borrower with (or in favor of) the Agent, the Issuing Bank or any of the
Banks and relating to any Letter of Credit, including any of the Issuing
Bank's standard form documents for letter of credit issuances, and
delivered to the Agent, the Issuing Bank or the Banks pursuant to the
requirements of this Agreement or in connection with any Letter of
Credit.
"LENDING OFFICE" means with respect to each Bank, the office of such
Bank designated as such on SCHEDULE 9.01 or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the
Agent.
"LETTER OF CREDIT" means a standby letter of credit issued pursuant
to this Agreement.
"LIBO RATE" means the rate of interest per annum determined by the
Agent to be the rate of interest per annum appearing on Telerate display
page 3750 (or such other display page on the Telerate System as may
replace such page) for Dollar deposits in the approximate amount of the
Offshore Rate Loan to be made, continued or converted by BofA and having
a maturity comparable to such Interest Period, at approximately
11:00 a.m. (London time) two Business Days prior to the commencement of
such Interest Period (rounded upwards if necessary to the next 1/16 of
1%). In the event that such rate is not available at such time for any
reason, then the "LIBO Rate" with respect to such Eurocurrency Borrowing
for such Interest Period shall be the rate at which deposits in Dollars
or in the applicable Offshore Currency approximately equal in principal
amount to such Eurocurrency Borrowing and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Agent in immediately available funds in the London interbank market (or
other applicable offshore interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such
Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance or security interest in,
on or of such asset, and (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention
agreement relating to such asset.
"LOAN DOCUMENTS" means this Agreement, the L/C-Related Documents and
any and all other consents, waivers, documents, agreements, instruments
and certificates delivered to the Agent, the Issuing Bank or the Banks
in connection herewith or therewith.
"LOANS" means the loans and L/C Advances made by the Banks to the
Borrowers pursuant to this Agreement.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation U promulgated by the Board.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or
otherwise, of the Company and the Subsidiaries taken as a whole, (b) the
ability of any Borrower to perform any of its obligations under this
Agreement or (c) the rights of or benefits available to the Banks
pursuant to this Agreement.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Company and its Subsidiaries in an
aggregate principal amount exceeding $10,000,000. For purposes of
determining Material Indebtedness, the "principal amount" of the
obligations of the Company or any Subsidiary in respect of any Hedging
Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Company or such Subsidiary
would be required to pay if such Hedging Agreement were terminated at
such time.
"MATURITY DATE" means the fifth anniversary of the date of this
agreement or such earlier date on which the Commitments terminate as
provided herein.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NOTICE OF BORROWING" means a notice given by the Borrowers' Agent
on behalf of itself or another Borrower to the Agent pursuant to
Section 2.03, in substantially the form of EXHIBIT C.
"NOTICE OF CONVERSION/CONTINUATION" means a notice given by the
Borrowers' Agent on behalf of itself or another Borrower to the Agent
pursuant to Section 2.04, in substantially the form of EXHIBIT D.
"OFFSHORE CURRENCY" means at any time English pounds sterling,
French francs, German deutsche marks, Italian lira and any Agreed
Alternate Currency.
"OFFSHORE CURRENCY COMMITMENT" means $50,000,000. The Offshore
Currency Commitment is part of the Total Commitment rather than a
separate, independent Commitment.
"OFFSHORE CURRENCY L/C OBLIGATIONS" means any L/C Obligations
denominated in an Offshore Currency or in Offshore Currencies.
"OFFSHORE CURRENCY LOAN" means any Eurocurrency Loan denominated in
an Offshore Currency.
"ORGANIZATION DOCUMENTS" means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, and all applicable resolutions of the
board of directors (or any committee thereof) of such corporation.
"OTHER TAXES" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement.
"OVERNIGHT RATE" means, for any day, (a) the rate of interest per
annum, as determined by the Agent, at which overnight deposits in the
relevant Offshore Currency, in an amount approximately equal to the
amount with respect to which such rate is being determined, would be
offered for such day by BofA's London Branch (or other applicable
office, as selected by the Agent) to major banks in the London or other
applicable offshore interbank market; or (b), if no such overnight
deposits are offered by BofA in any Offshore Currency, the rate of
interest per annum, as determined by the Agent, equal to the cost of
funding the amount with respect to which such rate is being determined
for such day.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar
functions.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law by any Governmental Authority for taxes
that are not yet due or are being contested in compliance with Section
5.04;
(b) carriers', warehousemen's, mechanics', material men's,
repairmen's and other like Liens imposed by law, and any other
involuntary, statutory or common law Lien arising in the ordinary course
of business and securing obligations that are not overdue by more than
30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the
ordinary course of business;
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Company or any
Subsidiary;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(g) Liens which constitute rights of set-off of a customary nature
or banker's Liens with respect to amounts on deposit arising by
operation of law in connection with arrangements entered into with banks
in the ordinary course of business;
(h) Liens in favor or customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) leases or subleases and licenses and sublicenses granted to
others in the ordinary course of business not interfering in any
material respect with the business of the Company or its Subsidiaries
taken as a whole, and any interest or title of any lessor or licensor
under any lease or license;
PROVIDED that the term "Permitted Encumbrances" shall not include any
Lien securing Indebtedness.
"PERMITTED SUBORDINATED INDEBTEDNESS" means Indebtedness of the
Company which is subordinated (on terms satisfactory to the Agent and
the Required Banks) to the Indebtedness of the Borrowers owing or
arising under this Agreement and the other Loan Documents, including the
Company's 6% Convertible Subordinated Notes due 2001.
"PERSON" means any natural person, corporation, limited liability
company, joint venture, association, company, partnership, Governmental
Authority or other entity.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which
the Borrower or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"REFERENCE RATE" means the rate of interest per annum publicly
announced from time to time by BofA as its "reference rate" in effect at
its principal office in San Francisco; each change in the Reference Rate
shall be effective from and including the date on which a change in the
reference rate is publicly announced as being effective.
"REGISTER" has the meaning set forth in subsection 9.04(c).
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"REQUIRED BANKS" means at any time Banks then holding in excess of
66-2/3% of the then aggregate unpaid principal amount of the Loans, or,
if no such principal amount is then outstanding, Banks then having in
excess of 66-2/3% of the Commitments.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon
the Person or any of its property or to which the Person or any of its
property is subject.
"REVOLVING LOAN" has the meaning set forth in subsection 2.01.
"S&P" means Standard & Poor's Rating Group of Standard & Poor's
Corporation.
"SAME DAY FUNDS" means (a) with respect to disbursements and
payments in Dollars, immediately available funds, and (b) with respect
to disbursements and payments in an Offshore Currency, same day or other
funds as may be determined by the Agent to be customary in the place of
disbursement or payment for the settlement of international banking
transactions in the relevant Offshore Currency.
"SPECIAL PURPOSE SUBSIDIARY" shall mean any bankruptcy remote
special purpose subsidiary of the Company formed for the purpose of
selling undivided interests in accounts receivable and/or other assets
transferred by the Company and/or any of its Subsidiaries to such
subsidiary for financing purposes, including Solectron Funding
Corporation, a corporation to be organized under the laws of the State
of Delaware.
"SPOT RATE" for a currency means the rate quoted by BofA as the spot
rate for the purchase by BofA of such currency with another currency
through its Foreign Exchange Trading Center located in San Francisco,
California, at approximately 8:00 a.m. (San Francisco time) on the date
two Banking Days prior to the date as of which the foreign exchange
computation is made.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated
with those of the parent in the parent's consolidated financial
statements if such financial statements were prepared in accordance with
GAAP as of such date.
"Subsidiary" means any subsidiary of the Company and any Special
Purpose Subsidiary.
"TAXES" means any and all present or future taxes, levies, deposits,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TOTAL COMMITMENT" means, at any time, the aggregate amount of
Commitments in effect at such time.
"TRANSACTIONS" means the execution, delivery and performance by the
Borrowers of this Agreement, the borrowing of Loans, the use of the
proceeds thereof and the issuance of Letters of Credit hereunder.
"TYPE," when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate,
the Alternate Base Rate or the CD Rate.
"UNFRIENDLY ACQUISITION" means any Acquisition that has not, at the
time of the first public announcement of an offer relating thereto, been
approved by the board of directors (or other legally recognized
governing body) of the Person to be acquired. For purposes of this
definition, "ACQUISITION" shall mean any transaction or series of
related transactions for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any
Person, or otherwise causing any Person to become a subsidiary, or (b) a
merger or consolidation or any other combination with another Person
(other than a Person that is a Subsidiary) in which the Company or a
Subsidiary is the surviving entity.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part l of Subtitle E of Title IV of ERISA.
2. CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this
Agreement, Loans may be classified and referred to by Class (E.G. a
"Revolving Loan") or by Type (E.G., a "Eurocurrency Loan") or by Class
and Type (E.G., a "Eurocurrency Revolving Loan"). Borrowings also may
be classified and referred to by Class (E.G., a "Revolving Borrowing")
or by Type (E.G., a "Eurocurrency Borrowing") or by Class and Type
(E.G., a "Eurocurrency Revolving Borrowing").
3. TERMS GENERALLY. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation." The word "will" shall be construed to have the same
meaning and effect as the word "shall." Unless the context requires
otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to
such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions
on such amendments, supplements or modifications set forth herein), (b)
any reference herein to any Person shall be construed to include such
Person's successors and assigns. (c) the words "herein", "hereof and
hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property'" shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties,
including all securities, accounts and contract rights. This Agreement
and other Loan Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way
of consent, approval or waiver shall be deemed modified by the phrase
"in its/their sole discretion." This Agreement and the other Loan
Documents are the result of negotiations among and have been reviewed by
counsel to the Agent, the Company and the other parties, and are the
products of all parties. Accordingly, they shall not be construed
against the Banks or the Agent merely because of the Agent's or Banks'
involvement in their preparation.
4. ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time;
PROVIDED that, if the Company notifies the Agent that the Company
requests an amendment to any provision hereof to eliminate the effect of
any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Agent notifies the
Company that the Required Banks request an amendment to any provision
hereof for such purpose), regardless of whether any such notice is given
before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect
and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
II. THE CREDITS
1. AMOUNTS AND TERMS OF COMMITMENTS.
(a) THE REVOLVING CREDIT. Each Bank severally agrees, on the terms
and conditions hereinafter set forth, to make Loans in Dollars or an
Offshore Currency to the Company, and (subject to compliance with
subsection 2.01(b)) in an Offshore Currency to each Additional Borrower
(each such Loan, sometimes referred to as a "Revolving Loan" and,
collectively, the "Revolving Loans") from time to time on any Business
Day during the Availability Period, in an aggregate amount (determined
in Dollars, including, when applicable, in accordance with the
Equivalent Amount of any requested and outstanding Offshore Currency
Loans pursuant to subsection 2.05(a)) not to exceed at any time
outstanding the Dollar amount set forth opposite such Bank's name in
SCHEDULE 2.01 under the heading "Commitment" (such amount as the same
may be reduced as a result of a reduction in the Commitments pursuant to
Section 2.06 or as a result of any assignment pursuant to Section 9.04,
such Bank's "COMMITMENT"); PROVIDED, HOWEVER, that the Effective Amount
of all Revolving Loans PLUS the Effective Amount of all L/C Obligations
shall not exceed the Total Commitment; PROVIDED FURTHER that the
Effective Amount of all Offshore Currency Loans shall not exceed the
Offshore Currency Commitment; and PROVIDED FURTHER, that the Effective
Amount of the Revolving Loans of any Bank PLUS the participation of such
Bank in the Effective Amount of all L/C Obligations shall not exceed
such Bank's Commitment. Revolving Loans may be made in Dollars (in the
case of ABR Loans and CD Rate Loans) and in Dollars or Offshore
Currencies (in the case of Eurocurrency Loans and Letters of Credit).
Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrowers may from time to time borrow under this
subsection 2.01(a), prepay pursuant to Section 2.07 and reborrow
pursuant to this subsection 2.01(a). The Total Commitment on the date
of this Agreement is $100,000,000 and is allocated among the Banks as
set forth in SCHEDULE 2.01.
(b) ADDITIONAL BORROWERS. The Banks and the Agent in their sole
discretion may hereafter agree that a Subsidiary that becomes a party
hereto after the Closing Date pursuant to Section 5.09 (an "ADDITIONAL
BORROWER") shall be entitled to request Offshore Currency Loans and
Letters of Credit denominated in an Offshore Currency hereunder. The
parties hereto acknowledge and agree that prior to any Additional
Borrower so becoming entitled to utilize the credit facilities provided
for herein the Agent and the Banks shall have first received (i) an
Additional Borrower Request and Assumption Agreement as provided in
Section 5.09, (ii) the parent guaranty specified in Section 5.09, and
(iii) such other documents or information (including a legal opinion
covering such matters as the Agent or any Bank may reasonably request),
in form and substance satisfactory to the Agent and the Banks, as may be
required by the Agent or any of the Banks in their sole discretion. If
the Agent and the Banks shall agree that an Additional Borrower shall be
entitled to request Revolving Loans and Letters of Credit hereunder, the
Agent shall send a notice in substantially the form of EXHIBIT E (an
"Additional Borrower Notice") to the Borrowers' Agent and the Banks
designating the effective date thereof, whereupon each of the Banks
agrees to permit such Additional Borrower to request Offshore Currency
Loans, and the Issuing Bank and the Banks agree to permit such
Additional Borrower to request Letters of Credit in an Offshore
Currency, on the terms and conditions set forth herein, and each of the
parties agrees that such Additional Borrower otherwise shall be a
Borrower for all purposes of this Agreement.
2. LOAN ACCOUNTS. The Loans made by each Bank shall be evidenced by
one or more loan accounts maintained by such Bank in the ordinary course
of business. The loan accounts or records maintained by the Agent and
each Bank shall be PRIMA FACIE evidence as to the amount of the Loans
made by the Banks to the Borrowers and the interest and payments
thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrowers
hereunder to pay any amount owing with respect to the Loans. In case of
a discrepancy between the entries in the Agent's books and any Bank's
books, such Bank's books shall constitute PRIMA FACIE evidence of the
accuracy of the information so recorded.
3. PROCEDURE FOR BORROWING.
(a) Each Borrowing shall be made upon the Borrowers' Agent's
irrevocable written notice delivered to the Agent in accordance with
Section 9.01 in the form of a Notice of Borrowing (which notice must be
received by the Agent prior to 9:00 a.m. (San Francisco time) (i) five
Business Days prior to the requested Borrowing date, in the case of
Offshore Currency Loans; (ii) three Business Days prior to the requested
Borrowing date, in the case of CD Rate Loans and Eurocurrency Loans
denominated in Dollars; and (iii) one Business Day prior to the
requested Borrowing date, in the case of ABR Loans, specifying in each
case: (1) the identity of the Borrower; (2) the amount of the Borrowing
(in the case of a Borrowing in an Offshore Currency, expressed in
Dollars), which shall be in an aggregate minimum principal amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof;
(3) the requested Borrowing date, which shall be a Business Day;
(4) whether the Borrowing is to be comprised of Eurocurrency Loans, CD
Rate Loans or ABR Loans; (5) in the case of a Borrowing comprised of
Offshore Currency Loans, the currency thereof; and (6) the duration of
the Interest Period applicable to such Loans included in such notice.
If the Notice of Borrowing shall fail to specify the duration of the
Interest Period for any Borrowing comprised of CD Rate Loans or
Eurocurrency Loans, such Interest Period shall be 90 days or three
months, respectively. The Equivalent Amount of any Borrowing in an
Offshore Currency requested in Dollars as provided above will be
determined by the Agent for such Borrowing on the Computation Date
therefor in accordance with subsection 2.05(a).
(b) Upon receipt of the Notice of Borrowing, the Agent will promptly
notify each Bank thereof and of the amount of such Bank's Applicable
Percentage of the Borrowing. In the case of a Borrowing comprised of
Offshore Currency Loans, such notice will consist of the approximate
amount of each Bank's Applicable Percentage of the Borrowing, and the
Agent will, upon the determination of the Equivalent Amount of the
Dollar amount of the Borrowing as specified in the Notice of Borrowing
(determined on the Computation Date as provided in subsection 2.05(a)),
promptly notify each Bank of the exact amount of such Bank's Applicable
Percentage of the Borrowing.
(c) Each Bank will make the amount of its Applicable Percentage of
the Borrowing available to the Agent for the account of the applicable
Borrower at the Agent's Payment Office on the Borrowing date requested
by the Borrowers' Agent in Same Day Funds and in the requested currency
(i) in the case of a Borrowing comprised of Revolving Loans in Dollars,
by 11:00 a.m. (San Francisco time), and (ii) in the case of a Borrowing
comprised of Offshore Currency Loans, by such time as the Agent may
specify. The proceeds of all such Revolving Loans will then be made
available to the applicable Borrower by the Agent by wire transfer or by
crediting the account of the applicable Borrower on the books of BofA
with the aggregate of the amounts made available to the Agent by the
Banks and in like funds as received by the Agent, unless on the date of
the Borrowing all or any portion of the proceeds thereof shall then be
required to be applied to the reimbursement of any outstanding drawings
under Letters of Credit pursuant to Section 2.12, in which case such
proceeds or portion thereof shall be applied to the reimbursement of
such Letter of Credit drawings.
(d) After giving effect to any Borrowing, there shall not be more
than six different Interest Periods in effect.
4. CONVERSION AND CONTINUATION ELECTIONS. (a) The Borrowers' Agent
may upon irrevocable written notice to the Agent in accordance with
subsection 2.04(b): (i) elect to convert on any Business Day, any ABR
Loans of a Borrower (or any part thereof in an amount not less than
$5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into Eurocurrency Loans in Dollars or CD Rate Loans; (ii) elect
to convert on the last day of the current Interest Period any
Eurocurrency Loans in Dollars maturing at the end of such Interest
Period (or any part thereof in an amount not less than $5,000,000, or
that is in an integral multiple of $1,000,000 in excess thereof) into
ABR Loans or CD Rate Loans; (iii) elect to convert on the last day of
the current Interest Period any CD Rate Loans maturing at the end of
such Interest Period (or any part thereof in an amount not less than
$5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into ABR Loans or Eurocurrency Loans in Dollars; or (iv) elect
to renew on the last day of the current Interest Period any Eurocurrency
Loans of a Borrower (whether in Dollars or in an Offshore Currency) or
CD Rate Loans maturing at the end of such Interest Period as such (or
any part thereof in an amount not less than $5,000,000 (or the
Equivalent Amount thereof in an Offshore Currency as determined as of
the most recent Computation Date), or that is in an integral multiple of
$1,000,000 (or the Equivalent Amount thereof in an Offshore Currency as
determined as of the most recent Computation Date) in excess thereof in
the same currency; PROVIDED, that if the aggregate amount of CD Rate
Loans or Eurocurrency Loans denominated in Dollars shall have been
reduced, by payment, prepayment, or conversion of part thereof to be
less than $5,000,000, such CD Rate Loans or Eurocurrency Loans shall
automatically convert into ABR Loans, and on and after such date the
right of the Borrowers' Agent to continue such Loans as, and convert
such Loans into, Eurocurrency Loans or CD Rate Loans, as the case may
be, on behalf of itself or any other Borrower, shall terminate.
(a) The Borrowers' Agent shall deliver a Notice of Conversion/
Continuation in accordance with Section 9.01 to be received by the Agent
not later than 9:00 a.m. (San Francisco time) (i) at least five Business
Days in advance of the continuation date, if the Loans are to be
continued as Offshore Currency Loans; (ii) at least three Business Days
in advance of the Conversion Date or continuation date, if the Loans are
to be converted into or continued as CD Rate Loans or Eurocurrency Loans
denominated in Dollars; and (iii) at least one Business Day in advance
of the Conversion Date, if the Loans are to be converted into ABR Loans,
specifying in each case: (A) the Loans to be continued or converted;
(B) the proposed Conversion Date or continuation date; (C) the aggregate
amount of Loans to be converted or continued; (D) the nature of the
proposed conversion or continuation; and (E) the duration of any
requested Interest Period.
(b) If the Borrowers' Agent has failed to select a new Interest
Period to be applicable to CD Rate Loans or Eurocurrency Loans
denominated in Dollars prior to the third Business Day in advance of the
expiration date of the current Interest Period applicable thereto as
provided in subsection 2.04(b), or if any Default or Event of Default
shall then exist, the Borrowers' Agent shall be deemed to have elected
to convert such CD Rate Loans or Eurocurrency Loans into ABR Loans
effective as of the expiration date of such current Interest Period. If
the Borrowers' Agent has failed to select a new Interest Period to be
applicable to Offshore Currency Loans prior to the fifth Business Day in
advance of the expiration date of the current Interest Period applicable
thereto as provided in subsection 2.04(b), or if any Default or Event of
Default shall then exist, subject to the provisions of subsection
2.05(d), the Borrowers' Agent shall be deemed to have elected to
continue such Offshore Currency Loans on the basis of a one-month
Interest Period.
(c) Upon receipt of a Notice of Conversion/Continuation, the Agent
will promptly notify each Bank thereof, or, if no timely notice is
provided by the Borrowers' Agent, the Agent will promptly notify each
Bank of the details of any automatic conversion or continuation, as the
case may be. All conversions and continuations shall be made pro rata
according to the respective outstanding principal amounts of the Loans
with respect to which the notice was given held by each Bank.
(d) Unless the Required Banks shall otherwise agree, during the
existence of a Default or Event of Default, the Borrowers' Agent may not
elect to have a Loan in Dollars converted into or continued as a
Eurocurrency Loan or a CD Rate Loan or to have an Offshore Currency Loan
continued on the basis of an Interest Period exceeding one month.
(e) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Loans,
there shall not be more than six different Interest Periods in effect.
5. UTILIZATION OF REVOLVING COMMITMENTS IN OFFSHORE CURRENCIES. (a)
The Agent shall determine the Equivalent Amount with respect to any
(i) Borrowing comprised of Offshore Currency Loans as of the requested
Borrowing date, (ii) outstanding Offshore Currency Loans or other
amounts due hereunder and denominated in an Offshore Currency as of the
last Business Day of each calendar quarter, (iii) Letters of Credit to
be issued in an Offshore Currency as of the requested date of issuance,
(iv) outstanding Letters of Credit denominated in an Offshore Currency
as of the last Business Day of each calendar quarter, and
(v) outstanding Offshore Currency Loans as of any redenomination date
pursuant to this Section 2.05 or Section 2.28 or Section 2.30 (each such
date under clauses (i) through (v) a "Computation Date"), PROVIDED that
the Required Banks may in writing instruct the Agent to determine such
Equivalent Amount as of a date in addition to the last Business Day of
each month, and the Issuing Bank may in writing instruct the Agent to
determine such Equivalent Amount as of a conversion date (if not on the
last Banking Day of a month) in connection with a redenomination of any
amounts payable in an Offshore Currency pursuant to subsection 2.12(b),
in which case such alternative date or dates shall also be a Computation
Date or Dates.
(a) In the case of a proposed Borrowing pursuant to Section 2.03
comprised of Offshore Currency Loans, the Banks shall be under no
obligation to make Offshore Currency Loans in the requested Offshore
Currency as part of such Borrowing if the Agent has received notice from
any of the Banks by 8:00 a.m. (San Francisco time) four Business Days
prior to the day of such Borrowing that such Bank cannot provide Loans
in the requested Offshore Currency, in which event the Agent will give
notice to the Borrowers' Agent not later than 9:00 a.m. (San Francisco
time) on the fourth Business Day prior to the requested date of such
Borrowing that the Borrowing in the requested Offshore Currency is not
then available, and notice thereof also will be given promptly by the
Agent to the Banks. If the Agent shall have so notified the Borrowers'
Agent that any such Borrowing in a requested Offshore Currency is not
then available, the Borrowers' Agent may, by notice to the Agent not
later than the 5:00 p.m. (San Francisco time) four Business Days prior
to the requested date of such Borrowing, withdraw the Notice of
Borrowing relating to such requested Borrowing. If the Borrowers' Agent
does so withdraw such Notice of Borrowing, the Borrowing requested
therein shall not occur and the Agent will promptly so notify each Bank.
If the Borrowers' Agent does not so withdraw such Notice of Borrowing,
the Agent will promptly so notify each Bank and such Notice of Borrowing
shall be deemed to be a Notice of Borrowing which requests a Borrowing
comprised of ABR Loans in an aggregate amount equal to amount of the
originally requested Borrowing as expressed in Dollars in the Notice of
Borrowing; and in such notice by the Agent to each Bank the Agent will
state such aggregate amount of such Borrowing in Dollars and such Bank's
Applicable Percentage thereof.
(b) In the case of a proposed continuation of Offshore Currency
Loans for an additional Interest Period pursuant to Section 2.04, the
Banks shall be under no obligation to continue such Offshore Currency
Loans if the Agent has received notice from any of the Banks by 8:00
a.m. (San Francisco time) four Business Days prior to the day of such
continuation that such Bank cannot continue to provide Loans in the
relevant Offshore Currency, in which event the Agent will give notice to
the Borrowers' Agent not later than 9:00 a.m. (San Francisco time) on
the fourth Business Day prior to the requested date of such continuation
that the continuation of such Offshore Currency Loans in the relevant
Offshore Currency is not then available, and notice thereof also will be
given promptly by the Agent to the Banks. If the Agent shall have so
notified the Borrowers' Agent that any such continuation of Offshore
Currency Loans is not then available, any Notice of
Continuation/Conversion with respect thereto shall be deemed withdrawn
and such Offshore Currency Loans shall be redenominated into ABR Loans
in Dollars with effect from the last day of the Interest Period with
respect to any such Offshore Currency Loans. The Agent shall promptly
notify the Borrowers' Agent and the Banks of any such redenomination and
in such notice by the Agent to each Bank the Agent will state the
aggregate Equivalent Amount of the redenominated Offshore Currency Loans
in Dollars as of the Computation Date with respect thereto and such
Bank's Applicable Percentage thereof.
(c) Notwithstanding anything herein to the contrary, during the
existence of a Default or an Event of Default, upon the request of the
Required Banks all or any part of any outstanding Offshore Currency
Loans shall be redenominated into ABR Loans in Dollars with effect from
the last day of the Interest Period, with respect to any such Offshore
Currency Loans, and all or any part of any other outstanding amount
payable in an Offshore Currency shall be redenominated into Dollars on
the date specified by the Required Banks. The Agent shall promptly
notify the Borrowers' Agent of any such redenomination request.
(d) The Borrowers' Agent shall be entitled to request that Revolving
Loans hereunder also be permitted to be made, and Letters of Credit
hereunder also be permitted to be issued, in any other lawful currency
constituting a eurocurrency (other than Dollars), in addition to the
eurocurrencies specified in the definition of "Offshore Currency"
herein, that in the opinion of all of the Banks is at such time freely
traded in the offshore interbank foreign exchange markets and is freely
transferable and freely convertible into Dollars (an "AGREED ALTERNATE
CURRENCY"). The Borrowers' Agent shall deliver to the Agent any request
for designation of an Agreed Alternate Currency in accordance with
Section 9.01, to be received by the Agent not later than 10:00 a.m. (San
Francisco time) at least ten Business Days in advance of the date of any
Borrowing hereunder proposed to be made in such Agreed Alternate
Currency or any Letter of Credit proposed to be issued hereunder in such
Agreed Alternate Currency. Upon receipt of any such request the Agent
shall promptly notify the Banks thereof, and each Bank shall use its
best efforts to respond to such request within two Business Days of
receipt thereof. Each Bank may grant or accept such request in its sole
discretion, and each of the Borrowers understands that there is no
commitment by or understanding with any Bank with respect to the
approval of any Agreed Alternate Currency. The Agent will promptly
notify the Borrowers' Agent of the acceptance (which shall require the
approval of ALL Banks) or rejection of any such request.
6. VOLUNTARY TERMINATION OR REDUCTION OF TOTAL COMMITMENT. The
Borrowers' Agent may, on behalf of the Borrowers, upon not less than
five Business Days' prior notice to the Agent, terminate the Total
Commitment (including the Aggregate L/C Commitment and Offshore Currency
Commitment) or permanently reduce the Total Commitment (including the
Aggregate L/C Commitment and Offshore Currency Commitment if specified
by the Borrowers' Agent) by an aggregate minimum amount of $1,000,000 or
any multiple of $1,000,000; PROVIDED that no such reduction or
termination shall be permitted if the Effective Amount of Revolving
Loans and L/C Obligations would exceed the amount of the Total
Commitment then in effect; and PROVIDED FURTHER that once reduced in
accordance with this Section 2.06, the Total Commitment may not be
increased. Any reduction of the Total Commitment and the Aggregate L/C
Commitment pursuant to this Section 2.06 shall be applied to each Bank's
Commitment and L/C Commitment in accordance with such Bank's Applicable
Percentage. The amount of any such Total Commitment reduction shall not
be applied to the Aggregate L/C Commitment or the Offshore Currency
Commitment unless otherwise specified by the Borrower. All accrued
commitment and letter of credit fees to, but not including, the
effective date of any such termination shall be payable on the effective
date of such termination.
7. PREPAYMENTS. (a) Subject to Section 2.29, the Borrowers' Agent
may, on behalf of itself or the applicable Borrower, at any time or from
time to time, ratably prepay Loans made to it in whole or in part, in
amounts of $1,000,000 (or, in the case of Offshore Currency Loans, the
Equivalent Amount thereof in an Offshore Currency as determined as of
the most recent Computation Date with respect thereto) or any multiple
of $1,000,000 (or, in the case of Offshore Currency Loans, the
Equivalent Amount thereof in an Offshore Currency as determined as of
the most recent Computation Date with respect thereto) in excess
thereof. The Borrowers' Agent shall deliver a notice of prepayment on
behalf of itself or the applicable Borrower in accordance with
Section 9.01 to be received by the Agent not later than 9:00 a.m. (San
Francisco time) (i) at least five Business Days in advance of the
prepayment date if the Loans to be prepaid are Offshore Currency Loans,
(ii) at least three Business Days in advance of the prepayment date if
the Loans to be prepaid are CD Rate or Eurocurrency Loans denominated in
Dollars, and (iii) at least one Business Day in advance of the
prepayment date if the Loans to be prepaid are ABR Loans.
(a) Subject to subsection 2.07(c) and Section 2.29, if on any date
the Effective Amount of all Revolving Loans PLUS the Effective Amount of
all L/C Obligations shall exceed the Total Commitment, the Borrowers
shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Revolving Loans and L/C Advances by an amount
equal to the applicable excess. Additionally, subject to
subsection 2.07(c), (i) if on any date the Effective Amount of L/C
Obligations shall exceed the Aggregate L/C Commitment, the Borrowers
shall cash collateralize, in Dollars, on such date the outstanding
Letters of Credit in an amount equal to the excess of the maximum amount
then available to be drawn under the Letters of Credit over the
Aggregate L/C Commitment (in the case of any Offshore Currency L/C
Obligations, such amounts to be determined on the basis of the
Equivalent Amount thereof in Dollars as of the most recent Computation
Date); and (ii) if on any date the Effective Amount of all Offshore
Currency Loans and the Effective Amount of all Offshore Currency L/C
Obligations (in each case, determined on the basis of the Equivalent
Amount thereof in Dollars as of the most recent Computation Date) shall
exceed the Offshore Currency Commitment, the Borrowers shall
immediately, and without notice or demand, prepay the outstanding amount
of the Offshore Currency Loans and the Offshore Currency L/C Advances by
an amount equal to the applicable excess.
(b) Subject to Section 2.29, if on any Computation Date the Agent
shall have determined that the Effective Amount of all Revolving Loans
PLUS the Effective Amount of all L/C Obligations shall exceed the Total
Commitment by more than $100,000 due to a change in applicable rates of
exchange between Dollars and Offshore Currencies, the Agent shall give
notice to the Borrowers' Agent that a prepayment by the Borrowers is
required hereunder, and the Borrowers shall thereupon be required to
make a prepayment of Revolving Loans and L/C Advances hereunder, such
that the Effective Amount of all Revolving Loans PLUS the Effective
Amount of all L/C Obligations (after giving effect to such prepayment)
will be equal to or less than the Total Commitment.
(c) Any notice of prepayment given by the Borrowers' Agent under
subsection 2.07(a) shall specify the date and amount of the proposed
prepayment. In connection with any prepayment pursuant to this Section
2.07, the Borrowers' Agent shall specify whether such prepayment is of
ABR Loans, CD Rate Loans or Eurocurrency Loans, or any combination
thereof, and identify any Offshore Currency Loans that are the subject
of the prepayment and shall identify the Borrower or Borrowers making
the prepayment. Any notice of prepayment given by the Borrowers' Agent
under subsection 2.07(a) shall not thereafter be revocable by the
Borrowers' Agent. The Agent will promptly notify each Bank of any
proposed prepayment and of such Bank's Applicable Percentage of such
prepayment.
(d) If any notice of prepayment is given, the Borrowers shall make
the prepayment described in such notice and the payment amount specified
in such notice shall be due and payable on the date specified therein,
together with accrued interest to such date on the amount prepaid and
any amounts required pursuant to Section 2.29.
8. REPAYMENT. Each Borrower shall repay to the Banks in full on the
Maturity Date the aggregate principal amount of the Revolving Loans made
to such Borrower outstanding on the Maturity Date.
9. INTEREST.
(a) Subject to Section 9.14, each Revolving Loan shall bear interest
on the outstanding principal amount thereof from the date when made
until it becomes due (i) during such periods as such Revolving Loan is a
Eurocurrency Loan, at a rate per annum equal during each Interest Period
for such Eurocurrency Loan to the Adjusted LIBO Rate for such Interest
Period PLUS the Applicable Margin, (ii) during such periods as such
Revolving Loan is a CD Rate Loan, at a rate per annum equal during each
Interest Period for such CD Rate Loan to the CD Rate for such Interest
Period PLUS the Applicable Margin, and (iii) during such periods as such
Revolving Loan is an ABR Loan, at a rate per annum equal to the
Alternate Base Rate PLUS the Applicable Margin.
(b) Each Borrower agrees to pay interest on each Loan made to it, in
arrears, on each Interest Payment Date. Interest shall also be paid by
each Borrower on the date of any prepayment of Loans pursuant to Section
2.07 for the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof and, during the existence of any Event of
Default, interest shall be paid on demand.
(c) If any amount of principal of or interest on any Loan, or any
other amount payable hereunder or under any of the other Loan Documents
by any Borrower is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), such Borrower agrees to
pay interest on such unpaid principal or other amount, from the date
such amount becomes due until the date such amount is paid in full, and
after as well as before any entry of judgment thereon to the extent
permitted by law, payable on demand, at a rate per annum equal to the
Alternate Base Rate PLUS 1%.
10. THE LETTER OF CREDIT SUBFACILITY. (a) On the terms and conditions
set forth herein (i) the Issuing Bank hereby agrees, (A) from time to
time on any Business Day during the period from the Closing Date to the
Maturity Date to issue Letters of Credit for the account of any Borrower
in accordance with subsection 2.11(a), and to amend or renew Letters of
Credit previously issued by it in accordance with subsections 2.11(c)
and 2.11(d), in an aggregate amount (determined in Dollars, including,
when applicable, in accordance with the Equivalent Amount of any
requested and outstanding Letters of Credit denominated in Offshore
Currencies pursuant to subsection 2.05(a)) not to exceed at any time the
Aggregate L/C Commitment, and (B) to honor drafts under the Letters of
Credit; and (ii) the Banks severally agree to participate in Letters of
Credit issued for the account of any Borrower; PROVIDED, that the
Issuing Bank shall not be obligated to issue any Letter of Credit if
(1) the Effective Amount of all L/C Obligations PLUS the Effective
Amount of all Revolving Loans shall exceed the Total Commitment, (2) the
Effective Amount of all Offshore Currency L/C Obligations PLUS the
Effective Amount of all Offshore Currency Loans (in each case,
determined on the basis of the Equivalent Amount thereof in Dollars as
of the most recent Computation Date) shall exceed the Offshore Currency
Commitment, (3) the participation of any Bank in the Effective Amount of
all L/C Obligations PLUS the Effective Amount of the Revolving Loans of
such Bank shall exceed such Bank's Commitment, or (4) the Effective
Amount of L/C Obligations shall exceed the Aggregate L/C Commitment.
Within the foregoing limits, and subject to the other terms and
conditions hereof, each Borrower's ability to obtain Letters of Credit
shall be fully revolving, and, accordingly, each Borrower may, during
the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(a) The Issuing Bank shall be under no obligation to issue, amend or
reinstate any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the
Issuing Bank from issuing, amending or reinstating such Letter of
Credit, or any Requirement of Law applicable to the Issuing Bank or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the issuance,
amendment or reinstatement of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Bank with
respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated)
not in effect on the Closing Date, or shall impose upon the Issuing Bank
any unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuing Bank in good faith deems material to
it;
(ii) the Issuing Bank has received written notice from any Bank,
the Agent or the Borrowers' Agent, at least one Business Day prior to
the requested date of issuance, amendment or reinstatement of such
Letter of Credit, that one or more of the applicable conditions
contained in Section 4.02 is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is
(A) more than 365 days after the date of issuance, unless the Required
Banks have approved such expiry date in writing, or (B) more than 365
days after the Maturity Date, unless all of the Banks have approved such
expiry date in writing; PROVIDED, that a Letter of Credit may state that
the expiry date thereof is extendible for an additional term as shall be
satisfactory to the Issuing Bank (either upon prior notice or
automatically) so long as the next succeeding additional term at any
time is not more than 365 days;
(iv) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuing
Bank, or the issuance, amendment or renewal of a Letter of Credit shall
violate any applicable policies of the Issuing Bank;
(v) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person;
(vi) such Letter of Credit is (A) in a face amount less than
$1,000,000 (or the Equivalent Amount thereof in an Offshore Currency, as
determined as of the Computation Date for an Offshore Currency Letter of
Credit), (B) to be used to support workers' compensation obligations,
(C) to be used to support the obligations of any Person other than the
Borrowers and the Subsidiaries, or (D) denominated in a currency other
than Dollars or an Offshore Currency; or
(vii) in respect of any Letter of Credit to be denominated in an
Offshore Currency, the Issuing Bank has determined that it is unable to
fund obligations in the requested Offshore Currency.
(b) The Issuing Bank will use its best efforts promptly following
receipt of a request to issue, amend or reinstate a Letter of Credit to
notify the Agent and the Borrowers' Agent of any unreimbursed material
loss, cost or expense imposed on the Issuing Bank referred to in
subsection (b)(i) above that may prevent such issuance, amendment or
reinstatement from occurring as provided in this Article II, PROVIDED
that any failure to provide such notice shall not impose any additional
obligations under this Article II.
11. ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT. (a) Each
Letter of Credit shall be issued upon the irrevocable written request of
the Borrowers' Agent received by the Issuing Bank (with a copy sent by
the Borrowers' Agent to the Agent) at least four Business Days (or in
each case such shorter time as the Issuing Bank may agree in a
particular instance in its sole discretion), prior to the proposed date
of issuance. Each such request for issuance of a Letter of Credit shall
be by facsimile, confirmed immediately in an original writing, in the
form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the proposed date of issuance of
the Letter of Credit (which shall be a Business Day); (ii) the face
amount of the Letter of Credit (and applicable Offshore Currency, if
such Letter of Credit is not denominated in Dollars); (iii) the expiry
date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing thereunder;
(vi) the full text of any certificate to be presented by the beneficiary
in case of any drawing thereunder; (vii) the identity of the Person
whose obligations will be supported by such Letter of Credit (which, if
other than the Borrower, must be a Subsidiary); and (viii) such other
matters as the Issuing Bank may require. The Equivalent Amount of any
Letter of Credit to be denominated in an Offshore Currency as provided
above will be determined by the Agent for such Letter of Credit on the
Computation Date therefor in accordance with subsection 2.05(a).
(a) Not more than one Business Day following receipt of any request
for the issuance of any Letter of Credit or any amendment or renewal of
any Letter of Credit, the Issuing Bank will confirm with the Agent (by
telephone or in writing) that the Agent has received a copy of the L/C
Application or L/C Amendment Application from the Borrowers' Agent and,
if not, the Issuing Bank will provide the Agent with a copy thereof.
Unless the Issuing Bank has received notice on or before the Business
Day immediately preceding the date the Issuing Bank is to issue, amend
or renew a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue, amend or renew such Letter of Credit because
such issuance, amendment or renewal is not then permitted under
subsection 2.10(a) as a result of the limitations set forth in clauses
(1) through (4) thereof or subsection 2.10(b)(iii); or (B) that one or
more conditions specified in Section 4.02 are not then satisfied; THEN,
subject to the terms and conditions hereof, the Issuing Bank shall, on
the requested date, issue a Letter of Credit for the account of the
applicable Borrower or amend or renew a Letter of Credit, as the case
may be, in accordance with the Issuing Bank's usual and customary
business practices.
(b) From time to time while a Letter of Credit is outstanding and
prior to the Maturity Date, the Issuing Bank will, upon the written
request of the Borrowers' Agent received by the Issuing Bank (with a
copy sent by the Borrowers' Agent to the Agent) at least four Business
Days (or in each case such shorter time as the Issuing Bank may agree in
a particular instance in its sole discretion), prior to the proposed
date of amendment, amend any Letter of Credit issued by it. Each such
request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory
to the Issuing Bank: (i) the Letter of Credit to be amended; (ii) the
proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such
other matters as the Issuing Bank may require. The Issuing Bank shall
be under no obligation to amend any Letter of Credit, and shall not
permit the amendment of a Letter of Credit, if: (A) the Issuing Bank
would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed
amendment to the Letter of Credit.
(c) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Maturity Date, at the option of
the Borrowers' Agent and upon the written request of the Borrowers'
Agent received by the Issuing Bank (with a copy sent by the Borrowers'
Agent to the Agent) at least four Business Days (or in each case such
shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion), prior to the proposed date of notification of
renewal, the Issuing Bank shall be entitled to authorize the automatic
renewal of any Letter of Credit issued by it. Each such request for
renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment
Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed
date of notification of renewal of the Letter of Credit (which shall be
a Business Day); (iii) the revised expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Bank may require. The
Issuing Bank shall be under no obligation so to renew any Letter of
Credit, and shall not permit any renewal (including any automatic
renewal of a Letter of Credit), if: (A) the Issuing Bank would have no
obligation at such time to issue or amend such Letter of Credit in its
renewed form under the terms of this Agreement; or (B) the beneficiary
of any such Letter of Credit does not accept the proposed renewal of the
Letter of Credit. If any outstanding Letter of Credit shall provide
that it shall be automatically renewed unless the beneficiary thereof
receives notice from the Issuing Bank that such Letter of Credit shall
not be renewed, and if at the time of renewal the Issuing Bank would be
entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 2.11(d) upon the request of the
Borrowers' Agent but the Issuing Bank shall not have received any L/C
Amendment Application from the Borrowers' Agent with respect to such
renewal or other written direction by the Borrowers' Agent with respect
thereto, the Issuing Bank shall nonetheless be permitted to allow such
Letter of Credit to renew, and the Borrowers and the Banks hereby
authorize such renewal, and, accordingly, the Issuing Bank shall be
deemed to have received an L/C Amendment Application from the Borrowers'
Agent requesting such renewal.
(d) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Required Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary
or transferee, or take any other action as necessary or appropriate, at
any time and from time to time, in order to cause the expiry date of
such Letter of Credit to be a date not later than the Maturity Date.
(e) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(i) The Issuing Bank will also deliver to the Agent,
concurrently with or promptly following its delivery of a Letter of
Credit, or amendment to or renewal of a Letter of Credit, to an advising
bank or a beneficiary, a true and complete copy of each such Letter of
Credit or amendment to or renewal of a Letter of Credit.
(ii) The Agent will promptly notify the Banks of the issuance,
amendment or renewal of a Letter of Credit hereunder (including the date
thereof and the amount, currency, expiry and reference number of such
Letter of Credit).
12. PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS. (a) Immediately upon
the issuance of each Letter of Credit, the Issuing Bank shall be deemed
irrevocably to have sold and transferred to each Bank without recourse
or warranty, and each Bank shall be deemed to, and hereby irrevocably
and unconditionally agrees to, purchase and accept from the Issuing
Bank, for such Bank's own account and risk, an undivided interest and
participation in such Letter of Credit and each drawing thereunder in an
amount equal to the product of (i) the Applicable Percentage of such
Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For
purposes of subsection 2.10(a), each issuance of a Letter of Credit
shall be deemed to utilize the Commitment of each Bank by an amount
equal to the amount of such participation.
(a) In the event of any request for a drawing under a Letter of
Credit by the beneficiary thereof, the Issuing Bank shall immediately
notify the Borrowers' Agent, the applicable Borrower and the Agent. The
applicable Borrower shall reimburse the Issuing Bank on each date that
any amount is paid by the Issuing Bank under any Letter of Credit, in an
amount equal to the amount paid by the Issuing Bank on such date under
such Letter of Credit, in the currency in which such Letter of Credit is
payable; PROVIDED that the Issuing Bank may at its election (a
"CONVERSION ELECTION"), require payment in respect of any Letter of
Credit payable in an Offshore Currency to be made in Dollars in an
amount equal to the Equivalent Amount in Dollars as of the date of
payment by the Issuing Bank on such Letter of Credit. Such
reimbursement shall be made by the applicable Borrower prior to 9:00
a.m. (San Francisco time) on such payment date in the case of payments
to be made in Dollars (whether originally payable in Dollars or
redenominated into Dollars as a result of a Conversion Election), and no
later than the time specified by the Issuing Bank on such payment date
in the case of payments to be made in an Offshore Currency. In the
event the applicable Borrower shall fail to reimburse the Issuing Bank
for the full amount of any drawing under any Letter of Credit by the
required time as provided above on the same date such drawing is honored
by the Issuing Bank, the Issuing Bank will promptly notify the Agent,
and the Agent will promptly notify each Bank thereof (including the
amount and currency of the drawing and such Bank's Commitment Percentage
thereof), and the applicable Borrower shall be deemed to have requested
that (i) ABR Loans be made by the Banks in the case of any reimbursement
obligation in Dollars, or (ii) Offshore Currency Loans be made in the
currency of any outstanding reimbursement obligations in an Offshore
Currency, on the basis of a one week Interest Period, to be disbursed on
the date of payment by the Issuing Bank under such Letter of Credit,
subject to the amount of the unutilized portion of the Total Commitment
and subject to the conditions set forth in Section 4.02. Each of the
Borrowers hereby directs that the proceeds of any such Loans deemed to
be made by it shall be used to pay its reimbursement obligations in
respect of any such drawing. Solely for the purposes of making such
Loans, the minimum borrowing amount limitations set forth in
Section 2.03 shall not be applicable. Any notice given by the Issuing
Bank or the Agent pursuant hereto may be oral if immediately confirmed
in writing (including by facsimile); PROVIDED that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding
effect of such notice.
(b) Each Bank shall upon receipt of any notice pursuant to
subsection 2.12(b) make available to the Agent for the account of the
relevant Issuing Bank an amount in the specified currency and in Same
Day Funds equal to its Applicable Percentage of the amount of the
drawing, whereupon the participating Banks shall (subject to subsection
2.12(d)) each be deemed to have made a Revolving Loan consisting of an
ABR Loan or Offshore Currency Loan, as the case may be, to the
applicable Borrower in that amount. If any Bank so notified shall fail
to make available to the Agent for the account of the Issuing Bank the
amount of such Bank's Applicable Percentage of the amount of the drawing
on the date such drawing was honored by the Issuing Bank (the
"PARTICIPATION DATE"), in the case of a drawing in to be reimbursed in
Dollars (whether originally payable in Dollars or redenominated into
Dollars as a result of a Conversion Election), by no later than 12:00
noon (San Francisco time), and in the case of a drawing to be reimbursed
in an Offshore Currency, by such time as the Agent may specify, then
interest shall accrue on such Bank's obligation to make such payment,
from the Participation Date to the date such Bank makes such payment, at
(i), in the case of payments to be made in Dollars, (A) the Federal
Funds Effective Rate in effect from time to time during the period
commencing on the Participation Date and ending on the date three
Business Days thereafter, and (B) thereafter at the Alternate Base Rate
as in effect from time to time, and (ii) in the case of payment to be
made in an Offshore Currency, at the Overnight Rate, as in effect for
each day during the period such amount remains unpaid. The Agent will
promptly give notice of the occurrence of the Participation Date, but
failure of the Agent to give any such notice on the Participation Date
or in sufficient time to enable any Bank to effect such payment on such
date shall not relieve such Bank from its obligations under this Section
2.12.
(c) With respect to any unreimbursed drawing which is not converted
into Revolving Loans consisting of ABR Loans or Offshore Currency Loans,
as the case may be, to the applicable Borrower in whole or in part,
because of such Borrower's failure to satisfy the conditions set forth
in Section 4.02 or for any other reason, such Borrower shall be deemed
to have incurred from the Issuing Bank an L/C Borrowing in the amount of
such drawing, which L/C Borrowing shall be due and payable on demand
(together with interest) and (i) if denominated in Dollars, shall bear
interest at the rate specified in subsection 2.09(c) for overdue amounts
payable in Dollars, and (ii) if denominated in an Offshore Currency,
shall initially have a one week Interest Period and bear interest at the
rate specified in subsection 2.09(c) for overdue amounts payable in an
Offshore Currency and each Bank's payment to the Issuing Bank pursuant
to subsection 2.12(c) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance
from such Bank in satisfaction of its participation obligation under
this Section 2.12.
(d) Each Bank's obligation in accordance with this Agreement to make
the Revolving Loans or L/C Advances, as contemplated by this
Section 2.12, as a result of a drawing under a Letter of Credit, shall
be absolute and unconditional and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing
Bank, any Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default, an Event of Default or
a Material Adverse Effect; or (iii) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
13. AUTOMATIC RENEWALS. If any outstanding Letter of Credit for the
account of any Borrower shall provide that it shall be automatically
renewed unless the beneficiary thereof receives notice from the Issuing
Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal the Issuing Bank would be entitled to authorize the automatic
renewal of such Letter of Credit in accordance with subsection 2.11(d)
upon the request of the Borrowers' Agent but the Issuing Bank shall not
have received any L/C Amendment Application from the Borrowers' Agent
with respect to such renewal or other written direction by the
Borrowers' Agent with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and,
notwithstanding anything in this Agreement to the contrary, the
Borrowers and the Banks hereby authorize such renewal (unless the
Required Banks notify the Agent and the Issuing Bank in writing that
non-renewal of any Letter of Credit is desired and such notice is
received by the Agent and the Issuing Bank no less than 30 days prior to
the last date on which the Issuing Bank is entitled to notify the
beneficiary of any such Letter of Credit of its non-renewal), and,
accordingly, the Issuing Bank shall be deemed to have received an L/C
Amendment Application from the Borrowers' Agent requesting such renewal.
14. REPAYMENT OF PARTICIPATIONS. (a) Upon (and only upon) receipt by
the Agent for the account of the Issuing Bank of funds from a Borrower
(i) in reimbursement of any payment made by the Issuing Bank under the
Letter of Credit with respect to which any Bank has theretofore paid the
Agent for the account of the Issuing Bank for such Bank's participation
in the Letter of Credit pursuant to Section 2.12, or (ii) in payment of
interest thereon, the Agent will pay to each Bank, in the same funds and
currency so received by the Agent for the account of the Issuing Bank,
the amount of such Bank's Applicable Percentage thereof, and the Issuing
Bank shall receive the amount of the Applicable Percentage thereof with
respect to any Bank that did not so pay the Agent for the account of the
Issuing Bank.
(a) If the Agent or the Issuing Bank is required at any time to
return to any Borrower or to a trustee, receiver, liquidator, custodian,
or any official in any Insolvency Proceeding, any portion of the
payments made by any Borrower to the Agent for the account of the
Issuing Bank pursuant to subsection 2.14(a) in reimbursement of a
payment made under the Letter of Credit or interest thereon, each Bank
shall, on demand of the Agent, forthwith return to the Agent or the
Issuing Bank the amount of its Applicable Percentage of any amounts so
returned by the Agent or the Issuing Bank and in the currency in which
any such amounts were so returned PLUS interest thereon from the date
such demand is made to the date such amounts are returned by such Bank
to the Agent or the Issuing Bank, at a rate per annum equal to (i) the
Federal Funds Effective Rate in effect from time to time with respect to
any such amounts denominated in Dollars, and (ii) the Overnight Rate
with respect to any amounts denominated in an Offshore Currency, for and
determined as of each day during such period.
15. ROLE OF THE ISSUING BANK. (a) Each of the Banks and the Borrowers
agrees that, in paying any drawing under a Letter of Credit, the Issuing
Bank shall not have any responsibility to obtain any document (other
than any sight draft and certificates expressly required by the Letter
of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering
any such document.
(a) No Agent/IB-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be
liable to any Bank for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Banks (including the
Required Banks, as applicable); (ii) any action taken or omitted in the
absence of gross negligence or wilful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any L/C-Related
Document.
(b) Each Borrower hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter
of Credit; PROVIDED, HOWEVER, that this assumption is not intended to,
and shall not, preclude such Borrower's pursuing such rights and
remedies as it may have against the beneficiary or transferee at law or
under any other agreement. No Agent/IB-Related Person, nor any of the
respective correspondents, participants or assignees of the Issuing
Bank, shall be liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 2.10(b); PROVIDED, HOWEVER,
anything in such clauses to the contrary notwithstanding, that such
Borrower may have a claim against the Issuing Bank, and the Issuing Bank
may be liable to such Borrower, to the extent, but only to the extent,
of any direct, as opposed to consequential or exemplary, damages
suffered by such Borrower which the Borrower proves were caused by the
Issuing Bank's willful misconduct or gross negligence or the Issuing
Bank's willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a
Letter of Credit. In furtherance and not in limitation of the
foregoing: (i) the Issuing Bank may accept documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary;
and (ii) the Issuing Bank shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason.
16. OBLIGATIONS ABSOLUTE. The obligations of each Borrower under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for
a drawing under a Letter of Credit, and to repay any L/C Borrowing and
any drawing under a Letter of Credit converted into Revolving Loans,
shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other
L/C-Related Document under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document; (ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
such Borrower in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents in accordance with their terms; (iii) the
existence of any claim, set-off, defense or other right that such
Borrower may have at any time against any beneficiary or any transferee
of any Letter of Credit (or any Person for whom any such beneficiary or
any such transferee may be acting), the Issuing Bank or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C-Related Documents or any unrelated
transaction; (iv) any draft, demand, certificate 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; (v) any payment by the Issuing
Bank under any Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of any Letter
of Credit; (vi) any payment made by the Issuing Bank under any Letter of
Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or
any transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding; (vii) any exchange, release
or non-perfection of any collateral, or any release or amendment or
waiver of or consent to departure from any other guarantee, for all or
any of the obligations of any Borrower in respect of any Letter of
Credit; or (viii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, any Borrower or a guarantor.
17. CASH COLLATERAL PLEDGE. Upon (i) the request of the Agent, if the
Issuing Bank has honored any full or partial drawing request on any
Letter of Credit and such drawing has resulted in an L/C Borrowing
hereunder, (ii) the occurrence of the Maturity Date, if any Letters of
Credit may for any reason remain outstanding and partially or wholly
undrawn, or (iii) the occurrence of the circumstances described in
subsection 2.07(b) requiring any Borrower to cash collateralize Letters
of Credit, such Borrower shall immediately pay over cash, in Dollars, in
an amount equal to the L/C Obligations of such Borrower to the Agent for
the benefit of the Banks to be held by the Agent as cash collateral
subject to the terms of this Section 2.17. Such amount, together with
any amount received by the Agent in respect of outstanding Letters of
Credit pursuant to Article VII and any additional amounts received by
the Agent as provided in this Section 2.17, when received by the Agent,
shall be held by the Agent in a cash collateral account opened by the
Agent as cash collateral for the reimbursement obligations of the
applicable Borrower under this Agreement in respect of the L/C
Obligations of such Borrower and for the other Obligations. In
connection with any such amounts to be paid over to the Agent as cash
collateral for Offshore Currency L/C Obligations then outstanding, the
amount of cash collateral to be paid over with respect thereto and held
as part of the cash collateral pursuant to this Section 2.17 shall be
determined on the basis of the Equivalent Amount thereof in Dollars as
of the most recent Computation Date. Each Borrower shall, to the extent
necessary, make such additional pledges from time to time as shall be
necessary to ensure that all L/C Obligations remain at all times fully
cash collateralized (in the case of any Offshore Currency L/C
Obligations, the amounts thereof from time to time to be determined on
the basis of the Equivalent Amount thereof in Dollars as of the most
recent Computation Date), PROVIDED that no such additional pledge shall
be required at any time that the shortfall in the amount of the required
cash collateral results from a change in applicable rates of exchange
between Dollars and Offshore Currencies and such shortfall shall not
exceed at such time $100,000. Such cash collateral shall bear interest
at a rate per annum equal at all times to the rate specified by BofA as
its money market rate, and shall be credited to such cash collateral
account monthly, PROVIDED that no interest shall be payable on such cash
collateral while an Event of Default exists hereunder. Amounts held in
such cash collateral account shall be applied by the Agent to the
reimbursement of the Issuing Bank for any payment made by it of drafts
drawn under the outstanding Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been
fully drawn upon, if any, shall be applied to repay other Obligations of
the Borrowers hereunder. After all such Letters of Credit shall have
expired or been fully drawn upon, all L/C Obligations shall have been
satisfied and all other Obligations of the Borrowers hereunder shall
have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrowers. The Borrowers hereby grant
the Agent (for itself and on behalf of and for the ratable benefit of
the Issuing Bank and the Banks) a security interest in all such cash
collateral. The Borrowers shall execute such further agreements,
documents, instruments or financing statements as the Agent reasonably
deems necessary in connection therewith.
18. LETTER OF CREDIT FEES. (a) The Company agrees to pay to the Agent
for the account of each of the Banks a letter of credit fee, in Dollars,
with respect to the average daily maximum amount available to be drawn
on the outstanding Letters of Credit, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon
Letters of Credit outstanding for that quarter as calculated by the
Agent equal to the applicable rate per annum set forth in Annex I. (For
the sake of clarity, a Letter of Credit which is a "financial standby
letter of credit" within the meaning of Parts 208 and 225 of 12 Code of
Federal Regulations shall accrue fees at the applicable rate per annum
set forth under the heading "Financial Standby Letter of Credit Fees" in
the pricing grid attached as Annex I, and a Letter of Credit which is a
"performance standby letter of credit" within the meaning of Parts 208
and 225 of 12 Code of Federal Regulations shall accrue fees at the
applicable rate per annum set forth under the heading "Performance
Standby Letter of Credit Fees" in such pricing grid). Such letter of
credit fees shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after
the Closing Date, through the Maturity Date (or such later date upon
which the outstanding Letters of Credit shall expire), with the final
payment to be made on the Maturity Date (or such expiration date). For
purposes of determining the average daily maximum amount available to be
drawn on the outstanding Letters of Credit in order to calculate the
letter of credit fee due under this subsection 2.18(a), the amount of
any Letter of Credit in an Offshore Currency on any date shall be
determined based upon the Equivalent Amount in Dollars thereof as of the
most recent Computation Date pursuant to subsection 2.05(a) with respect
to such Letter of Credit.
(a) The Company agrees to pay to the Agent for the account of the
Issuing Bank a letter of credit fronting fee, in Dollars, for each
standby Letter of Credit issued by the Issuing Bank equal to 0.125% of
the face amount of such standby Letter of Credit. Such standby Letter
of Credit fronting fee shall be due and payable on each date of issuance
of a standby Letter of Credit and, if such Letter of Credit is in an
Offshore Currency, the amount thereof shall be determined based upon the
Equivalent Amount in Dollars thereof as of the initial Computation Date
pursuant to subsection 2.05(a) with respect to such standby Letter of
Credit.
(b) The Company agrees to pay to the Issuing Bank from time to time
on demand the normal and reasonable issuance, presentation, amendment
and other processing fees, and other standard costs and charges, of the
Issuing Bank relating to standby letters of credit as from time to time
in effect, in Dollars or in such Offshore Currency as the Issuing Bank
shall specify.
(c) All fees payable under this Section 2.18 shall be nonrefundable.
19. THE BORROWERS' AGENT.
(a) Each of the Borrowers irrevocably appoints, designates and
authorizes the Borrowers' Agent to take such action on its behalf under
the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated
to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. The
Borrowers' Agent may execute any of its duties under this Agreement or
any other Loan Document by or through agents, employees or
attorneys-in-fact.
(b) The Borrowers' Agent shall promptly forward to the Agent or the
Borrowers, as appropriate, all notices, certificates, financial
statements and reports received by it in the performance of its duties
hereunder.
(c) The Borrowers may, upon 30 days' notice to and with the consent
of the Agent (which consent shall not be unreasonably withheld), appoint
another Borrower to act as Borrowers' Agent and upon such appointment
such successor Borrowers' Agent shall succeed to all the appointment,
powers and duties of the retiring Borrowers' Agent and the term
"Borrowers' Agent" shall mean such successor agent and the retiring
Borrowers' Agent's rights, powers and duties as Borrowers' Agent shall
be terminated.
(d) The Borrowers' Agent shall perform its duties hereunder and
under the other Loan Documents on behalf of the Borrowers. The action
of the Borrowers' Agent shall in each case bind all the Borrowers, and
any action taken by the Borrowers' Agent in the name of the Borrowers or
any of them pursuant to this Agreement or any other Loan Document shall
bind the Borrowers, whether or not such action has been duly authorized
by such Borrowers.
20. UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice for
Documentary Credits as most recently published by the International
Chamber of Commerce ("UCP") shall in all respects be deemed a part of
this Article II as if incorporated herein and shall apply to the Letters
of Credit.
21. OTHER FEES.
(a) ARRANGEMENT FEE; AGENCY FEE. The Company shall pay to the Agent
for the Agent's own account an arrangement fee and an agency fee, in
each case in the amount and at the times set forth in a letter agreement
between the Company and the Agent dated February 6, 1997.
(b) COMMITMENT FEES. The Company agrees to pay to the Agent for the
account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon the
daily utilization for that quarter as calculated by the Agent, equal to
the applicable rate per annum set forth on Annex I. Such commitment fee
shall accrue from the Closing Date through the Maturity Date and shall
be due and payable quarterly in arrears on the last Business Day of each
calendar quarter commencing on the first such date after the Closing
Date through the Maturity Date, with the final payment to be made on the
Maturity Date; PROVIDED that, in connection with any termination of
Commitments pursuant to Section 2.06, the accrued commitment fee
calculated for the period ending on such date shall be paid on the date
of such termination. The commitment fees provided in this subsection
shall accrue at all times after the above-mentioned commencement date,
including at any time during which one or more conditions in Article IV
are not met.
(c) FEES NONREFUNDABLE. All fees payable under this Section 2.21
shall be nonrefundable.
22. COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest payable in respect of ABR Loans at
all times that the Alternate Base Rate is determined by BofA's Reference
Rate shall be made on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of fees
and interest under this Agreement shall be made on the basis of a 360-
day year and actual days elapsed, which results in more interest being
paid than if computed on the basis of a 365-day year. Interest and fees
shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) For purposes of determining utilization of each Bank's
Commitment in order to calculate the commitment fee due under Section
2.21(b), (i) the amount of any outstanding Offshore Currency Loan on any
date shall be determined based upon the Equivalent Amount in Dollars
thereof as of the most recent Computation Date pursuant to subsection
2.05(a) with respect to such Offshore Currency Loan, and (ii) each
Bank's Revolving Commitment shall be considered used on any date to the
extent of its participation on such date in any Letter of Credit and any
L/C Advance made by it, and for such purposes the amount of its
participation in any outstanding Letter of Credit in an Offshore
Currency or any L/C Advance constituting an Offshore Currency Loan on
any date shall be determined based upon the Equivalent Amount in Dollars
thereof as of the most recent Computation Date pursuant to subsection
2.05(a) with respect to such Letter of Credit or L/C Advance.
(c) The Agent will, with reasonable promptness, notify the
Borrowers' Agent and the Banks of each determination of Adjusted LIBO
Rate or of a CD Rate and each determination of the Equivalent Amount of
outstanding Offshore Currency Loans and other outstanding amounts
denominated in an Offshore Currency on any Computation Date as provided
in subsection 2.05(a); PROVIDED that any failure to do so shall not
relieve any Borrower of any liability hereunder or provide the basis for
any claim against the Agent. Any change in the interest rate on a CD
Rate Loan resulting from a change in the Reserve Percentage or the
Assessment Rate (as such terms are defined in the definition of CD Rate
herein) shall become effective as of the opening of business on the day
on which such change in the Reserve Percentage or the Assessment Rate
becomes effective. The Agent will with reasonable promptness notify the
Borrowers' Agent and the Banks of the effective date and the amount of
each such change, PROVIDED that any failure to do so shall not relieve
any Borrower of any liability hereunder or provide the basis for any
claim against the Agent.
(d) Each determination of an interest rate and an Equivalent Amount
by the Agent pursuant hereto shall be conclusive and binding on the
Borrowers and the Banks in the absence of manifest error.
23. PAYMENTS BY THE BORROWERS. (a) All payments (including
prepayments) to be made by any Borrower on account of principal,
interest, drawings under Letters of Credit, fees and other amounts
required hereunder shall be made without set-off or counterclaim and
shall, except as otherwise expressly provided with respect to drawings
under Letters of Credit and elsewhere herein, be made to the Agent for
the ratable account of the Banks at the Agent's Payment Office
identified on SCHEDULE 9.01 or such other office as the Agent shall
specify to the Borrowers' Agent in writing, with respect to principal
of, interest on, and other amounts relating to, any Offshore Currency
Loan, or any other Obligation payable in an Offshore Currency, in the
Offshore Currency in which such Offshore Currency Loan or other
Obligation is denominated or payable, and, with respect to all other
amounts payable hereunder, except as otherwise expressly provided
herein, in Dollars. Such payments shall be made in Same Day Funds, and
(i) in the case of Offshore Currency payments, no later than such time
on the date specified herein as may be determined by the Agent to be
necessary for such payment to be credited on such date in accordance
with normal banking procedures in the place of payment, and (ii) in the
case of any Dollar payments, no later than 11:00 a.m. (San Francisco
time) on the date specified herein. The Agent will promptly distribute
to each Bank its Applicable Percentage (or other applicable share as
expressly provided herein) of such principal, interest, fees or other
amounts, in like funds and currency as received. Any payment which is
received by the Agent later than 11:00 a.m. (San Francisco time) (in the
case of any Dollar payments) or later than the time specified by the
Agent as provided in clause (i) above (in the case of Offshore Currency
payments) shall be deemed to have been received on the immediately
succeeding Business Day and any applicable interest or fee shall
continue to accrue.
(a) Whenever any payment hereunder shall be stated to be 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 in such case
be included in the computation of interest or fees, as the case may be,
subject to the provisions set forth in the definition of "Interest
Period" herein.
(b) Unless the Agent shall have received notice from the Borrowers'
Agent prior to the date on which any payment is due to the Banks
hereunder that any Borrower will not make such payment in full as and
when required hereunder, the Agent may assume that such Borrower has
made such payment in full to the Agent on such date in Same Day Funds
and the Agent may (but shall not be so required), in reliance upon such
assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent any
such Borrower shall not have made such payment in full to the Agent,
each Bank shall repay to the Agent on demand such amount distributed to
such Bank, together with interest thereon for each day from the date
such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at the Federal Funds Effective Rate or, in the
case of a payment in an Offshore Currency, the Overnight Rate, as in
effect for each such day.
24. PAYMENTS BY THE BANKS TO THE AGENT. (a) Unless the Agent shall
have received notice from a Bank on the Closing Date or, with respect to
each Borrowing after the Closing Date, at least one Business Day prior
to the date of any proposed Borrowing, that such Bank will not make
available to the Agent as and when required hereunder for the account of
any Borrower the amount of that Bank's Applicable Percentage of the
Borrowing, the Agent may assume that each Bank has made such amount
available to the Agent in Same Day Funds on the Borrowing date and the
Agent may (but shall not be so required), in reliance upon such
assumption, make available to such Borrower on such date a corresponding
amount. If and to the extent any Bank shall not have made its full
amount available to the Agent in Same Day Funds and the Agent in such
circumstances has made available to any Borrower such amount, that Bank
shall on the next Business Day following the date of such Borrowing make
such amount available to the Agent, together with interest at the
Federal Funds Effective Rate or, in the case of any Borrowing consisting
of Offshore Currency Loans, the Overnight Rate, for and determined as of
each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Agent. A notice of the Agent
submitted to any Bank with respect to amounts owing under this
subsection 2.24(a) shall be conclusive, absent manifest error. If such
amount is so made available, such payment to the Agent shall constitute
such Bank's Loan on the date of borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on the
next Business Day following the date of such Borrowing, the Agent shall
notify the Borrowers' Agent of such failure to fund and, upon demand by
the Agent to the Borrowers' Agent, the applicable Borrower shall pay
such amount to the Agent for the Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate
per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(a) The failure of any Bank to make any Loan on any date of
Borrowing shall not relieve any other Bank of any obligation hereunder
to make a Loan on the date of such Borrowing, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be
made by such other Bank on the date of any Borrowing.
25. SHARING OF PAYMENTS, ETC. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by
it any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) in excess of its Applicable
Percentage of payments on account of the Loans obtained by all the
Banks, such Bank shall forthwith (a) notify the Agent of such fact, and
(b) purchase from the other Banks such participations in the Loans made
by them as shall be necessary to cause such purchasing Bank 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 the
purchasing Bank, such purchase shall to that extent be rescinded and
each other Bank shall repay to the purchasing Bank the purchase price
paid therefor, together with an amount equal to such paying Bank's
Applicable Percentage (according to the proportion of (i) the amount of
such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid
or payable by the purchasing Bank in respect of the total amount so
recovered. Each of the Borrowers agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 2.25 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 9.09) with
respect to such participation as fully as if such Bank were the direct
creditor of the applicable Borrower in the amount of such participation.
The Agent will keep records (which shall be conclusive and binding in
the absence of manifest error) of participations purchased pursuant to
this Section 2.25 and will in each case notify the Banks following any
such purchases or repayments.
26. TAXES. (a) Subject to subsection 2.26(g), any and all payments by
any Borrower to each Bank or the Agent under this Agreement and any
other Loan Document shall be made free and clear of, and without
deduction or withholding for, any Taxes. In addition, the Borrowers
shall pay all Other Taxes.
(a) If any Borrower shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then, subject to subsection
2.26(g):
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
(ii) such Borrower shall make such deductions and withholdings;
(iii) such Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) such Borrower shall also pay to each Bank or the Agent for
the account of such Bank, at the time interest is paid, Further Taxes in
the amount that the respective Bank specifies as necessary to preserve
the after-tax yield such Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed.
(b) Subject to subsection 2.26(g), each Borrower agrees to indemnify
and hold harmless each Bank and the Agent for the full amount of
(i) Taxes, (ii) Other Taxes, and (iii) Further Taxes in the amount that
the respective Bank specifies as necessary to preserve the after-tax
yield such Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or
with respect thereto, whether or not such Taxes, Other Taxes or Further
Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Bank or
the Agent makes written demand therefor.
(c) Within 30 days after the date of any payment by any Borrower of
Taxes, Other Taxes or Further Taxes, such Borrower shall furnish to each
Bank or the Agent the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment satisfactory to
such Bank or the Agent.
(d) If any Borrower is required to pay any amount to any Bank or the
Agent pursuant to subsection (b) or (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may
thereafter accrue, if such change in the sole judgment of such Bank is
not otherwise disadvantageous to such Bank.
(e) Each Bank which is a foreign person (i.e., a person other than a
United States person for United States Federal income tax purposes)
agrees that:
(i) it shall, no later than the Closing Date (or, in the case of
a Bank which becomes a party hereto pursuant to Section 9.04 after the
Closing Date, the date upon which the Bank becomes a party hereto)
deliver to the Borrowers' Agent through the Agent two accurate and
complete signed originals of Internal Revenue Service Form 4224 or any
successor thereto ("Form 4224"), or two accurate and complete signed
originals of Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"), as appropriate, in each case indicating that the Bank is
on the date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from withholding
of United States Federal income tax;
(ii) if at any time the Bank makes any changes necessitating a
new Form 4224 or Form 1001, it shall with reasonable promptness deliver
to the Borrowers' Agent through the Agent in replacement for, or in
addition to, the forms previously delivered by it hereunder, two
accurate and complete signed originals of Form 4224; or two accurate and
complete signed originals of Form 1001, as appropriate, in each case
indicating that the Bank is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this Agreement
free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any
event (including the passing of time but excluding any event mentioned
in (ii) above) requiring a change in or renewal of the most recent Form
4224 or Form 1001 previously delivered by such Bank and deliver to the
Borrowers' Agent through the Agent two accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Bank; and
(iv) it shall, promptly upon the Borrowers' Agent's or the
Agent's reasonable request to that effect, deliver to the Borrowers'
Agent or the Agent (as the case may be) such other forms or similar
documentation as may be required from time to time by any applicable
law, treaty, rule or regulation in order to establish such Bank's tax
status for withholding purposes.
(f) The Borrowers will not be required to pay any additional amounts
in respect of United States Federal income tax pursuant to subsection
2.26(b) to any Bank for the account of any Lending Office of such Bank:
(i) if the obligation to pay such additional amounts would not
have arisen but for a failure by such Bank to comply with its
obligations under subsection 2.26(f) in respect of such Lending Office;
(ii) if such Bank shall have delivered to the Borrowers' Agent a
Form 4224 in respect of such Lending Office pursuant to subsection
2.26(f), and such Bank shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by any Borrower for the account of such Lending
Office for any reason other than a change in United States law or
regulations or in the official interpretation of such law or regulations
by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form 4224; or
(iii) if the Bank shall have delivered to the Borrowers' Agent a
Form 1001 in respect of such Lending Office pursuant to subsection
2.26(f), and such Bank shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by any Borrower hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or any applicable tax treaty or regulations or in the
official interpretation of any such law, treaty or regulations by any
governmental authority charged with the interpretation or administration
thereof (whether or not having the force of law) after the date of
delivery of such Form 1001.
(g) If, at any time, the Borrowers' Agent requests any Bank to
deliver any forms or other documentation pursuant to subsection
2.26(f)(iv), then the Borrowers jointly and severally agree, on demand
of such Bank through the Agent, to reimburse such Bank for any costs and
expenses (including Attorney Costs) reasonably incurred by such Bank in
the preparation or delivery of such forms or other documentation.
27. ILLEGALITY. If any Bank shall determine that the introduction of
any Requirement of Law, or any change in any Requirement of Law or in
the interpretation or administration thereof, has made it unlawful, or
that any central bank or other Governmental Authority has asserted that
it is unlawful, for any Bank or its Lending Office to make Eurocurrency
Loans, then, on notice thereof by the Bank to the Borrowers' Agent
through the Agent, the obligation of that Bank to make Eurocurrency
Loans shall be suspended until the Bank shall have notified the Agent
and the Borrowers' Agent that the circumstances giving rise to such
determination no longer exist. If a Bank shall determine that it is
unlawful to maintain any Eurocurrency Loan, each Borrower shall prepay
in full all Eurocurrency Loans of that Bank made to such Borrower then
outstanding, together with interest accrued thereon, either on the last
day of the Interest Period thereof if the Bank may lawfully continue to
maintain such Eurocurrency Loans to such day, or immediately, if the
Bank may not lawfully continue to maintain such Eurocurrency Loans,
together with any amounts required to be paid in connection therewith
pursuant to Section 2.29. If any Borrower is required to prepay any
Eurocurrency Loan immediately as provided in this Section 2.27, then
concurrently with such prepayment, such Borrower shall borrow from the
affected Bank, in the amount of such repayment (or the Equivalent Amount
thereof in Dollars on the date of repayment and borrowing, in the case
of a prepayment of an Offshore Currency Loan), an ABR Loan.
28. INCREASED COSTS AND REDUCTION OF RETURN. (a) If any Bank or the
Issuing Bank shall determine that, due to either (i) the introduction of
or any change (other than any change by way of imposition of or increase
in reserve requirements included in the calculation of the CD Rate or
the Offshore Rate) in or in the interpretation of any law or regulation
or (ii) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Bank or the
Issuing Bank of agreeing to make or making, funding or maintaining any
Eurocurrency Loans or CD Rate Loans or participating in any L/C
Obligations, or any increase in the cost to the Issuing Bank of agreeing
to issue, issuing or maintaining any Letter of Credit or of agreeing to
make or making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Borrowers shall be liable for, and shall from
time to time, upon demand therefor to the Borrowers' Agent by such Bank
or the Issuing Bank, as the case may be (with a copy of such demand to
the Agent), pay to the Agent for the account of such Bank or the Issuing
Bank, additional amounts as are sufficient to compensate such Bank or
the Issuing Bank for such increased costs, not later than 30 days
following demand therefor.
(a) If any Bank or the Issuing Bank shall have determined that
(i) the introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by
any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank
(or its Lending Office) or the Issuing Bank, as the case may be, or any
corporation controlling the Bank, or the Issuing Bank, as the case may
be, with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or
the Issuing Bank or any corporation controlling the Bank or the Issuing
Bank and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return
on capital) determines that the amount of such capital is increased as a
consequence of its Commitment, Loans, Letters of Credit or other
extensions of credit or obligations under this Agreement, then, the
Borrowers shall be liable for, and shall upon demand to the Borrowers'
Agent by such Bank or the Issuing Bank, as the case may be (with a copy
to the Agent), pay to such Bank or the Issuing Bank, from time to time
as specified by such Bank or the Issuing Bank, additional amounts
sufficient to compensate such Bank or the Issuing Bank for such
increase, not later than 30 days following demand therefor.
29. FUNDING LOSSES. Each Borrower agrees to reimburse each Bank for,
and to hold each Bank harmless from any loss, cost or expense which the
Bank may sustain or incur as a consequence of: (a) any failure of such
Borrower to make any payment or prepayment of principal of any
Eurocurrency Loan or a CD Rate Loan (including payments made after any
acceleration thereof); (b) any failure of such Borrower to borrow,
continue or convert a Loan after the Borrowers' Agent has given (or is
deemed to have given) a Notice of Borrowing or a Notice of
Conversion/Continuation in respect of such Borrower; (c) any failure of
such Borrower to make any prepayment after the Borrowers' Agent has
given a notice in accordance with Section 2.07; (d) any prepayment
(including pursuant to Section 2.07) of a Eurocurrency Loan or a CD Rate
Loan on a day which is not the last day of the Interest Period with
respect thereto; or (e) any conversion pursuant to Section 2.04 of any
Eurocurrency Loan to an ABR Loan or a CD Rate Loan, or of any CD Rate
Loan to a Eurocurrency Loan or an ABR Loan, on a day that is not the
last day of the respective Interest Period; including any such loss or
expense arising from the liquidation or reemployment of funds obtained
by it to maintain its Eurocurrency Loans or CD Rate Loans hereunder or
from fees payable to terminate the deposits from which such funds were
obtained or from charges relating to the Offshore Currency Loans. Any
request for compensation by any Bank pursuant to this Section 2.29 shall
be paid not later than 30 days following demand therefor.
30. INABILITY TO DETERMINE RATES. If the Required Banks shall have
determined that for any reason adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the CD Rate for any
requested Interest Period with respect to a proposed Eurocurrency Loan
or CD Rate Loan or that the Offshore Rate or the CD Rate applicable
pursuant to subsection 2.09(a) for any requested Interest Period with
respect to a proposed Eurocurrency Loan or CD Rate Loan does not
adequately and fairly reflect the cost to such Banks of funding such
Loan, the Agent will forthwith give notice of such determination to the
Borrowers' Agent and each Bank. Thereafter, the obligation of the Banks
to make or maintain CD Rate Loans or Eurocurrency Loans, as the case may
be, hereunder shall be suspended until the Agent upon the instructions
of the Required Banks revokes such notice in writing. Upon receipt of
such notice, the Borrowers' Agent may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the
Borrowers' Agent does not revoke such notice, the Banks shall make,
convert or continue the Loans, as proposed by the Borrowers' Agent, in
the amount specified in the applicable notice submitted by the
Borrowers' Agent, but such Loans shall be made, converted or continued
as ABR Loans instead of CD Rate Loans or Eurocurrency Loans, as the case
may be. In the case of any Offshore Currency Loans, the Borrowing shall
be in an aggregate amount equal to the originally requested Borrowing
amount in Dollars, and the continuation shall be in an aggregate amount
equal to the Equivalent Amount as of the continuation date for any such
Offshore Currency Loans, and to that end any outstanding Offshore
Currency Loans which are the subject of any such continuation shall be
redenominated into ABR Loans in Dollars with effect from the last day of
the Interest Period with respect to any such Offshore Currency Loans.
31. CERTIFICATES OF BANKS. Any Bank or the Issuing Bank claiming
reimbursement or compensation pursuant to this Article II shall deliver
to the Borrowers' Agent (with a copy to the Agent) a certificate setting
forth in reasonable detail the amount payable to the Bank or the Issuing
Bank hereunder and such certificate shall be conclusive and binding on
the Borrowers' Agent in the absence of manifest error. If any Bank or
the Issuing Bank fails to notify the Borrowers' Agent that it intends to
claim any such reimbursement or compensation within six months after
such Bank or the Issuing Bank has, or with reasonable diligence should
have, knowledge of its claim therefor, the Borrowers shall not be
obligated to compensate such Bank or the Issuing Bank for the amount of
such Bank's or the Issuing Bank's claim accruing prior to the date which
is six months before the date on which such Bank or the Issuing Bank
first notifies the Borrowers' Agent that it intends to such claim; it
being understood that the calculation of the actual amounts may not be
possible within such period and that in the event it is not possible to
calculate such amounts within such period such Bank or the Issuing Bank
may provide such calculation as soon as reasonably practicable
thereafter without affecting or limiting any Borrower's payment
obligations hereunder.
32. SUBSTITUTION OF BANKS. Upon the receipt by the Borrowers' Agent
from any Bank (an "Affected Bank") of a claim for compensation pursuant
to Section 2.28, the Borrowers' Agent may: (i) request the Affected
Bank to use its best efforts to obtain a replacement bank or financial
institution satisfactory to the Borrowers' Agent to acquire and assume
all or part of such Affected Bank's Loans and Commitment (a "Replacement
Bank"); (ii) request one OR more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Revolving Commit-
ment; or (iii) designate a Replacement Bank. Any such designation of a
Replacement Bank under clause (i) or (iii) shall be subject to the prior
written consent of the Agent and the Issuing Bank (which consent shall
not be unreasonably withheld). Any substitution of Banks under this
Section 2.32, shall be subject to payment by the applicable Borrower to
the applicable Bank(s) of amounts, if any, incurred by such Bank(s)
under Section 2.29 hereof arising from the substitutions of Bank(s) on a
date other than the last day of the applicable Interest Period(s).
III. Representations and Warranties
Each Borrower represents and warrants to the Banks that:
1. EXISTENCE AND POWER. Each Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; (b) has the power and authority and
all governmental licenses, authorizations, consents and approvals (i) to
own its assets and carry on its business as presently conducted and
(ii) to execute, deliver, and perform its obligations under, the Loan
Documents; (c) is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification; and (d) is in compliance with all
Requirements of Law; except, in each case, to the extent that the
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
2. BINDING EFFECT. Each Loan Document to which any Borrower is a party
constitutes the legal, valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally
or by equitable principles relating to enforceability.
3. CORPORATE AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance by each Borrower of each Loan Document to which it is party,
have been duly authorized by all necessary corporate action of such
Borrower, and do not and will not: (a) contravene the terms of any of
its Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which such Borrower is a party
or any order, injunction, writ or decree of any Governmental Authority
to which such Borrower or its property is subject; or (c) violate any
Requirement of Law. The Borrowers are not in default under or with
respect to any Contractual Obligation or Requirement of Law in any
respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect.
4. SUBSIDIARIES. The Company has no Subsidiaries as of the Closing
Date other than those specifically disclosed in SCHEDULE 3.04.
5. FINANCIAL CONDITION. (a) The audited consolidated balance sheet of
the Company and its Subsidiaries as at August 31, 1996, and the related
consolidated statements of income, shareholders' equity and cash flows
for the fiscal year ended on that date, and the unaudited consolidated
balance sheet of the Company and its Subsidiaries as at February 28,
1997, and other Indebtedness and liabilities incurred since such date
permitted hereunder, and the related consolidated statements of income
and cash flows, for the period ended on that date: (i) were prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, except as otherwise expressly noted therein, except that the
February 28, 1997, financial statements are subject to year-end
adjustments and except for the absence of notes; (ii) are complete and
accurate in all material respects and fairly present in all material
respects the consolidated financial condition of the Company and its
Subsidiaries as of the dates thereof and results of operations for the
periods covered thereby; and (iii) except as specifically disclosed in
Schedule 3.05 and except for Indebtedness and other liabilities incurred
in the ordinary course of business since February 28, 1997, and other
Indebtedness and liabilities incurred since such date permitted
hereunder, neither the Company nor any of its Subsidiaries has incurred,
created, assumed or otherwise become liable with respect to any material
Indebtedness or other liabilities, direct or contingent, including
liabilities for material taxes, commitments and Guarantees not reflected
in the financial statements referred to above.
(a) Since February 28, 1997, there has been no Material Adverse
Effect.
6. LITIGATION. Except as specifically disclosed in SCHEDULE 3.06 or
otherwise disclosed to the Banks in writing, there are no actions,
suits, proceedings, claims or disputes pending, or to the best knowledge
of the Company, after due inquiry, threatened or contemplated, at law,
in equity, in arbitration or before any Governmental Authority, against
the Company, or any of its Subsidiaries or any of their respective
properties, which could reasonably be expected to have a Material
Adverse Effect.
7. GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority, or the consent of any other Person, is necessary
or required in connection with the execution, delivery or performance
by, or enforcement against, the Company or any Additional Borrower of
any Loan Document to which it is a party.
8. TITLE TO PROPERTIES. The Company and each of its Subsidiaries has
good record and marketable title in fee simple to, or valid leasehold
interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as could not,
individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect. The property of the Company and each of its
Subsidiaries is subject to no Liens, other than Permitted Liens.
9. ERISA COMPLIANCE. All Employee Benefit Plans of the Company are
listed in SCHEDULE 3.09. Except as specifically disclosed in such
Schedule, no Termination Event which could result in unfunded liability
in excess of $500,000 has occurred or is reasonably expected to occur
with respect to any Pension Plan. Each Employee Benefit Plan is in
compliance in all material respects with the applicable provisions of
ERISA, the Code and other applicable Federal or state law, and benefits
have been paid in accordance with the provisions of each such Employee
Benefit Plan, except for such failures as would not have a Material
Adverse Effect. No prohibited transaction (as defined in Section 4975
of the Code or Section 406 of ERISA) or other event that would result in
material liability to the Company or any of its Subsidiaries has
occurred with respect to any Employee Benefit Plan.
10. USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans and
other extensions of credit hereunder are intended to be and shall be
used solely for the purposes set forth in and permitted by Section 5.08,
subject to the limitations set forth in Section 6.05.
11. TAXES. The Company and each of its Subsidiaries has filed all
Federal and other material tax returns and reports required to be filed,
and has paid all Federal and other material taxes, assessments, fees and
other governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except those
which are being or will be contested in good faith by appropriate
proceedings and for which adequate reserves have been provided for to
the extent required by GAAP and no notice of lien has been filed or
recorded. There is no proposed tax assessment against the Company or
any of its Subsidiaries which would, if the assessment were made, have a
Material Adverse Effect.
12. ENVIRONMENTAL MATTERS. The on-going operations of the Company and
each of its Subsidiaries comply in all respects with all Environmental
Laws, except such non-compliance which could not be reasonably expected
to have a Material Adverse Effect. There are no Hazardous Materials or
other conditions or circumstances existing with respect to any property
of the Company or any of its Subsidiaries, or arising from operations
prior to the Closing Date (in the case of any previous owner, tenant,
occupant, user or operator thereof, to the best of the Company's
knowledge), that could reasonably be expected to result in a Material
Adverse Effect.
13. COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use
all of the material patents, trademarks, service marks, trade names,
copyrights, franchises, authorizations and other intellectual property
rights that are reasonably necessary for the operation of their
respective businesses, without known conflict with the rights of any
other Person, which conflicts, either individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect.
Except as specifically disclosed in SCHEDULE 3.13, no claim or
litigation regarding any of the foregoing is pending or, to the
knowledge of the Company, threatened, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
14. FULL DISCLOSURE. The documents, certificates and written
statements (including the Loan Documents) furnished by the Company or
any Subsidiary to the Agent or any Bank pursuant to any provision of any
Loan Document, or for use in connection with the transactions
contemplated by this Agreement, taken together with all such documents,
certificates and written statements, do not contain any untrue
statements of a material fact or omit any material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they are made, not misleading.
It is recognized by the Agent and the Banks that projections and
forecasts provided by or on behalf of the Company or any Subsidiary,
although reflecting the Company's or such Subsidiary's good faith
projections or forecasts based upon methods and data the Borrower or
such Subsidiary believes to be reasonable and accurate, are not to be
viewed as facts and that actual results during the period or periods
covered by any such projections and forecasts may differ from the
projected or forecasted results.
15. REGULATED ENTITIES. Neither the Company, any Person controlling
the Company, nor any Subsidiary of the Company, is (a) an "Investment
Company" within the meaning of the Investment Company Act of 1940; or
(b) subject to regulation under the Public Utility Holding Company Act
of 1935 or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.
16. INSURANCE. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies, in
such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Company or such
Subsidiaries operate (after giving effect to customary self-insurance).
IV. CONDITIONS
1. CLOSING DATE. The obligations of the Banks to make Loans and of the
Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement signed on behalf of
such party or (ii) written evidence satisfactory to the Agent (which may
include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.
(b) The Agent shall have received a favorable written opinion
(addressed to the Agent, the Issuing Bank and the Banks and dated the
Closing Date) of Wilson, Sonsini, Goodrich & Rosati, in substantially
the form set forth in EXHIBIT F satisfactory to the Agent and each Bank,
and covering such other matters relating to the Company, this Agreement
or the Transactions as the Banks shall reasonably request. The Company
hereby requests such counsel to deliver such opinion.
(c) The Agent shall have received such documents and certificates as
the Agent or any Bank may reasonably request relating to the
organization, existence and good standing of the Company, the
authorization of the Transactions and any other legal matters relating
to the Company, this Agreement or the Transactions, all in form and
substance satisfactory to the Agent and each Bank.
(d) The Agent shall have received a certificate. dated the Closing
Date and signed by the President, a Vice President or a Financial
Officer of the Company, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 4.02.
(e) The Banks shall be satisfied that (i) no Material Adverse Effect
has occurred since February 28, 1997, and (ii) the Company and the
Subsidiaries are not party to or subject to any litigation which would
be likely to have a Material Adverse Effect.
(f) The Agent shall have received all fees and other amounts due are
payable on or prior to the Closing Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Company hereunder.
(g) The Agent shall have received evidence satisfactory to it that
the Existing Facility and all commitments to make loans or otherwise
extend credit thereunder has been terminated as of the Closing Date.
2. EACH CREDIT EVENT. The obligation of each Bank to make a Loan on the
occasion of any Borrowing (other than a Borrowing in which Revolving
Loans or L/C Borrowings are refinanced with Revolving Loans without any
increase in the Effective Amount of Revolving Loans and L/C
Obligations), and of the Issuing Bank to issue, amend, renew or extend
any Letter of Credit, is subject to the satisfaction of the following
conditions:
(a) The representations and warranties of the Company and each other
Borrower set forth in this Agreement shall be true and correct on and as
of the date of such Borrowing or the date of issuance, amendment,
renewal or extension of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default shall have occurred and be
continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a
Letter of Credit shall be deemed to constitute a representation and
warranty by the Company and each other Borrower on the date thereof as
to the matters specified in paragraphs (a) and (b) of this Section.
V. AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full and all Letters of Credit shall have
expired or terminated and all L/C Obligations shall have been
reimbursed, and unless the Required Banks waive compliance in writing in
accordance with Section 9.02, the Company covenants and agrees with the
Banks that:
1. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company will furnish
to the Agent and each Bank:
(a) within 90 day's after the end of each fiscal year of the
Company, its audited consolidated balance sheet and related statements
of operations, changes in shareholders' equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on by KPMG Peat
Marwick or other independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present
fairly in all material respects the financial condition and results of
operations of the Company and the consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance
sheet and related statements of operations and cash flows as of the end
of and for such fiscal quarter and the then elapsed portion of the
fiscal year. setting forth in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the
balance sheet. as of the end of) the previous fiscal year, all certified
by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the
Company and the consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a completed Compliance Certificate of a
Financial Officer of the Company;
(d) Concurrently with any delivery of consolidated financial
statements under clause (a) above, a certificate of the accounting firm
that reported on such financial statements stating whether they obtained
knowledge during the course of their audit of such consolidated
financial statements of any Default insofar as it relates to accounting
matters (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed
by the Company or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities
exchange. or distributed by the Company to its shareholders generally,
as the case may be;
(f) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
the Company or any Subsidiary, or compliance with the terms of this
Agreement, as the Agent or any Bank may reasonably request; and
(g) promptly upon becoming aware thereof, notice of the
effectiveness of any rating of any Index Debt by S&P or Moody's and
notice of the effectiveness of any change in any rating of any Index
Debt by S&P or Moody's.
2. NOTICES OF MATERIAL EVENTS. The Company will furnish to the Agent
and each Bank prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
the Company or any Subsidiary thereof that could reasonably be expected
to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred. could reasonably be expected
to result in liability of the Company and its Subsidiaries in an
aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a
statement of a Financial Officer or other executive officer of the
Company setting forth the details of the event or development requiring
such notice and any action taken or proposed to be taken with respect
thereto.
3. EXISTENCE; CONDUCT OF BUSINESS. The Company will, and will cause
each of the Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence
and the licenses, permits, privileges and franchises material to the
conduct of its business; PROVIDED that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under
Section 6.04.
4. PAYMENT OF OBLIGATIONS. The Company will, and will cause each of its
Subsidiaries to, pay its obligations, including Tax liabilities, that,
if not paid, could result in a Material Adverse Effect before the same
shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate
proceedings, (b) the Company or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
5. MAINTENANCE OF PROPERTIES; INSURANCE. The Company will, and will
cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, except to the extent the
failure to do so could not reasonably be expected to result in a
Material Adverse Effect, and (b) maintain, with financially sound and
reputable insurance companies. insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the
sane or similar businesses operating in the same or similar locations
(after giving effect to customary self insurance).
6. BOOKS AND RECORDS; INSPECTION RIGHTS. The Company will, and will
cause each of its Subsidiaries to, keep proper books of record and
account in which entries are made of all dealings and transactions in
relation to its business and activities (including with respect to ERISA
if applicable) that are true and complete in all material respects. The
Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Agent or any Bank, upon reasonable
prior notice, to visit and inspect its properties, to examine and make
extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
7. COMPLIANCE WITH LAWS. The Company will, and will cause each of its
Subsidiaries to comply in all material respects with all laws, rules,
regulations and orders (including ERISA if applicable) of any
Governmental Authority applicable to it or its property, except such as
may be contested by the Company or the applicable Subsidiary in good
faith or as to which a bona fide dispute may exist at except for
noncompliance by any Subsidiary that individually or taken together with
all compliance by Subsidiaries could not reasonably be expected to
result in a Material Adverse Effect.
8. USE OF PROCEEDS AND LETTERS OF CREDIT. The Letters of Credit and
the proceeds of the Loans will be used only for general corporate
purposes of the Company and its Subsidiaries, including acquisitions,
subject to the limitations set forth in Section 6.05.
9. ACCESSION BY SUBSIDIARY. In addition to the requirements set forth
in subsection 2.01(b), prior to any Subsidiary becoming an Additional
Borrower hereunder, such Subsidiary shall furnish to the Agent and each
Bank the following, each in form and substance satisfactory to the Agent
and each Bank:
(a) a duly executed notice and agreement in substantially the form
of EXHIBIT G (an "ADDITIONAL BORROWER REQUEST AND ASSUMPTION
AGREEMENT"); and
(b) a guaranty in substantially the form of EXHIBIT H duly executed
by the Company.
VI. NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and
all L/C Obligations shall have been reimbursed, and unless the Required
Banks waive compliance in writing in accordance with Section 9.02, the
Company covenants and agrees with the Banks that:
1. SUBSIDIARY INDEBTEDNESS. No Subsidiary will create, incur, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness existing on the date hereof and set forth in
SCHEDULE 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof;
(b) Indebtedness of any Subsidiary to the Company or any other
Subsidiary;
(c) Guarantees by any Subsidiary of Indebtedness of the Company or
of any other Subsidiary to the extent such Indebtedness is permitted
under this Agreement;
(d) Indebtedness of any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien
on any such assets prior to the acquisition thereof and extensions,
renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 120 days after such
acquisition or the completion of such construction or improvement and
(ii) the aggregate principal amount of Indebtedness permitted by this
clause (d) when aggregated (without duplication) with all Indebtedness
incurred under clause (g) below, with the aggregate amount of all claims
and obligations secured by Liens permitted pursuant to clauses (d) and
(f) of Section 6.02 and with the aggregate book value or sale price of
the assets sold in sale and leaseback transactions permitted pursuant to
Section 6.03 does not exceed 30% of Consolidated Tangible Assets as of
the last day of the most recent fiscal period in respect of which
financial statements shall have been delivered pursuant to Section 5.01:
(e) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; PROVIDED that such Indebtedness exists at the time such
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary;
(f) Indebtedness of any Subsidiary as an account party in respect of
trade letters of credit;
(g) other unsecured Indebtedness of the Subsidiaries in an aggregate
principal amount outstanding at any time that, when aggregated (without
duplication) with all Indebtedness incurred under clause (d) above, with
the aggregate amount of all claims and obligations secured by Liens
permitted pursuant to clauses (d) and (f) of Section 6.02 and with the
aggregate book value or sale price of the assets sold in sale and
leaseback transactions permitted pursuant to Section 6.03 does not
exceed 30% of Consolidated Tangible Assets as of the last day of the
most recent fiscal period in respect of which financial statements shall
have been delivered pursuant to Section 5.01; and
(h) (i) Indebtedness of any Special Purpose Subsidiary; or (ii)
Indebtedness of any other Subsidiary incurred by such Subsidiary in
connection with the incurrence of Indebtedness by any Special Purpose
Subsidiary.
2. LIENS. The Company will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property or
asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect
of any thereof, except:
(a) Permitted Encumbrances and Liens securing Capital Lease
Obligations permitted under subsection 6.01(d), and any renewal or
extension of any such Permitted Encumbrance or Lien so long as the
principal amount of the obligations secured thereby is not increased;
(b) any Lien on any property or asset of the Company or any
Subsidiary existing on the date hereof and set forth in SCHEDULE 6.02;
PROVIDED that (i) such Lien shall not apply to any other property or
asset of the Company or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Company or any Subsidiary or existing on any
property or asset (including attachments, accessions, replacements or
proceeds thereof) of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; PROVIDED that
(i) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Subsidiary, as the case may
be, (ii) such Lien shall not apply to any other property or assets of
the Company or any Subsidiary and (iii) such Lien shall secure only
those obligations which it secures on the date of such acquisition or
the date such Person becomes a Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Company or any Subsidiary (including replacements or
proceeds of such assets and including any Capital Lease Obligations);
PROVIDED that (i) in the case of any Subsidiary, such security interests
secure Indebtedness permitted by clause (d) of Section 6.01, (ii) such
security interests and the Indebtedness secured thereby are incurred
prior to or within 120 days after such acquisition or the completion of
such construction or improvement, (iii) the Indebtedness secured thereby
does not exceed 100% of the cost of acquiring, constructing or improving
such fixed or capital assets, (iv) such security interests shall not
apply to any other property or assets of the Company or any Subsidiary
and (v) the aggregate amount of such Indebtedness when aggregated
(without duplication) with all Indebtedness incurred under clauses (d)
and (g) of Section 6.01, with the aggregate amount of all claims secured
by Liens permitted pursuant to clause (f) below and with the aggregate
book value or sale price of the assets sold in sale and leaseback
transactions permitted pursuant to Section 6.03 does not exceed 30% of
Consolidated Tangible Assets as of the last day of the most recent
fiscal period in respect of which financial statements shall have been
delivered pursuant to Section 5.01;
(e) Liens securing claims of any Special Purpose Subsidiary against
any other Subsidiary and sales or assignments of accounts receivable (or
interests therein) by any Subsidiary to a Special Purpose Subsidiary and
by any Special Purpose Subsidiary; and
(f) other Liens securing claims in an aggregate amount at any time
outstanding that when aggregated (without duplication) with (i) all
obligations of any Special Purpose Subsidiary secured by Liens, (ii) all
Indebtedness incurred under clauses (d) and (g) of Section 6.01, (iii)
the aggregate amount of all obligations secured by Liens permitted
pursuant to clause (d) above and (iv) the aggregate book value or sale
price of the assets sold in sale and leaseback transactions permitted
pursuant to Section 6.03, does not exceed 30% of Consolidated Tangible
Assets as of the last day of the most recent fiscal period in respect of
which financial statements shall have been delivered pursuant to
Section 5.01, PROVIDED that the Dollar amount of claims and other
obligations (other than claims or other obligations of any Subsidiary in
favor of any Special Purpose Subsidiary which is directly or indirectly
wholly owned by the Company and inchoate indemnity obligations) secured
by accounts receivable does not exceed the greater of $130,000,000 or
35% of the Company's aggregate accounts receivable (including such
accounts receivable sold to any Special Purpose Subsidiary) calculated
on a consolidated basis.
3. SALE AND LEASEBACK TRANSACTIONS. The Company will not, and will not
permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property
which it intends to use for substantially the same purpose or purposes
as the property being sold or transferred; PROVIDED, HOWEVER, that
notwithstanding the above, the Company or any Subsidiary may engage in
any sale and leaseback transaction if, immediately after the
consummation of such transaction, the aggregate book value or sale price
of the assets sold in sale and leaseback transactions referred to in
this Section 6.03, when aggregated (without duplication) with all
Indebtedness incurred under clauses (d) and (g) of Section 6.01 and with
the aggregate amount of all claims and obligations secured by Liens
permitted pursuant to clauses (d) and (f) of Section 6.02, does not
exceed 30% of Consolidated Tangible Assets as of the last day of the
most recent fiscal period in respect of which financial statements shall
have been delivered pursuant to Section 5.01.
4. FUNDAMENTAL CHANGES. (a) The Company will not, and will not permit
any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or any substantial portion of its assets, or
all or substantially all of the capital stock of any of the Subsidiaries
(in each case, whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing
(i) any Person may merge into or consolidate with the Company in a
transaction in which the Company is the surviving corporation, (ii) any
Person may merge into any Subsidiary in a transaction in which the
surviving entity is a Subsidiary, (iii) any Subsidiary may sell,
transfer, lease or otherwise dispose of its assets to the Company or to
another Subsidiary, (iv) any Subsidiary may liquidate or dissolve if the
Company determines in good faith that such liquidation or dissolution is
in the best interests of the Company and is not materially
disadvantageous to the Banks and any distribution or other transfer of
assets in connection with such liquidation or dissolution is made to the
Company or another Subsidiary in an amount consistent with such person's
ownership percentage of the Subsidiary being dissolved or liquidated,
(v) the Borrower and the Subsidiaries may sell, lease or otherwise
dispose of property in any individual transaction not related to any
other such transaction if the aggregate fair market value of the assets
sold, leased or otherwise disposed of in such transaction is less than
$2,000,000, (vi) the Company and/or any of the Subsidiaries may sell or
otherwise transfer their accounts receivable and other assets to any
Special Purpose Subsidiary and/or any Special Purpose Subsidiary may
sell or otherwise transfer such accounts receivable or other property
(or interests therein) if otherwise permitted under Section 6.02(f), and
(vii) the Company and the Subsidiaries may sell, lease or otherwise
dispose of property in any other transaction in the ordinary course of
business, PROVIDED that, with respect to transactions outside of the
ordinary course of business, the aggregate fair market value of all
assets sold, leased or otherwise disposed of in transactions under this
clause (vii) shall not when taken together at the time of each such
sale, lease or other disposition exceed 25% of Consolidated Tangible
Assets as of the last day of the most recent fiscal period in respect of
which financial statements shall have been delivered pursuant to
Section 5.01 at such time.
(a) The Company will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any line of business
material to the Company and the Subsidiaries, taken as a whole, other
than businesses currently conducted by the Company and the Subsidiaries
and businesses reasonably related thereto.
5. MARGIN STOCK; UNFRIENDLY ACQUISITIONS. No Letter of Credit and no
part of the proceeds of any Loan will be used, (a) whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to
purchase or carry Margin Stock or to extend credit to others for the
purpose of purchasing or carrying Margin Stock or to refund Indebtedness
originally incurred for such purpose or (ii) for any purpose which
entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board. including. without limitation, Regulations
G, T, U or X thereof, or (b) directly or through any Subsidiary, to
finance any Unfriendly Acquisition.
6. FISCAL YEAR. The Company will not change its fiscal year end from
August 31.
7. RESTRICTIVE AGREEMENTS. The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Company
or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its
capital stock or to make or repay loans or advances to the Company or
any other Subsidiary or to Guarantee Indebtedness of the Company or any
other Subsidiary if any such prohibition, restriction or condition is
more burdensome than any similar prohibition, restriction or condition
contained in this Agreement or any other Loan Document; PROVIDED that
(i) the foregoing shall not apply to restrictions and conditions imposed
by law or by this Agreement, (ii) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on
SCHEDULE 6.07 (but shall apply to any amendment or modification
expanding the scope of any such restriction or condition unless
otherwise permitted under this Section 6.07), (iii) the foregoing shall
not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale,
provided such restrictions and conditions apply only to the Subsidiary
that is to be sold and such sale is permitted hereunder, (iv) clause (a)
of the foregoing shall not apply to restrictions or conditions imposed
by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness, (v) clause (a) of the foregoing
shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof, (vi) the foregoing shall not apply
to such restrictions and conditions applicable to any Subsidiary
acquired after the date hereof if such restrictions and conditions
existed at the time such Subsidiary was acquired and were not created in
anticipation of such acquisition, (vii) the foregoing shall not apply to
one or more Subsidiaries having any such restriction or condition so
long as any such Subsidiary individually shall not account for more than
5% of the gross revenues for the most recently ended fiscal year of the
Company and the Subsidiaries, taken as a whole, and each such Subsidiary
together with all other such Subsidiaries in the aggregate shall not
account for more than 10% of the gross revenues for the most recently
ended fiscal year of the Company and the Subsidiaries, taken as a whole,
(viii) the foregoing shall not apply to any working capital facility
entered into by a Subsidiary organized under the laws of any foreign
country, and (ix) the foregoing shall not apply to any Special Purpose
Subsidiary or to any agreement or other arrangement entered into by the
Company or any of the Subsidiaries incidental to a transaction involving
a Special Purpose Subsidiary which transaction is otherwise permitted
under the terms of this Agreement.
8. DISTRIBUTIONS. The Company shall not declare or make, and shall not
suffer or permit any of its Subsidiaries to declare or make, any
dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any class
of its capital stock, or purchase, redeem or otherwise acquire for value
any shares of its capital stock or any warrants, rights or options to
acquire such shares, now or hereafter outstanding, if any Default then
exists or would result therefrom.
9. ADJUSTED LEVERAGE RATIO. Notwithstanding any other provision of
this Agreement, the Company shall not permit its Adjusted Leverage
Ratio, as calculated as of the last day of each fiscal quarter, to be
greater than (a) 1.75 to 1.00 from the Closing Date through and
including February 28, 1998, (b) 1.50 to 1.00 from May 31, 1998 through
and including February 28, 1999, (c) 1.25 to 1.00 from May 31, 1999
through and including February 28, 2000, and (d) 1.00 to 1.00
thereafter.
10. CONSOLIDATED TANGIBLE NET WORTH. Notwithstanding any other
provision of this Agreement, the Company will not permit its
Consolidated Tangible Net Worth as of the last day of each fiscal
quarter following the Closing Date to be less than the sum of (without
duplication) 80% of Consolidated Tangible Net Worth measured as of the
end of the fiscal quarter ended February 28, 1997, PLUS 50% of
consolidated net income (without subtracting losses or acquisition
related charges) for each fiscal quarter ended after the fiscal quarter
ended February 28, 1997, MINUS 100% of all acquisition-related charges
if such charges are recorded in the same fiscal quarter in which the
applicable acquisition is consummated.
VII. EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) any Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any L/C Obligation when and as
the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a)
of this Article) payable under this Agreement, when and as the same
shall become due and payable, and such failure shall continue unremedied
for a period of five Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Company or any Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder,
or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or any
amendment or modification hereof or waiver hereunder, shall prove to
have been materially incorrect or misleading when made or deemed made;
(d) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.03 (with respect to
the Company's existence) or 5.08 or in Article VI;
(e) any Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the Agent to the Borrowers' Agent (which notice will be given at
the request of any Bank)
(f) the Company or any Subsidiary shall be in default with respect
to any payment (whether of principal or interest and regardless of
amount) in respect of any Material Indebtedness and such failure shall
continue beyond the applicable grace period specified in the agreement
or instrument relating to such Material Indebtedness;
(g) the Company or any Subsidiary shall default in any obligation
under any Material Indebtedness and such failure shall result in such
Material Indebtedness being declared to be due and payable prior to the
stated maturity thereof;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Company or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any
Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60
days;
(i) the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to
the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
the Company or any Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(j) the Company or any Subsidiary shall become unable, admit in
writing or fail generally to pay its debts as they become due;
(k) (i) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against the
Company, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets
of the Company or any Subsidiary to enforce any such judgment or (ii)
any non-monetary judgment, order or decree is entered against the
Company or any Subsidiary which does or would reasonably be expected to
have a Material Adverse Effect, and there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Banks, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in a Material
Adverse Effect; or
(m) a Change in Control shall occur;
(n) the stated (or implied) ratings by S&P and Moody's,
respectively, applicable to the Index Debt shall at any time be lower
than BB/Ba2.
then, and in every such event (other than an event with respect to the
Company or any Subsidiary described in clause (h) or (i) of this
Article), and at any time thereafter during the continuance of such
event, the Agent may with the consent of the Required Banks, or shall at
the request of the Required Banks, by notice to the Borrowers' Agent,
take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Loans then outstanding
to be due and payable in whole (or in part, in which case any principal
not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrowers accrued hereunder, shall
become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the
Borrowers; and in case of any event with respect to the Company or any
Subsidiary described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and all fees
and other obligations of the Borrowers accrued hereunder, shall
automatically become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrowers.
VIII. THE AGENT
1. APPOINTMENT AND AUTHORIZATION. Each of the Banks and the Issuing
Bank hereby irrevocably appoints, designates and authorizes the Agent to
take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall the Agent have or be
deemed to have any fiduciary relationship with any Bank or the Issuing
Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent. Without
limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent
contracting parties.
2. DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
3. LIABILITY OF AGENT AND ISSUING BANK. None of the Agent/IB-Related
Persons shall (i) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any other
Loan Document (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer
thereof, contained in this Agreement or in any other Loan Document, or
in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with,
this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company
or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent/IB-Related Person shall be under any
obligation to any Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of,
this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
4. RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon advice and statements
of legal counsel (including counsel to any Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by
the Banks 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 Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Banks
and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(a) For purposes of determining compliance with the conditions
specified in Sections 4.01 and 4.02, each Bank that has executed this
Agreement shall be deemed to have consented to, approved or accepted or
to be satisfied with each document or other matter either sent or made
available by the Agent to such Bank for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by
or acceptable or satisfactory to the Bank, unless an officer of the
Agent responsible for the transactions contemplated by the Loan
Documents shall have received notice from the Bank prior to the Closing
Date specifying its objection thereto and either such objection shall
not have been withdrawn by notice to the Agent to that effect on or
prior to the Closing Date or, if any Borrowing or other Credit Extension
on the Closing Date has been requested, the Bank shall not have made
available to the Agent on or prior to the Closing Date the Bank's
ratable portion of any Borrowing or made the applicable Credit
Extension, as the case may be.
5. NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the
Borrowers' Agent referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default."
In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Banks. The Agent shall take such
action with respect to such Default or Event of Default as shall be
requested by the Required Banks in accordance with Article VII;
PROVIDED, HOWEVER, that unless and until the Agent shall have received
any such request, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
6. CREDIT DECISION. Each Bank expressly acknowledges that none of the
Agent/IB-Related Persons has made any representation or warranty to it
and that no act by the Agent or the Issuing Bank hereinafter taken,
including any review of the affairs of the Company and its Subsidiaries,
shall be deemed to constitute any representation or warranty by the
Agent or the Issuing Bank to any Bank. Each Bank represents to the
Agent and the Issuing Bank that such Bank has, independently and without
reliance upon the Agent or the Issuing Bank and based on such documents
and information as it has deemed appropriate, made its own appraisal of
and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to
the transactions contemplated thereby, and made its own decision to
enter into this Agreement and extend credit to the Borrowers hereunder.
Each Bank also represents that it will, independently and without
reliance upon the Agent or the Issuing Bank and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrowers. Except for notices,
reports and other documents expressly herein required to be furnished to
the Banks by the Agent or the Issuing Bank (if any), the Agent and the
Issuing Bank shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrowers which may come into the possession of
any of the Agent/IB-Related Persons.
7. INDEMNIFICATION. Whether or not the transactions contemplated
hereby shall be consummated, the Banks shall indemnify upon demand the
Agent/IB-Related Persons (to the extent not reimbursed by or on behalf
of the Borrowers and without limiting the obligation of the Borrowers to
do so), ratably from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever (including as a result of foreign currency
fluctuations) which may at any time (including at any time following the
termination of the Letters of Credit, the repayment of the Loans and the
termination or resignation of the related Agent) be imposed on, incurred
by or asserted against any such Person in any way relating to or arising
out of this Agreement or any other Loan Document, the transactions
contemplated hereby or thereby, or the Loans or the use of the proceeds
thereof or the Letters of Credit, or any action taken or omitted by any
such Person under or in connection with any of the foregoing; PROVIDED,
HOWEVER, that no Bank shall be liable for the payment to the
Agent/IB-Related Persons of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses or disbursements resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of
the foregoing, each Bank shall reimburse the Agent and the Issuing Bank
upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent or the Issuing Bank in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights
or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein to the extent that
the Agent or the Issuing Bank is not reimbursed for such expenses by or
on behalf of the Borrowers. Without limiting the generality of the
foregoing, if the Internal Revenue Service or any other Governmental
Authority of the United States or other jurisdiction asserts a claim
that the Agent did not properly withhold tax from amounts paid to or for
the account of any Bank (because the appropriate form was not delivered,
was not properly executed, or because such Bank failed to notify the
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such
Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with all costs
and expenses and attorneys' fees (including Attorney Costs). The
obligations of the Banks in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the
Agent.
8. AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory or other business with any Borrower
and its Subsidiaries and Affiliates as though BofA were not the Agent or
the Issuing Bank hereunder or without notice to or consent of the Banks.
With respect to its Loans and participation in Letters of Credit, BofA
shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Agent or the
Issuing Bank, and the terms "Bank" and "Banks" shall include BofA in its
individual capacity. The Banks acknowledge that, pursuant to any
activities that BofA may pursue in its individual capacity as
contemplated under this Section 8.08, BofA or its Affiliates may receive
information regarding the Company, its Subsidiaries or its Affiliates
(including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiaries and Affiliates)
and acknowledge that BofA shall be under no obligation to provide such
information to the Banks.
9. SUCCESSOR AGENT. The Agent may, and at the request of the Required
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent shall resign as Agent under this Agreement, the Required Banks
shall, with the consent of the Borrowers' Agent (not to be unreasonably
withheld), appoint from among the Banks a successor agent for the Banks.
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with
the Banks and the Borrowers' Agent, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the appointment,
powers and duties of the retiring Agent and the term "Agent" shall mean
such successor agent and the retiring Agent's rights, powers and duties
as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article VIII and Section 9.03
shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement. If no successor
agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks
shall perform all of the duties of the Agent hereunder until such time,
if any, as the Required Banks appoint a successor agent as provided for
above.
IX. MISCELLANEOUS
1. NOTICES. Subject to the last three sentences of this Section 9.01,
all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile, PROVIDED
that any matter transmitted by the Borrowers' Agent or any Borrower by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient and (ii) shall be followed promptly by delivery of a hard copy
original thereof, as follows:
(a) if to the Company (including in its capacity as Borrowers'
Agent), to it at 847 Gibraltar Drive, Building 5, Milpitas, CA 95035;
attention: Treasurer (Telephone: 408/956-6577; Facsimile: 408/956-6062);
(b) if to the Agent, to it at Agency Administrative Services #5596,
1455 Market Street, 13th Floor, San Francisco, CA 94103; attention:
Blanca Vinje (Telephone: (415) 436-2783; Facsimile: (415) 436-2700); and
(c) if to the Issuing Bank or any other Bank, to it at its address
(or facsimile number) set forth in its SCHEDULE 9.01.
Any party hereto may change its address or facsimile number, address of
offshore lending office or payment instructions for notices and other
communications hereunder by notice to the parties listed above. All
notices and other communications given to any party here to in
accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt. Any agreement of the Agent and the
Banks herein to receive certain notices by telephone or facsimile is
solely for the convenience and at the request of the Borrower's Agent
and the Borrowers. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Borrowers' Agent or the Borrowers to give such notice and the Agent and
the Banks shall not have any liability to any Borrower or other Person
on account of any action taken or not taken by the Agent or the Banks in
reliance upon such telephonic or facsimile notice. The obligation of
each Borrower to repay their Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Banks of a confirmation which
is at variance with the terms understood by the Agent and the Banks to
be contained in the telephonic or facsimile notice.
2. WAIVERS; AMENDMENTS. (a) No failure or delay by the Agent, the
Issuing Bank or any Bank in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Agent, the Issuing Bank and the
Banks hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of
this Agreement or consent to any departure by any Borrower (or the
Borrowers' Agent) therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and
for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the
Agent, any Bank or the Issuing Bank may have had notice or knowledge of
such Default at the time.
(a) Neither this Agreement nor any provision hereof may be waived,
amended or modified. except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Banks or by the
Borrowers and the Agent with the consent of the Required Banks; PROVIDED
that no such agreement shall (i) increase the Commitment of any Bank
without the written consent of such Bank, (ii) reduce the principal
amount of any Loan or L/C Obligations or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written
consent of each Bank affected thereby, (iii) postpone the scheduled date
of payment of the principal amount of any Loan or L/C obligations, or
any interest thereon, or any fees payable hereunder, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled
date of expiration of any Commitment, without the written consent of
each Bank affected thereby, (iv) change Section 2.14 or Section 2.25 in
a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Bank, or (v) change any of
the provisions of this Section or the definition of "Required Banks" or
any other provision hereof specifying the number or percentage of Banks
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written
consent of each Bank; PROVIDED FURTHER that no such agreement shall
amend, modify or otherwise affect the rights or duties of the Agent or
the Issuing Bank hereunder without the prior written consent of the
Agent or the Issuing Bank, as the case may be.
3. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The Borrowers shall pay (i)
all reasonable out-of-pocket expenses incurred by the Agent and its
Affiliates, including the reasonable fees, charges and disbursements of
counsel (including the allocated costs and expenses of in-house
counsel), in connection with the syndication of the credit facilities
provided for herein, the preparation and administration of this
Agreement or any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions contemplated hereby or thereby
shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the Agent,
the Issuing Bank or any Bank, including the fees, charges and
disbursements of any counsel (including, in the case of the Agent,
allocated costs and expenses of in-house counsel) for the Agent, the
Issuing Bank or any Bank, in connection with the enforcement or
protection of its rights in connection with this Agreement, including
its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in
respect of such Loans or Letters of Credit.
(a) The Borrowers shall indemnify the Agent, the Issuing Bank and
each Bank, and each Related Party of any of the foregoing Persons (each
such Person being called an "INDEMNITEE") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee (including, in the case
of the Agent, allocated costs and expenses of in-house counsel),
incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the
performance by the parties hereto of their respective obligations
hereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or
the use of the proceeds therefrom (including any refusal by the Issuing
Bank to honor a demand for payment under a Letter of Credit if the
documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit), (iii) any actual or
alleged presence or release of Hazardous Materials on or from any
property owned or operated by the Company or any of its Subsidiaries, or
any Environmental Liability related in any way to the Company Borrower
or any of its Subsidiaries, (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto, or (v) foreign
currency fluctuations; PROVIDED that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims,
damages. liabilities or related expenses resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(b) To the extent any Borrowers fail to pay any amount required to
be paid by it to the Agent or the Issuing Bank under paragraph (a) or
(b) of this Section, each Bank severally agrees to pay to the Agent or
the Issuing Bank, as the case may be, such Bank's Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; PROVIDED that the
unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or assessed against
the Agent or the Issuing Bank in its capacity as such.
(c) To the extent permitted by applicable law, Borrowers shall not
assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or Letter of
Credit or the use of the proceeds thereof.
(d) All amounts due under this Section shall be payable promptly
after written demand therefor.
4. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank), except that each Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Bank (and any attempted assignment or
transfer by any Borrower without such consent shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the
Issuing Bank) and, to the extent expressly contemplated hereby, the
Related Parties of each of the Agent, the Issuing Bank and the Banks)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(a) Any Bank may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to
it); PROVIDED that (i) except in the case of an assignment to a Bank or
an Affiliate of a Bank, the Borrowers' Agent and the Agent (and, in the
case of an assignment of all or a portion of a Commitment or any Bank's
obligations in respect of its L/C Obligations, the Issuing Bank) must
give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment
to a Bank or an Affiliate of a Bank or an assignment of the entire
remaining amount of the assigning Bank's Commitment, the amount of the
Commitment of the assigning Bank subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to
such assignment is delivered to the Agent) shall not be less than
$10,000,000 unless the Borrowers' Agent and the Agent otherwise consent,
(iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Bank's rights and obligations
under this Agreement, and (iv) the parties to each assignment shall
execute and deliver to the Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500; and PROVIDED FURTHER
that any consent of the Borrowers' Agent otherwise required under this
paragraph shall not be required if an Event of Default under clause (h)
or (i) of Article VII has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to paragraph (d) of this
Section, from and after the effective date specified in each Assignment
and Acceptance the assignee thereunder shall be a party hereto and, to
the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Bank under this Agreement, and the
assigning Bank thereunder shall, to the extent of the interest assigned
by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all of the assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto but shall continue
to be entitled to the benefits of Section 9.03), any assignment or
transfer by a Bank of rights or obligations under this Agreement that
does not comply with this paragraph shall be treated for purposes of
this Agreement as a sale by such Bank of a participation in such rights
and obligations in accordance with paragraph (e) of this Section.
(b) The Agent, acting for this purpose as an agent of the Borrowers,
shall maintain at one of its offices in San Francisco a copy of each
Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks, and the Commitment
of, and principal amount of the Loans and L/C Obligations owing to, each
Bank pursuant to the terms hereof from time to time (the "REGISTER").
The entries in the Register shall be conclusive, and the Borrowers, the
Agent, the Issuing Bank and the Banks may treat each Person whose name
is recorded in the Register pursuant to the terms hereof as a Bank
hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the
Borrowers, the Issuing Bank and any Bank, at any reasonable time and
from time to time upon reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Bank and an assignee, the processing and
recordation fee referred to in paragraph (b) of this Section and any
written consent to such assignment required by paragraph (b) of this
Section, the Agent shall accept such Assignment and Acceptance and
record the information contained therein in the Register.
(d) Any Bank may, without the consent of the Borrowers, the Agent or
the Issuing Bank, sell participations to one or more banks or other
entities (a "PARTICIPANT") in all or a portion of such Bank's rights and
obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); PROVIDED that (i) such Bank's
obligations under this Agreement shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrowers, the Agent, the
Issuing Bank and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement or instrument pursuant
to which a Bank sells such a participation shall provide that such Bank
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
PROVIDED that such agreement or instrument may provide that such Bank
shall not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first provision to
Section 9.02(b) that affects such Participant. Subject to paragraph (o)
of this Section, each Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.26 through 2.32 to the same
extent as if it were a Bank and had acquired its interest by assignment
pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant, if notice of such Participant is given to the
Borrower's Agent, also shall be entitled to the benefits of Section 9.09
as though it were a Bank.
(e) A Participant shall not be entitled to receive any greater
payment under Sections 2.26 through 2.32 than the applicable Bank would
have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such
Participant is made with the prior written consent of each Borrower.
(f) Any Bank may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure
obligations of such Bank, including any pledge or assignment to secured
obligations to a Federal Reserve Bank, and this Section shall not apply
to any such pledge or assignment of a security interest; PROVIDED that
no such pledge or assignment of a security interest shall release a Bank
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Bank as a party hereto.
5. SURVIVAL. All covenants, agreements, representations and warranties
made by the Company and the other Borrowers herein and in the
certificates or other instruments delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon
by the other parties hereto and shall survive the execution and delivery
of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such
other party or on its behalf, and notwithstanding that the Agent, the
Issuing Bank or any Bank may have had notice or knowledge of any Default
or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.26 through
2.32 and 9.03 and Article VIII shall survive and remain in full force
and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any provision hereof.
6. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This
Agreement and any separate letter agreements with respect to fees
payable to the Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject
matter hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the Agent and when
the Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be effective as delivery of a manually executed counterpart of
this Agreement.
7. SEVERABILITY. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall
not invalidate such provision in any other jurisdiction.
8. AUTOMATIC DEBITS OF FEES. With respect to any commitment fee,
facility fee, letter of credit fee or other fee, or any other cost or
expense (including Attorney Costs) due and payable to the Agent, the
Issuing Bank or BofA under the Loan Documents, each Borrower hereby
irrevocably authorizes BofA to debit any deposit account of such
Borrower with BofA in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit accounts to
cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in BofA's sole discretion)
and such amount not debited shall be deemed to be unpaid. No such debit
under this Section 9.08 shall be deemed unpaid. No such debit under
this Section 9.08 shall be deemed a set-off. The authority granted to
the Agent, the Issuing Bank and BofA pursuant to this Section 9.08 may
be revoked at any time by the Borrowers' Agent upon not less than five
Business Days' prior notice to the Agent, PROVIDED that no such
revocation may be made if a Default has occurred and is continuing
hereunder. The Agent shall promptly notify the Issuing Bank and BofA of
any such revocation.
9. RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, each Bank and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at
any time owing by such Bank or Affiliate to or for the credit or the
account of any Borrower against any of and all the obligations of such
Borrower now or hereafter existing under this Agreement held by such
Bank, irrespective of whether or not such Bank shall have made any
demand under this Agreement and although such obligations may be
unmatured. The rights of each Bank under this Section are in addition to
other rights and remedies (including other rights of setoff) which such
Bank may have.
10. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. This
Agreement shall be construed in accordance with and governed by the law
of the State of California.
(a) Each Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the
court of the State of California sitting in San Francisco and of the
United States District Court of the Northern District of California, and
any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such California
State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that the Agent,
the Issuing Bank or any Bank may otherwise have to bring any action or
proceeding relating to this Agreement against each Borrower or its
properties in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any
court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in
this Agreement will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
(d) WAIVER OF JURY TRIAL. THE BORROWERS, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY
TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT/IB-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE BANKS
AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY
IS WAIVED BY OPERATION OF THIS SECTION. AS TO ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
12. HEADINGS. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
13. CONFIDENTIALITY. Each of the Agent, the Issuing Bank and the Banks
agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that
the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations
or by any subpoena or similar legal process (in which event, the party
receiving such subpoena or legal process will, if permitted, as promptly
as practicable give notice thereof to the Borrower's Agent and use
reasonable efforts, at the expense of the Borrowers, to cooperate with
the Borrower's Agent in seeking a protective order), (d) to any other
Party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
Section and naming any Borrower as a third party beneficiary (in the
absence of a provision naming such Borrower as a third party
beneficiary, the applicable Bank hereby agrees to use its reasonable
efforts, at the expense of the Borrowers, upon the request of any
Borrower to enforce such agreement), to any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights
or obligations under this Agreement, (g) with the consent of the
Borrower's Agent or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Agent, the Document Agent, any Issuing
Bank or any Bank on a nonconfidential basis from a source other than any
Borrower not known by it to be bound by obligations of confidentiality.
For the purposes of this Section, "INFORMATION" means all information
received from any Borrower relating to any Borrower or its business,
other than any such information that is available to the Agent, the
Issuing Bank or any Bank on a nonconfidential basis prior to disclosure
by such Borrower; Provided that, in the case of information received
from any Borrower after the date hereof, such information is clearly
identified at the time of delivery as confidential, any Person required
to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its
own confidential information.
14. INTEREST RATE LIMITATION. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "CHARGES"),
shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be
contracted for, charged, taken, received or reserved by the Bank holding
such Loan in accordance with applicable law, the rate of interest
payable in respect of such Loan hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to
the extent lawful, the interest and Charges that would have been payable
in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and
Charges payable to such Bank in respect of other Loans or periods shall
be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by
such Bank.
15. JUDGMENT CURRENCY. (a) If, for the purpose of obtaining judgment in
any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto agrees, to the fullest
extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in
the relevant jurisdiction the first currency could be purchased with
such other currency on the Business Day immediately preceding the day on
which final judgment is given.
(a) The obligations of any Borrower in respect of any sum due to any
party hereto or any holder of the obligations owing hereunder (the
"APPLICABLE CREDITOR") shall, notwithstanding any judgment in a currency
(the "JUDGMENT CURRENCY") other than the currency in which such sum is
stated to be due hereunder (the "AGREEMENT CURRENCY"), be discharged
only to the extent that, on the Business Day following receipt by the
Applicable Creditor of any sum adjudged to be so due in the Judgment
Currency, the Applicable Creditor may in accordance with normal banking
procedures in the relevant jurisdiction purchase the Agreement Currency
with the Judgment Currency; if the amount of the Agreement Currency so
purchased is less than the sum originally due to the Applicable Creditor
in the Agreement Currency, the Borrower agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify the Applicable
Creditor against such loss. The obligations of each Borrower contained
in this Section 9.15 shall survive the termination of this Agreement and
the payment of all other amounts owing hereunder.
16. NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrowers, the
Banks, the Agent and the Agent/IB-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other
Loan Documents.
17. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the
Borrowers, the Banks and the Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
1.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the
day and year first above written.
SOLECTRON CORPORATION
By: /s/ Richard D. Gilpin
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank, Agent
and Issuing Bank
By: /s/ [signature illegible]
Title: Managing Director
ABN AMRO BANK, N.V.
By: /s/ Robin S. Yim
Title: Group Vice President
By: /s/ Robert N. Hartinger
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ [signature illegible]
Title: Assistant Vice President
BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH
By: /s/ Raphael C. Lumanlan
Title: Vice President
By: /s/ Charles H. Day
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Haruhiko Masuda
Title: Deputy General Manager
THE SANWA BANK LIMITED, SAN FRANCISCO BRANCH
By: /s/ [signature illegible]
Title: General Manager
STANDARD CHARTERED BANK
By: /s/ [signature illegible]
Title:
By: /s/ [signature illegible]
Title: V.P.
THE FUJI BANK, LIMITED, SAN FRANCISCO AGENCY
By: /s/ [signature illegible]
Title: General Manager
<PAGE>
<TABLE>
ANNEX I
Pricing Grid
<CAPTION>
Basis Points Per Annum
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro- Financial Performance
currency CD Rate Standby Standby
Index Debt Loan Loan ABR Loan Letter of Letter of
Rating Applicable Applicable Applicable Commitment Credit Credit
(S&P/Moody's) Margin Margin Margin Fees Fees Fees
- --------------- ---------- ---------- ---------- ---------- --------- -----------
Level BBB+/Baa1
I (or better) 27.50 27.50 0.00 9.00 27.50 13.75
Level
II BBB/Baa2 35.00 35.00 0.00 12.50 35.00 17.50
Level
III BBB-/Baa3 43.75 43.75 0.00 15.00 43.75 21.875
Level
IV BB+/Ba1 62.50 62.50 0.00 20.00 62.50 32.25
Level BB/Ba2
V (or lower, 75.00 75.00 0.00 25.00 75.00 37.50
or no
applicable
rating)
</TABLE>
The Applicable Margin, commitment fee and letter of credit fees shall be
determined by reference to the stated (or implied) ratings by S&P and
Moody's, respectively, applicable to the Index Debt. On any date of
determination, the Applicable Margin, commitment fee and letter of
credit fees shall be set at the Level in the above Pricing Grid which
corresponds to the ratings by S&P and Moody's, respectively, applicable
on such day to the Index Debt; PROVIDED that (a) if either Moody's or
S&P shall not have in effect a rating for the Index Debt, then the
Applicable Margin, commitment fee and letter of credit fees shall be
determined solely with reference to the available rating by the rating
agency that still rates the Index Debt; (b) if the ratings established
or deemed to have been established by Moody's and S&P for the Index Debt
shall indicate two different but consecutive Levels, the Applicable
Margin, commitment fee and letter of credit fees shall be based on the
higher of the two ratings; (c) if the ratings established or deemed to
have been established by Moody's and S&P for the Index Debt shall
indicate two different but nonconsecutive Levels, the Applicable Margin,
commitment fee and letter of credit fees shall be the average of the
Applicable Margins, commitment fees and letter of credit fees,
respectively, corresponding to such Levels; and (d) if the rating
established or deemed to have been established by Moody's or S&P for the
Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of
the date on which it is first announced by the applicable rating agency.
If the rating system of Moody's or S&P shall change, or if both such
rating agencies shall cease to be in the business of rating corporate
debt obligations, the Borrower's Agent and the Banks shall negotiate in
good faith to amend this definition to reflect such changed rating
system or the unavailability of ratings from such rating agencies and,
pending the effectiveness of any such amendment, the Applicable Margin,
commitment fee and letter of credit fees shall be set at Level V.
On the Closing Date, the Applicable Margin, commitment fee and letter of
credit fees shall be initially set at Level III. Each change in the
Applicable Margin, commitment fee and letter of credit fees shall apply
during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next
such change.
<PAGE>
SCHEDULE 2.01
to the Credit Agreement
COMMITMENTS
AND APPLICABLE PERCENTAGES
APPLICABLE
BANK COMMITMENT PERCENTAGE
Bank of America NT & SA $ 14,719,100 14.719000%
ABN AMRO Bank N.V. $ 13,483,146 13.483146%
Union Bank of California, N.A. $ 13,483,146 13.483146%
Banque Nationale de Paris $ 12,078,652 12.078652%
The Industrial Bank of Japan, Limited $ 12,078,652 12.078652%
The Sanwa Bank Limited, San Francisco Branch $ 12,078,652 12.078652%
Standard Chartered Bank $ 12,078,652 12.078652%
The Fuji Bank Limited, San Francisco Agency $ 10,000,000 10.000000%
------------ -----------
Total: $100,000,000 100.000000%
<PAGE>
DISCLOSURE SCHEDULE
SCHEDULE 3.04: SUBSIDIARIES
Solectron California Corporation
Solectron Technology, Inc.
Solectron Texas, Inc.
Solectron Holdings, Inc.
Solectron Massachusetts Corporation
Solectron Washington, Inc.
Fine Pitch Technology, Inc.
Force Computers Inc.
Solectron Technology, Inc. SDN BHD
Solectron Japan, Inc.
Solectron France, S.A.
Solectron Scotland Limited
Solectron GmbH
Solectron (Suzhou) Technology Co. Ltd.
Solectron Hong Kong Ltd.
Solectron Netherlands Holdings B.V.
Solectron de Mexico, S.A. de C.V.
SCHEDULE 3.05: MATERIAL INDEBTEDNESS NOT DISCLOSED IN FINANCIALS
Indebtedness of the Company pursuant to Lease Agreement, dated as of
September 6, 1994 (as amended from time to time) between BNP Leasing
Company and Solectron Corporation, and related agreements.
SCHEDULE 3.06: LITIGATION
None.
SCHEDULE 3.09: EMPLOYEE BENEFITS PLANS
1. 1983 Incentive Stock Option Plan, as amended August 13, 1991.
2. 1988 Employee Stock Purchase Plan, as amended October 1992.
3. Amended and Restated 1992 Stock Option Plan
4. 401(k) Retirement Savings Plan
SCHEDULE 3.13: COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES INFRINGEMENT
CLAIMS
None.
SCHEDULE 6.01: SUBSIDIARY INDEBTEDNESS
Name of Subsidiary Agreement
Solectron Scotland Limited $4.918 million Credit Facility with Royal
Bank of Scotland
Solectron Technology, $30.488 million Credit Agreement with
Inc. SDN BHD Standard Chartered Bank and DCB Bank
Solectron GmbH $5,000 Credit Agreement with Commerzebank
$7 million L-T note from Landersgirekasse
Oeffentliche Bank
$2 million Credit Agreement with Hewlett
Packard Company for purchase of inventory
at acquisition
Solectron Japan, Inc. $22.425 million Credit Agreement with Bank
of Tokyo Mitsubishi Ltd.
Fine Pitch Technology, Inc. $89,000 Equipment Loan from San Jose
National Bank
Force Computers, Inc. $1.038 million Credit Facility with
Dresdner Bank Tokyo
$8.876 million Credit Facility with
Stadtoparkasse Munich
$5.917 million Credit Facility with
Hypobanck Munich
$5.917 million Credit Facility with
Reuschelbank
$655,000 Credit Facility with Barclays
Bank
$500,000 Credit Facility with Bank Leumi
$7.5 million Credit Facility with Comerica
Bank
SCHEDULE 6.02: LIENS
1. Solectron Corporation
SECRETARY OF STATE - CALIFORNIA
Description of Filing
Secured Party Collateral Date File Number
- ------------------- ------------------------ -------- -----------
Equitable Life Specific Equipment
Leasing Corporation and Proceeds 1-26-93 88020525
Xerox Corporation Office Equipment
and Proceeds 6-22-92 92137563
Taylor Made Office Specific Equipment
Systems, Inc. and Proceeds 4-15-94 94074579
Hewlett Packard Specific Equipment
Company and Proceeds 5-11-94 94093984
Hewlett Packard Specific Equipment
Company and Proceeds 3-2-95 9506661264
Hewlett Packard Specific Equipment
Company and Proceeds 8-28-95 9524460015
Taylor Made Office Specific Equipment
Systems, Inc. and Proceeds 12-19-95 9535560504
Taylor Made Office Specific Equipment
Systems, Inc. and Proceeds 3-1-96 9606760948
Taylor Made Office Specific Equipment
Systems, Inc. and Proceeds 7-24-96 9620860481
Associates Leasing, Computer Equipment
Inc. and Proceeds 1-10-97 9701360025
Security Pacific Specific Equipment
Equipment Leasing,Inc. and Proceeds 5-1-95 85169376
Security Pacific Computer Equipment
Equipment Leasing,Inc. and Proceeds 8-21-95 85270060
MNLC/BALTC Specific Equipment
Leasing Partners and Proceeds 4-2-92 87117094
Security Pacific Computer Equipment
Equipment Leasing,Inc. and Proceeds 5-6-92 87217647
Equitable Life Computer Equipment
Leasing Corporation and Proceeds 10-20-92 87314510
G.E. Capital Specific Equipment
Corporation and Proceeds 2-18-93 88046793
NEMLC Leasing Specific Equipment
Associates No. 3 and Proceeds 1-11-93 88063091
Security Pacific Specific Equipment
Equipment Leasing and Proceeds 12-27-94 90067753
Deutsch Credit Specific Equipment
Corporation and Proceeds 4-3-95 90101368
Security Pacific Specific Equipment
Equipment Leasing,Inc. and Proceeds 5-1-95 90172604
Hewlett-Packard Computer Equipment
Company and Proceeds 5-4-92 92099518
Lease Plan USA, Inc. Specific Equipment
and Proceeds 5-12-92 92107399
Hewlett Packard Specific Equipment
Company and Proceeds 7-13-92 92153799
Hewlett Packard Specific Equipment
Company and Proceeds 10-6-92 92216939
Hewlett Packard Specific Equipment
Company and Proceeds 10-16-92 92223550
Hewlett Packard Specific Equipment
Company and Proceeds 10-27-92 92231425
Hewlett Packard Specific Equipment
Company and Proceeds 4-1-93 92241883
Equitable Life Specific Equipment
Leasing Corporation and Proceeds 1-28-93 93018954
Hewlett Packard Specific Equipment
Company and Proceeds 4-22-93 9308147
Hewlett Packard Specific Equipment
Company and Proceeds 5-12-93 93096482
MetLife Capital, L.P. Computer Equipment
and Proceeds 1-28-94 93113136
Hewlett Packard Specific Equipment
Company and Proceeds 6-4-93 93114108
Hewlett Packard Specific Equipment
Company and Proceeds 6-16-93 93122297
United States Leasing Computer Equipment
International, Inc. and Proceeds 11-5-93 93223327
Capital Preferred Yield Specific Equipment
Fund - II, L.P. and Proceeds 4-7-94 93234553
Avnet Computer Specific Equipment
Technologies, Inc. and Proceeds 2-4-94 94021647
Hewlett Packard Specific Equipment
Company and Proceeds 4-25-94 94081377
Hewlett Packard Specific Equipment
Company and Proceeds 5-4-94 94088238
Hewlett Packard Specific Equipment
Company and Proceeds 5-20-94 94101661
Hewlett Packard Specific Equipment
Company and Proceeds 7-18-94 94145012
Hewlett Packard Specific Equipment
Company and Proceeds 8-30-94 94178790
BNP Leasing Specific Equipment
Corporation and Proceeds 9-8-94 94185412
Hewlett Packard Specific Equipment
Company and Proceeds 9-21-94 9428560112
BNP Leasing Specific Equipment
Corporation and Proceeds 9-27-94 9429360076
Hewlett Packard Specific Equipment
Company and Proceeds 11-28-94 9434761275
Comdisco, Inc. Specific Equipment
and Proceeds 12-8-94 9434960578
Hewlett Packard Specific Equipment
Company and Proceeds 12-14-94 9500361142
Hewlett Packard Specific Equipment
Company and Proceeds 1-26-95 9503360328
Hewlett Packard Specific Equipment
Company and Proceeds 2-10-95 9504860699
Hewlett Packard Specific Equipment
Company and Proceeds 2-10-95 9504860715
Hewlett Packard Specific Equipment
Company and Proceeds 2-21-95 9505960514
Hewlett Packard Specific Equipment
Company and Proceeds 3-6-95 9506860234
Hewlett Packard Specific Equipment
Company and Proceeds 4-28-95 9512160498
Hewlett Packard Specific Equipment
Company and Proceeds 4-28-95 9512160513
Hewlett Packard Specific Equipment
Company and Proceeds 6-5-95 9515960516
Hewlett Packard Specific Equipment
Company and Proceeds 6-5-95 9515960526
Hewlett Packard Specific Equipment
Company and Proceeds 9-5-95 9525560208
Hewlett Packard Specific Equipment
Company and Proceeds 9-5-95 9525560219
Hewlett Packard Specific Equipment
Company and Proceeds 9-26-95 9527260307
Pitney Bowes Credit Specific Equipment
Corporation and Proceeds 1-22-96 9602360211
Hewlett Packard Specific Equipment
Company and Proceeds 1-29-96 9603060985
Copelco Capital, Inc. Specific Equipment
and Proceeds 4-25-96 9608261042
Copelco Capital, Inc. Specific Equipment
and Proceeds 6-19-96 9617660616
Copelco Capital, Inc. Specific Equipment
and Proceeds 7-30-96 9621460705
Hewlett Packard Specific Equipment
Company and Proceeds 8-9-96 9622661204
Copelco Capital, Inc. Specific Equipment
and Proceeds 11-26-96 9633161377
Comdisco, Inc. Specific Equipment
and Proceeds 2-10-97 9704260387
Comdisco, Inc. Specific Equipment
and Proceeds 2-24-97 9705660119
Hewlett Packard Specific Equipment
Company and Proceeds 7-7-93 93138136
Taylor Made Office Specific Equipment
Systems, Inc. and Proceeds 8-21-95 9523560031
Liens of the Company pursuant to that Lease Agreement, dated as of
September 6, 1994 ( as amended from time to time) between BNP Leasing
Company and Solectron Corporation.
2. Solectron Washington, Inc.
DEPARTMENT OF LICENSING-WASHINGTON
Secured Party Description of Collateral Filing Date File Number
- ----------------- ------------------------- ----------- -----------
GTE Northwest Specific Equipment 9-20-93 93-263-0729
AT&T Capital Leasing
Services, Inc. Specific Equipment 11-3-95 95-307-0414
3. Solectron Texas, Inc.
SECRETARY OF STATE-TEXAS
Secured Party Description of Collateral Filing Date File Number
- ----------------- ------------------------- ----------- -----------
General Electric
Capital Corp Electronic Equipment 8-26-96 96704367
4. Fine Pitch Technology
SECRETARY OF STATE - CALIFORNIA
Secured Party Description of Collateral Filing Date File Number
- ----------------- ------------------------- ----------- -----------
San Jose National
Bank Specific Equipment 2-29-95 9504660745
San Jose National
Bank Specific Equipment 4-3-95 9509560531
San Jose National
Bank Specific Equipment 12-13-95 9534860123
5. Force Computers, Inc.
SECRETARY OF STATE - CALIFORNIA
Secured Party Description of Collateral Filing Date File Number
- ----------------- ------------------------- ----------- -----------
Taylor Made Office
Systems, Inc. Specific Equipment 10-11-94 9430660823
Taylor Made Office
Systems, Inc. Specific Equipment 8-21-95 9523460666
Taylor Made Office
Systems, Inc. Specific Equipment 6-13-94 94119361
6. Solectron Technology, Inc. (Charlotte)
SECRETARY OF STATE - NORTH CAROLINA
Secured Party Description of Collateral Filing Date File Number
- ----------------- ------------------------- ----------- -----------
Hewlett Packard
Company Specific Equipment 2-22-93 0000970502
SCHEDULE 6.07: RESTRICTIVE AGREEMENTS
Indenture dated as of February 15, 1996 governing the terms of issuance
of 7 3/8% Senior Notes due 2006. Contains a covenant restricting the
Company's ability to encumber certain items of its property.
Lease Agreement dated as of September 6, 1994 (as amended from time to
time) between BNP Leasing Company and Solectron Corporation. Includes
all covenants by cross reference in Article VI of this Credit Agreement.
The Force Computers, Inc. credit facilities contains (1) restrictions on
its ability to pay dividends to Solectron and (2) its ability to
encumber any of its assets except for ordinary course involuntary liens
and equipment finance and purchase money security interests.
<PAGE>
SCHEDULE 9.01
to the Credit Agreement
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
SOLECTRON CORPORATION
Solectron Corporation
847 Gibraltar Drive, Building 5
Milpitas, CA 95035
Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent and Issuing Bank
BORROWING NOTICES, NOTICES OF
CONVERSION/CONTINUATION AND PAYMENTS:
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 13th Floor
San Francisco, CA 94103
Attention: Blanca Vinje
Telephone: (415) 436-2783
Facsimile: (415) 436-2700
ALL OTHER NOTICES:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Credit Products, High Technology #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Michael J. McCutchin
Telephone: (415) 622-4589
Facsimile: (415) 622-2514
AGENT'S PAYMENT OFFICE:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
ABA No. 1210-0035-8 SF
1850 Gateway Boulevard, Fourth Floor
Concord, CA 94520
Account No.: 1233915383
Reference: Solectron Corporation
Attention: Agency Administrative Services #5596
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
DOMESTIC AND OFFSHORE LENDING OFFICE
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Global Payment Operations
Customer Service Americas #5693
1850 Gateway Boulevard, Fourth Floor
Concord, CA 94520
Attention: Jackie Holland
Telephone: (510) 675-7531
Facsimile: (510) 675-7331
ALL OTHER NOTICES:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Credit Products, High Technology #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Michael J. McCutchin
Telephone: (415) 622-4589
Facsimile: (415) 622-2514
ABN AMRO BANK, N.V.
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
ABN AMRO Bank, N.V.
101 California Street, Suite 4550
San Francisco, CA 94111
Attention: Gloria Chiang Lee
Telephone: (415) 984-3720
Facsimile: (415) 362-3524
ALL OTHER NOTICES:
ABN AMRO Bank, N.V.
101 California Street, Suite 4550
San Francisco, Ca 94111
Attention: Bruce W. Swords
Telephone: (415) 984-3721
Facsimile: (415) 362-3524
BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
Banque Nationale de Paris, San Francisco Branch
180 Montgomery Street, 4th Floor
San Francisco, CA 94104
Attention: Donald Hart
Telephone: (415) 956-2511
Facsimile: (415) 989-9041
ALL OTHER NOTICES:
Banque Nationale de Paris, San Francisco Branch
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attention: Rafael Lumanlan
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
THE SANWA BANK LIMITED, SAN FRANCISCO BRANCH
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
The Sanwa Bank Limited, San Francisco Branch
444 Market Street, 18th Floor
San Francisco, CA 94111
Attention: S. Endo
Telephone: (415) 597-5231
Facsimile: (415) 788-5459
ALL OTHER NOTICES:
The Sanwa Bank Limited, San Francisco Branch
444 Market Street, 18th Floor
San Francisco, CA 94111
Attention: Terrence J. Mech
Telephone: (415) 597-5222
Facsimile: (415) 788-5459
UNION BANK OF CALIFORNIA, N.A.
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
Union Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Attention: Stacie Burks-Garcia
Telephone: (415) 765-3641
Facsimile: (415) 765-2634
ALL OTHER NOTICES:
Union Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Attention: Glen Leyrer
Telephone: (415) 705-7578
Facsimile: (415) 705-5093
THE INDUSTRIAL BANK OF JAPAN, LIMITED
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
The Industrial Bank of Japan, Limited
San Francisco Agency
555 California Street, Suite 3110
Attention: Debbie Rajkumar
Telephone: (415) 693-1830
Facsimile: (415) 982-1917
ALL OTHER NOTICES:
The Industrial Bank of Japan, Limited
555 California Street, Suite 3110
San Francisco, CA 94104
Attention: Michael McCorriston
Telephone: (415) 693-1822
Facsimile: (415) 982-1917
THE FUJI BANK, LIMITED, SAN FRANCISCO AGENCY
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
The Fuji Bank, Limited, San Francisco Agency
601 California Street, 5th Floor
San Francisco, CA 94108
Attention: Andy Poon
Telephone: (415) 296-5420
Facsimile: (415) 362-4613
ALL OTHER NOTICES:
The Fuji Bank, Limited, San Francisco Agency
601 California Street, 5th Floor
San Francisco, CA 94108
Attention: Mami Yamajo
Telephone: (415) 256-5433
Facsimile: (415) 362-4613
STANDARD CHARTERED BANK
DOMESTIC AND OFFSHORE LENDING OFFICE(S)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
Standard Chartered Bank
707 Wilshire Boulevard, W-8-33
Los Angeles, CA 90017
Attention: Qustandi Shiber/Amelia Quintana
Telephone: (213) 614-5037/5019
Facsimile: (213) 614-4270
ALL OTHER NOTICES:
Standard Chartered Bank
707 Wilshire Boulevard, 8th Floor
Los Angeles, CA 90017
Attention: Mary Machado-Schammel
Telephone: (213) 614-4756
Facsimile: (213) 614-5158
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT AND ACCEPTANCE
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "ASSIGNMENT AND
ACCEPTANCE") dated as of _____________ is made between
__________________ (the "ASSIGNOR") and ________________ (the
"ASSIGNEE").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement
dated as of April 30, 1997 (as amended, restated, modified, supplemented
or renewed from time to time, the "CREDIT AGREEMENT"), among Solectron
Corporation (the "COMPANY"), the "Additional Borrowers" from time to
time party thereto, the several financial institutions from time to time
party thereto (including the Assignor, the "BANKS") and Bank of America
National Trust and Savings Association, as agent for the Banks (the
"AGENT"). Any terms defined in the Credit Agreement and not defined in
this Assignment and Acceptance are used herein as defined in the Credit
Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Revolving Loans to the Company in an aggregate
amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Loans in the aggregate principal
amount of $__________ to the Company] [no Loans are outstanding under
the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of
the] [all] rights and obligations of the Assignor under the Credit
Agreement in respect of its Commitment, [together with a corresponding
portion of each of its outstanding Loans], in an amount equal to ___% of
the Assignor's Commitment [and Loans], on the terms and subject to the
conditions set forth herein, and the Assignee wishes to accept
assignment of such rights and to assume such obligations from the
Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ACCEPTANCE.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes
from the Assignor, without recourse and without representation or
warranty (except as provided in this Assignment and Acceptance) ___%
(the "ASSIGNEE'S PERCENTAGE SHARE") of (A) the Commitment [and the
Loans] of the Assignor and (B) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in
connection with the Credit Agreement and the Loan Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement
and succeed to all of the rights and be obligated to perform all of the
obligations of a Bank under the Credit Agreement, including the
requirements concerning confidentiality and the payment of
indemnification, with a Commitment in the amount set forth in
subsection (c) below. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of
the Credit Agreement are required to be performed by it as a Bank. It
is the intent of the parties hereto that the Commitment of the Assignor
shall, as of the Effective Date, be reduced by an amount equal to the
portion thereof assigned to the Assignee hereunder, and the Assignor
shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by
the Assignee; PROVIDED, HOWEVER, that the Assignor shall not relinquish
its rights under Sections 2.26 through 2.34 and Section 9.03 of the
Credit Agreement to the extent such rights relate to the time prior to
the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date: (i) the Assignee's Commitment will
be $__________; and (ii) the Assignee's aggregate outstanding Loans will
be $_______________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date: (i) the Assignor's Commitment will
be $__________; and (ii) the Assignor's aggregate outstanding Loans will
be $_______________.
2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor
on the Effective Date in immediately available funds an amount equal to
$__________, representing the Assignee's Percentage Share of the
principal amount of all Loans previously made by the Assignor to the
Company and the Additional Borrowers, if any, under the Credit Agreement
and outstanding on the Effective Date.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in subsection 9.04(b) of
the Credit Agreement.
3. REALLOCATION OF PAYMENTS. Any interest, fees and other
payments accrued to the Effective Date with respect to the Commitment
[and Loans] of the Assignor shall be for the account of the Assignor.
Any interest, fees and other payments accrued on and after the Effective
Date with respect to the portion of such Commitment [and Loans] assigned
to the Assignee shall be for the account of the Assignee. Each of the
Assignor and the Assignee agrees that it will hold in trust for the
other party any interest, fees and other amounts which it may receive to
which the other party is entitled pursuant to the preceding sentence and
pay to the other party any such amounts which it may receive promptly
upon receipt.
4. INDEPENDENT CREDIT DECISION. The Assignee: (a) acknowledges
that it has received a copy of the Credit Agreement and the Schedules
and Exhibits thereto, together with copies of the most recent financial
statements referred to in Section 3.05 or Section 5.01 of the Credit
Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to
enter into this Assignment and Acceptance; and (b) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit and legal
decisions in taking or not taking action under the Credit Agreement.
5. EFFECTIVE DATE; NOTICES.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be ______________ (the
"EFFECTIVE DATE"); PROVIDED that the following conditions precedent have
been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) any consent of the Company and the Agent required under
Section 9.04 of the Credit Agreement for the effectiveness of the
assignment hereunder by the Assignor to the Assignee shall have been
duly obtained and shall be in full force and effect as of the Effective
Date;
(iii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section 2(b) hereof
and in subsection 9.04(b) of the Credit Agreement shall have been paid
to the Agent; and
(v) the Assignor and Assignee shall have complied with the
other requirements of Section 9.04 of the Credit Agreement and with the
requirements of Section 9.13 of the Credit Agreement (in each case to
the extent applicable).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in
the form attached hereto as SCHEDULE 1.
6. AGENT. The Assignee hereby appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the Banks
pursuant to the terms of the Credit Agreement. [The Assignee shall
assume no duties or obligations held by the Assignor in its capacity as
Agent under the Credit Agreement.] [INCLUDE ONLY IF ASSIGNOR IS AGENT]
7. WITHHOLDING TAX. The Assignee (a) represents and warrants to
the Assignor, the Agent and the Company that under applicable law and
treaties no tax will be required to be withheld by the Bank with respect
to any payments to be made to the Assignee hereunder, and (b) agrees to
furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Agent and the
Company prior to the time that the Agent or Company is required to make
any payment of interest or fees under the Credit Agreement, duplicate
executed originals of either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein the Assignee claims
entitlement to the benefits of a tax treaty that provides for a complete
exemption from U.S. federal income withholding tax on all payments
hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, as and when
required under the Credit Agreement.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any Lien or other
adverse claim; (ii) it is duly organized and existing and it has the
full power and authority to take, and has taken, all action necessary to
execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance and to fulfill its
obligations hereunder; (iii) no notices to, or consents, authorizations
or approvals of, any Person are required (other than those referred to
in Section 5(a)(ii) hereof and any already given or obtained) for its
due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings
required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery
or performance; and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and
binding obligation of the Assignor, enforceable against the Assignor in
accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of
general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument or
document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or
statements of the Company, or the performance or observance by the
Company, of any of its respective obligations under the Credit Agreement
or any other instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment
and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and
Acceptance, and to fulfill its obligations hereunder; (ii) no notices
to, or consents, authorizations or approvals of, any Person are required
(other than those referred to in Section 5(a)(ii) hereof and any already
given or obtained) for its due execution, delivery and performance of
this Assignment and Acceptance; and apart from any agreements or
undertakings or filings required by the Credit Agreement, no further
action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes
the legal, valid and binding obligation of the Assignee, enforceable
against the Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors'
rights and to general equitable principles; and (iv) it is an Eligible
Assignee.
9. FURTHER ASSURANCES. The Assignor and the Assignee each hereby
agrees to execute and deliver such other instruments, and take such
other action, as either party may reasonably request in connection with
the transactions contemplated by this Assignment and Acceptance,
including the delivery of any notices or other documents or instruments
to the Company or the Agent, which may be required in connection with
the assignment and assumption contemplated hereby.
10. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No
failure or delay by either party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver thereof and any waiver
of any breach of the provisions of this Assignment and Acceptance shall
be without prejudice to any rights with respect to any other or further
breach thereof.
(b) All payments made hereunder shall be made without any set-
off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall
be deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. THE
ASSIGNOR AND THE ASSIGNEE EACH IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN CALIFORNIA OVER
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
ASSIGNMENT AND ACCEPTANCE AND IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
CALIFORNIA STATE OR FEDERAL COURT. EACH PARTY TO THIS ASSIGNMENT AND
ACCEPTANCE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY
DOCUMENT RELATED HERETO, AND PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, AND ANY
RELATED DOCUMENTS AND AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY
TYPE BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE
PARTIES ALSO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY.
[OTHER PROVISIONS TO BE ADDED AS MAY BE NEGOTIATED BETWEEN THE ASSIGNOR
AND THE ASSIGNEE, PROVIDED THAT SUCH PROVISIONS ARE NOT INCONSISTENT
WITH THE CREDIT AGREEMENT.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By:
Title:
[ASSIGNEE]
By:
Title:
<PAGE>
SCHEDULE 1
to the Assignment and Acceptance Agreement
NOTICE OF ASSIGNMENT AND ACCEPTANCE
Date: ___________________
To: Bank of America National Trust and Savings Association, as Agent
Solectron Corporation
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of April 30, 1997 (as
amended, restated, modified, supplemented or renewed from time to time,
the "CREDIT AGREEMENT") among Solectron Corporation (the "COMPANY"), the
"Additional Borrowers" from time to time party thereto, the Banks
referred to therein and Bank of America National Trust and Savings
Association, as Agent for the Banks (the "AGENT"). Terms defined in the
Credit Agreement are used herein as therein defined.
1. We hereby give you notice of[, and request the consent of [the
Company and] the Agent to,] the assignment by ________________________
(the "ASSIGNOR") to ____________________ (the "ASSIGNEE") of ____% of
the right, title and interest of the Assignor in and to the Credit
Agreement (including, without limitation, ____% of the right, title and
interest of the Assignor in and to the Commitment of the Assignor [and
all outstanding Loans made by the Assignor]) pursuant to that certain
Assignment and Acceptance Agreement, dated as of ___________ (the
"ASSIGNMENT AND ACCEPTANCE") between Assignor and Assignee, a copy of
which Assignment and Acceptance is attached hereto. Before giving
effect to such assignment the Assignor's Commitment is $___________.
[The Assignor has made Loans in the aggregate principal amount of
$__________ to the Company.] [No Loans are outstanding under the Credit
Agreement.]
2. The Assignee agrees that, upon receiving the consent of the
Company and the Agent to such assignment (if applicable) and from and
after the Effective Date (as such term is defined in Section 5 of the
Assignment and Acceptance), the Assignee shall be bound by the terms of
the Credit Agreement, with respect to the interest in the Credit
Agreement assigned to it as specified above, as fully and to the same
extent as if the Assignee were the Bank originally holding such interest
in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Lending Office(s):
Assignee name:
Address:
Attention:
Telephone:
Facsimile:
Assignee name:
Address:
Attention:
Telephone:
Facsimile:
(B) Notice Address:
Assignee name:
Address:
Attention:
Telephone:
Facsimile:
(C) Payment Instructions:
Account No.:
At:
Reference:
Attention:
4. You are entitled to rely upon the representations, warranties
and covenants of each of the Assignor and Assignee contained in the
Assignment and Acceptance.
5. This Notice of Assignment and Acceptance may be executed by the
Assignor and the Assignee in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same notice and
agreement.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective
duly authorized officials, officers or agents as of the date first above
mentioned.
Very truly yours,
ADJUSTED COMMITMENT: [ASSIGNOR]
$_________________ By:
ADJUSTED PRO RATA SHARE: Title:
_______%
COMMITMENT: [ASSIGNEE]
$_________________ By:
PRO RATA SHARE: Title:
_______%
[CONSENTED TO this _____ day
of___________________:
SOLECTRON CORPORATION
By:
Title: ]
ACKNOWLEDGED [AND CONSENTED
TO] this ____ day of ________:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:
Title:
<PAGE>
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
SOLECTRON CORPORATION
Financial Statements Date: ______________
Reference is made to that certain Credit Agreement dated as of
April 30, 1997 (as extended, renewed, amended or restated from time to
time, the "CREDIT AGREEMENT"), among Solectron Corporation (the
"COMPANY"), the "Additional Borrowers" from time to time party thereto,
the several financial institutions from time to time party thereto (the
"BANKS") and Bank of America National Trust and Savings Association, as
Agent (in such capacity, the "AGENT"). Unless otherwise defined herein,
capitalized terms used herein have the respective meanings assigned to
them in the Credit Agreement.
The undersigned Responsible Officer of the Company hereby certifies
as of the date hereof that he/she is the [_______________] of the
Company, and that, as such, he/she is authorized to execute and deliver
this Certificate to the Banks and the Agent on the behalf of the Company
and its consolidated Subsidiaries, and that:
[USE THE FOLLOWING PARAGRAPH IF THIS CERTIFICATE IS DELIVERED IN
CONNECTION WITH THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 5.01(A)
OF THE CREDIT AGREEMENT.]
1. Attached hereto are true and correct copies of the audited
consolidated balance sheet of the Company and its Subsidiaries as at the
end of the fiscal year ended _______________ and the related
consolidated statements of income or operations, shareholders' equity
and cash flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, accompanied by the
opinion of KPMG Peat Marwick or other independent public accountants of
recognized national standing (the "Independent Auditor"), which opinion
(a) states that such consolidated financial statements present fairly
the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (b) does not contain
a "going concern" or like qualification and is not qualified or limited
because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any Subsidiary's
records.
or
[USE THE FOLLOWING PARAGRAPH IF THIS CERTIFICATE IS DELIVERED IN
CONNECTION WITH THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 5.01(B)
OF THE CREDIT AGREEMENT.]
1. Attached hereto are true and correct copies of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the
end of the fiscal quarter ended _________ and the related consolidated
statements of income or operations and cash flows for the period
commencing on the first day and ending on the last day of such quarter,
which are complete and accurate in all material respects and fairly
present, in accordance with GAAP (subject to ordinary, good faith year-
end audit adjustments), the financial position, the results of
operations and the cash flows of the Company and the Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of
the Credit Agreement and has made, or has caused to be made under
his/her supervision, a detailed review of the transactions and condition
(financial or otherwise) of the Company and its Subsidiaries during the
accounting period covered by the attached financial statements.
3. To the best knowledge of the undersigned, the Company and its
Subsidiaries, during such period, have observed, performed or satisfied
all of the covenants and other agreements, and satisfied every condition
in the Credit Agreement to be observed, performed or satisfied by the
Company and its Subsidiaries, and the undersigned has no knowledge of
any Default or Event of Default.
4. The representations and warranties of the Company contained in
Article III of the Credit Agreement are true and correct as though made
on and as of the date hereof (except to the extent such representations
and warranties relate to an earlier date, in which case they shall be
true and correct as of such date; and except that this notice shall be
deemed instead to refer to the last day of the most recent year for
which financial statements have then been delivered in respect of the
representation and warranty made in subsection 3.05(a) of the Credit
Agreement).
5. The financial covenant analyses and information set forth on
SCHEDULE 1 attached hereto are true and accurate on and as of the date
of this Certificate. All amounts and ratios in SCHEDULE 1 refer to the
financial statements attached hereto and are determined in accordance
with the specifications set forth in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as the ____________ of the Company as of ______________, 199_.
SOLECTRON CORPORATION
By:
Title:
<PAGE>
SCHEDULE 1
to the Compliance Certificate
Dated __________, ____
For the fiscal quarter ended __________, _____
Actual Required/Permitted
1. SECTION 6.09 - ADJUSTED
LEVERAGE RATIO As of the last day
of each fiscal
quarter, the
amount which is
not greater than
(a) 1.75 to 1.00
from the Closing
Date through and
including
February 28, 1998,
(b) 1.50 to 1.00
from May 31, 1998
through and
including
February 28, 1999,
(c) 1.25 to 1.00
from May 31, 1999
through and
including
February 28, 2000,
and (d) 1.00 to
1.00 thereafter.
Adjusted Leverage Ratio calculation
(A) Consolidated Funded Debt $________
PLUS Guarantee obligations ________
PLUS Indebtedness with respect
to synthetic leases and
securitized assets ________
PLUS Indebtedness in respect
of letters of credit (including
the Letters of Credit) ________
MINUS Permitted Subordinated
Indebtedness ________
TOTAL $________
(B) operating income $________
PLUS depreciation and
amortization charges ________
TOTAL $________
Ratio of (A) to (B) ________
2. SECTION 6.10 - MINIMUM
CONSOLIDATED TANGIBLE NET WORTH
A. Consolidated Tangible
Net Worth calculation: As of the last day
of each fiscal
quarter following
the Closing Date,
the amount that is
not less than the
sum of (without
duplication) 80%
of Consolidated
Tangible Net Worth
measured as of the
end of the fiscal
quarter ended
February 28, 1997,
PLUS 50% of
consolidated net
income (without
subtracting losses
or acquisition-
related charges)
for each fiscal
quarter ended
after the fiscal
quarter ended
February 28, 1997,
MINUS 100% of all
acquisition-
related charges if
such charges are
recorded in the
same fiscal
quarter in which
the applicable
acquisition is
consummated.
total shareholders' equity $________
MINUS intangible assets ________
Consolidated Tangible Net Worth $________
(B) Minimum Consolidated
Tangible Net Worth
calculation:
Beginning minimum amount ________
PLUS 50% of quarterly net
income for each fiscal quarter
subsequent to the quarter
ended February 28, 1997, with
no reduction for losses or
acquisition-related charges ________
MINUS 100% of all acquisition-
related charges if such
charges are recorded in the same
fiscal quarter in which the
applicable acquisition is
consummated ________
Minimum Consolidated
Tangible Net Worth $________
(A) minus (B) $________
<PAGE>
EXHIBIT C
FORM OF NOTICE OF BORROWING
Date: ______________
To: Bank of America National Trust and Savings Association, as Agent
Ladies and Gentlemen:
The undersigned, Solectron Corporation (the "COMPANY"), in its
capacity as Borrowers' Agent, refers to the Credit Agreement, dated as
of April 30, 1997 (as extended, renewed, amended or restated from time
to time, the "CREDIT AGREEMENT"), among the Company, the "Additional
Borrowers" from time to time party thereto, the several financial
institutions from time to time party thereto (the "BANKS") and Bank of
America National Trust and Savings Association, as Agent (the "AGENT"),
the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 2.03 of the
Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is _______________.
2. The aggregate amount of the proposed Borrowing is
$_____________________.
3. The Borrowing is to be comprised of $___________ of [ABR
Loans][CD Rate Loans][Eurocurrency Loans][Offshore Currency Loans].
[4. The duration of the Interest Period for the [Eurocurrency
Loans][CD Rate Loans][Offshore Currency Loans] included in the Borrowing
shall be [_____ months][______ days].]
5. The applicable Borrower is ______________.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application
of the proceeds therefrom:
(a) the representations and warranties of the Company contained
in Article III of the Credit Agreement are true and correct as though
made on and as of such date, except to the extent such representations
and warranties expressly refer to an earlier date, in which case they
are true and correct as of such date, and except that this notice shall
be deemed instead to refer to the last day of the most recent year for
which financial statements have then been delivered in respect of the
representation and warranty made in Section 3.05 of the Credit
Agreement;
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing;
(c) there has occurred since February 28, 1997 no event or
circumstance that has resulted or could reasonably be expected to result
in a Material Adverse Effect; and
(d) after giving effect to the proposed Borrowing, (i) the
Effective Amount of all Revolving Loans PLUS the Effective Amount of all
L/C Obligations shall not exceed the Total Commitment, and (ii) the
Effective Amount of all Offshore Currency Loans shall not exceed the
Offshore Currency Commitment.
SOLECTRON CORPORATION, as
Borrowers' Agent
By:
Title:
<PAGE>
EXHIBIT D
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date: ______________
To: Bank of America National Trust and Savings Association, as Agent
Ladies and Gentlemen:
The undersigned, Solectron Corporation (the "COMPANY"), in its
capacity as Borrowers' Agent, refers to the Credit Agreement, dated as
of April 30, 1997 (as extended, renewed, amended or restated from time
to time, the "CREDIT AGREEMENT"), among the Company, the "Additional
Borrowers" from time to time party thereto, the several financial
institutions from time to time party thereto (the "BANKS") and Bank of
America National Trust and Savings Association, as Agent (the "AGENT"),
the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 2.04 of the
Credit Agreement, of the [conversion] [continuation] of Loans specified
below:
1. The Conversion/Continuation Date is ______________.
2. The aggregate amount of the Loans to be [converted] [continued]
is $_______________.
3. The Loans are to be [converted into] [continued as]
[Eurocurrency Loans][CD Rate Loans] [ABR Loans].
[4. The duration of the Interest Period for the [Eurocurrency
Loans][CD Rate Loans] included in the [conversion] [continuation] shall
be [____ months][____ days].]
5. The applicable Borrower is ______________.
The undersigned hereby certifies that the following statement is
true on the date hereof, and will be true on the proposed
Conversion/Continuation Date:
After giving effect to the proposed [conversion] [continuation],
(i) the Effective Amount of all Revolving Loans PLUS the Effective
Amount of all L/C Obligations shall not exceed the Total Commitment, and
(ii) the Effective Amount of all Offshore Currency Loans shall not
exceed the Offshore Currency Commitment.
SOLECTRON CORPORATION, as
Borrowers' Agent
By:
Title:
<PAGE>
EXHIBIT E
FORM OF ADDITIONAL BORROWER NOTICE
To: Solectron Corporation, as Borrowers' Agent
The Banks party to the Credit
Agreement referred to below
Re: SOLECTRON CORPORATION
Ladies and Gentlemen:
This Additional Borrower Notice is made and delivered pursuant to
subsection 2.01(b) of the Credit Agreement, dated as of April 30, 1997
(as amended, modified, renewed or extended from time to time, the
"Credit Agreement"), among Solectron Corporation and each Additional
Borrower party to the Credit Agreement (each a "Borrower" and,
collectively, the "Borrowers"), the several financial institutions party
to the Credit Agreement (the "Banks") and Bank of America National Trust
and Savings Association, as Agent for the Banks, and reference is made
thereto for full particulars of the matters described herein. All
capitalized terms used in this Additional Borrower Notice and not
otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement.
The Agent hereby notifies the Borrowers' Agent and the Banks that
effective as of the date hereof [____________________] (the "Additional
Borrower") may request Revolving Loans and Letters of Credit denominated
in Offshore Currencies for its account on the terms and conditions set
forth in the Credit Agreement.
This Additional Borrower Notice shall constitute a Loan Document
under the Credit Agreement.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
By:
Title:
<PAGE>
EXHIBIT F
FORM OF LEGAL OPINION OF COMPANY'S COUNSEL
See attached.
<PAGE>
May 1, 1997
Bank of America National Trust and Savings Association,
as Agent
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
and the Banks party to the Credit Agreement described below
RE: CREDIT AGREEMENT DATED AS OF APRIL 30, 1997 BY AND AMONG SOLECTRON
CORPORATION, THE BANKS NAMED THEREIN, AND BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, IN ITS CAPACITY AS AGENT
Gentlemen:
We have acted as counsel to Solectron Corporation, a Delaware
corporation (the "Company"), in connection with the negotiation of the
Credit Agreement, dated as of April 30, 1997 (the "Credit Agreement") by
and among the Company, the Banks named therein, and Bank of America
National Trust and Savings Association, not in its individual capacity,
but solely in its capacity as Agent (the "Agent"), pursuant to which the
Banks have agreed to lend up to $100,000,000 to the Company. This
opinion is delivered to you pursuant to Section 4.01(b) of the Credit
Agreement. Capitalized terms used herein and not defined shall have the
meanings provided in the Credit Agreement.
In rendering the opinions expressed below, we have examined executed
originals or copies of the following documents:
(a) the Credit Agreement;
(b) the Certificate of Incorporation of the Company;
(c) the Bylaws of the Company;
(d) records of proceedings of the Board of Directors of the Company
during or by which resolutions were adopted relating to matters covered
by this opinion;
(e) a Certificate of the Secretary of the Company, dated as of the
date hereof, as to, among other things: (i) the incumbency and signature
of certain officers of the Company; (ii) the Certificate of
Incorporation of the Company; (iii) the Bylaws of the Company; and
(iv) the adoption of certain resolutions by the directors of the
Company;
(f) (i) a certificate of the Secretary of State of the State of
Delaware with respect to the standing of the Company as a corporation
incorporated under the laws of the State of Delaware, (ii) a Certificate
of the Secretary of State of the State of California with respect to the
standing of Borrower as a foreign corporation qualified to do business
in the State of California; and (iii) a tax status certificate from the
Franchise Tax Board of the State of California;
(g) the certificate of certain officers of the Company as to certain
factual matters;
(h) each of the documents listed on ANNEX A hereto (the "Reviewed
Agreements").
In addition, we have examined and relied upon such corporate records of
the Company as we have deemed necessary or appropriate for purposes of
the opinions expressed below. We have also relied upon and obtained
from public officials and officers of the Company such other
certificates and assurances as we consider necessary for the rendering
of this opinion.
With your permission and without any verification by us, we have assumed
the following for purposes of rendering the opinions set forth herein:
(i) The genuineness of all signatures, the legal capacity of
all natural persons to execute and deliver documents, the authenticity
and completeness of documents submitted to us as originals and the
completeness and conformity with authentic original documents of all
documents submitted to us as copies, and that all documents, books and
records made available to us by the Company are accurate and complete.
(ii) That there are no agreements or understandings between or
among the Company, the Agent or the Banks or third parties which would
expand, modify or otherwise affect the terms of the Credit Agreement or
the respective rights or obligations of the parties thereunder and that
the Credit Agreement correctly and completely sets forth the intent of
all parties thereto.
(iii) That all parties to the Credit Agreement (other than the
Company) have filed all required franchise tax returns, if any, and paid
all required taxes, if any, under the California Revenue & Taxation
Code.
(iv) That the Credit Agreement has been duly authorized, executed
and delivered by each of the Agent and the Banks to the extent each such
party is contemplated to be a party thereto and that each of the Agent
and the Banks has full power, authority and legal right to enter into
and perform the terms and conditions of the Credit Agreement to be
performed by such person, and that the Credit Agreement constitutes a
legal, valid and binding obligation of each such person, enforceable
against it in accordance with its terms.
(v) That each Lender is either (i) a "Bank" as defined in and
operating under that certain act known as the "Bank Act" approved March
1, 1909, as amended, (ii) a bank created and operating under and
pursuant to the laws of the State of California or of the United States
or (iii) a foreign bank complying with the criteria set forth in Section
1716 of the California Financial Code, as amended, and that the Banks
are therefore exempt from the restrictions of Section 1 of Article XV of
the California Constitution and related statutes relating to usury.
(vi) With respect to certain matters of fact, that the
representations and warranties of the Company set forth in the Credit
Agreement, the certificates of certain officers of the Company delivered
to you in connection with the transactions contemplated by the Credit
Agreement and the certificate of certain officers of the Company
referred to in paragraph (g) above are true, correct and complete.
As used in this opinion, the expression "to our knowledge" or "known to
us" with reference to matters of fact means that during the course of
our representation of the Company in connection with the Credit
Agreement, no information has come to the attention of the attorneys of
our firm involved in this engagement which would give them actual
knowledge of the existence or absence of such facts; provided, however,
we have made no independent investigation to determine the existence or
absence of such facts, and any limited inquiry undertaken by us during
the preparation of this opinion should not be regarded as such an
investigation. We note that for purposes of paragraph 7 below only,
attorneys of the firm involved in the engagement have made inquiry of
Larry W. Sonsini and Steven E. Bochner as to their knowledge of
proceedings against the Company in which this firm is currently
providing legal representation. No inference as to our knowledge of the
existence or absence of any facts underlying any opinion given "to our
knowledge" should be drawn from the fact of our representation of the
Company. Specifically, in rendering the opinion set forth in
paragraph 5 below, we have not made any independent investigation of
court records to determine whether any actions have been filed.
On the basis of the foregoing and in reliance thereon, and based upon
examination of such questions of law as we have deemed appropriate, and
subject to the assumptions, exceptions, qualifications, and limitations
set forth herein, we advise you that in our opinion:
1. The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Delaware and
is duly qualified to do business and is in good standing in the state of
California..
2. The Company has the requisite corporate power and authority to
enter into the Credit Agreement and to carry out the transactions
contemplated thereby.
3. The execution and delivery by the Company of the Credit
Agreement, and the performance by the Company of its obligations under
the Credit Agreement, have been duly authorized by all necessary
corporate action on the part of the Company.
4. The Credit Agreement constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
5. The execution and delivery of the Credit Agreement, the
undertaking of the covenants set forth in the Credit Agreement and the
borrowing of Loans in accordance with the Credit Agreement and repayment
of any Loans by the Company do not (a) conflict with or violate the
Bylaws or Certificate of Incorporation of the Company; (b) violate or
contravene any United States federal or California state law, statute,
rule or regulation applicable to the Company; (c) to our knowledge,
violate or contravene any order, writ, judgment, decree, determination
or award of any United States federal or California state governmental
authority applicable to the Company; or (d) to our knowledge after
reviewing the Reviewed Agreements, violate or result in a breach of or
constitute any default under any Reviewed Agreement, or, to our
knowledge, result in or require the creation or imposition of any lien
on any of its properties or revenues pursuant to any provision of any
United States federal or California state law, rule or regulation or any
such contractual obligation.
6. No consents, approvals, authorizations, registrations,
declarations or filings are required to be made or obtained by or in
respect of the Company (or on its behalf) with or from any governmental
or regulatory authority or agency of the United States or the State of
California for the due authorization, execution and delivery by the
Company of the Credit Agreement, the undertaking of the covenants set
forth in the Credit Agreement, the borrowing of Loans in accordance with
the Credit Agreement or the repayment of any such Loans by the Company.
7. Except as disclosed in Schedule 3.06 to the Credit Agreement, to
our knowledge, there are no actions or proceedings against the Company
pending or overtly threatened in writing before any court, governmental
agency or arbitrator which (a) seek to challenge the enforceability of
the Credit Agreement, or (b) we believe are reasonably likely to have a
material adverse effect on the ability of the Company to perform its
obligations under the Credit Agreement.
8. Neither the Company nor any domestic Subsidiary, is an
"Investment Company" within the meaning of the Investment Company Act of
1940.
Our opinions above are subject to the following qualifications:
A. We express no opinion as to any matter relating to laws of any
jurisdiction other than the laws of the State of California, the General
Corporation Law of the State of Delaware and the federal laws of the
United States, as such are in effect on the date hereof, and we have
made no inquiry into, and we express no opinion as to, the statutes,
regulations, treaties, common laws or other laws of any other nation,
state or jurisdiction. As you know, we are not licensed to practice law
in the State of Delaware and, accordingly, our opinions as to Delaware
General Corporation Law are based solely on a review of the official
statutes of the State of Delaware.
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, mora-
torium or other laws relating to or affecting the rights of creditors
generally, or (ii) the effect of general principles of equity, including
without limitation, concepts of materiality, reasonableness, good faith
and fair dealing, and the possible unavailability of specific
performance, injunctive relief or other equitable relief, whether
considered in a proceeding in equity or at law.
C. We express no opinion regarding any of (i) the rights or remedies
available to any party for violations or breaches of any provisions
which are immaterial or the enforcement of which would be unreasonable
under the then existing circumstances, (ii) the rights or remedies
available to any party for material violations or breaches which are the
proximate result of actions taken by any party to the Credit Agreement
other than the party against whom enforcement is sought, which actions
such other party is not entitled to take pursuant to the Credit
Agreement or which otherwise violate applicable laws, (iii) the rights
or remedies available to any party which takes discretionary action
which is arbitrary, unreasonable or capricious, or is not taken in good
faith or in a commercially reasonable manner, whether or not the Credit
Agreement permits such action, (iv) the effect of the exercise of
judicial discretion, whether in a proceeding in equity or at law,
(v) the enforceability of any provision deemed to be "unconscionable"
within the meaning of Section 1670.5 of the California Civil Code,
(vi) the enforceability of any provision authorizing the exercise of any
remedy without reasonable notice and opportunity to cure, or (vii) the
effect of any provision of the Credit Agreement purporting to give the
Agent or the Banks the right to make any conclusive determination in its
sole discretion.
D. We express no opinion as to the legality, validity, binding
nature or enforceability of (i) any provisions in the Credit Agreement
providing for the payment or reimbursement of costs or expenses or
indemnifying a party, to the extent such provisions may be held
unenforceable as contrary to public policy, (ii) any provision of the
Credit Agreement insofar as it provides for the payment or reimbursement
of costs and expenses or indemnification for claims, losses or
liabilities in excess of a reasonable amount determined by any court or
other tribunal, (iii) any provisions regarding a party's ability to
collect attorneys' fees and costs in an action involving the Credit
Agreement, if the party is not the prevailing party in such action (and
we call your attention to the effect of Section 1717 of the California
Civil Code, which provides that, where a contract permits one party
thereto to recover attorneys' fees, the prevailing party in any action
to enforce any provision of the contract shall be entitled to recover
its reasonable attorneys' fees), (iv) any provisions of the Credit
Agreement imposing penalties or forfeitures, late payment charges or any
increase in interest rate, upon delinquency in payment or the occurrence
of a default to the extent they constitute a penalty or forfeiture or
are otherwise contrary to public policy, (v) any rights of set-off,
(vi) any provision of the Credit Agreement to the effect that a
statement, certificate, determination or record shall be deemed
conclusive absent manifest error (or similar effect), including, without
limitation, that any such statement, certificate, determination or
record shall be prima facie evidence of a fact, or (vii) any provision
of the Credit Agreement which provides that notice not actually received
may be binding on any party.
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any vaguely or broadly stated
waiver, including without limitation, the waivers of diligence,
presentment, demand, protest or notice, or (ii) any waivers or consents
(whether or not characterized as a waiver or consent in the Credit
Agreement) relating to the rights of the Company or duties owing to it
existing as a matter of law, including, without limitation, waivers of
the benefits of statutory or constitutional provisions, to the extent
such waivers or consents are found by courts to be against public policy
or which are ineffective pursuant to California statutes and judicial
decisions.
F. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Credit
Agreement to the effect that rights or remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to
any other right or remedy, that the election of some particular remedy
or remedies does not preclude recourse to one or more other remedies or
that failure to exercise or delay in exercising rights or remedies will
not operate as a waiver of any such right or remedy.
G. We express no opinion as to any provision of the Credit Agreement
requiring written amendments or waivers of such documents insofar as it
suggests that oral or other modifications, amendments or waivers could
not be effectively agreed upon by the parties or that the doctrine of
promissory estoppel might not apply.
H. We express no opinion as to the applicability or effect of
compliance or non-compliance by the Agent or the Banks with any state,
federal or other laws applicable to the Agent or the Banks or to the
transactions contemplated by the Credit Agreement because of the nature
of its business, including its legal or regulatory status.
I. Our opinions set forth in paragraph 1 as to due incorporation,
valid existence and good standing are based solely on the certificates
referenced in paragraph (f) above (originals or copies of which have
been furnished to you).
J. Our opinion set forth in paragraph 3 as to the due execution of
the Credit Agreement by the Company is based solely on representations
made to us by the Company in the certificate referenced in paragraph (g)
above.
K. We express no opinion as to the enforceability or legal effect of
any provision of the Credit Agreement purporting to reinstate, as
against any obligor or guarantor, obligations or liabilities of such
obligor which have been avoided or which have arisen from transactions
which have been rescinded or the payment of which has been required to
be returned by any court of competent jurisdiction.
L. Our opinion in clauses (b) and (c) of paragraph 5 above is
intended to express our opinion that the execution, delivery and
performance by the Company of the Credit Agreement are neither
prohibited by, nor do they subject The Company to a fine, penalty or
similar sanction under or any law, rule, regulation of the State of
California or United States federal law or any order, writ, judgment,
decree, determination or award of any United States federal or
California state governmental authority that a lawyer practicing in the
State of California exercising customary professional diligence would
reasonably recognize to be applicable to the Company and the
transactions contemplated by the Credit Agreement; accordingly, our
opinions set forth above are limited to the foregoing.
M. This opinion speaks only at and as of its date and is based
solely on the facts and circumstances known to us at and as of such
date. We express no opinion as to the effect on Agent's or any Bank's
rights under the Credit Agreement of any statute, rule, regulation or
other law which is enacted or becomes effective after, or of any court
decision which changes the law relevant to such rights which is rendered
after, the date of this opinion or the conduct of the parties following
the closing of the contemplated transaction. In addition, in rendering
this opinion, we assume no obligation to revise or supplement this
opinion should the present laws of the jurisdictions mentioned herein be
changed by legislative action, judicial decision or otherwise.
This opinion is made with the knowledge and understanding that you (but
no other person) may rely thereon in entering into the Credit Agreement
and is solely for your benefit, and this opinion may not be disclosed to
or relied upon by any person other than you, except that (i) this
opinion may be disclosed to (A) bank regulatory and other governmental
authorities having jurisdiction over you requesting (or requiring) such
disclosure, and (B) prospective Eligible Assignees in connection with
the potential transfer of all or part of the Loans or Commitments of any
Bank, and (ii) this opinion may be relied upon by Eligible Assignees in
the Loans if the assignments relating thereto are permitted under and
made in accordance with the Credit Agreement; PROVIDED that in no event
does this opinion extend to any issue or matter related to any such
assignment or arising from or out of any such assignment (as distinct
from the subject transaction).
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT G
FORM OF ADDITIONAL BORROWER REQUEST AND
ASSUMPTION AGREEMENT
To: Bank of America National Trust and
Savings Association, as Agent
Re: SOLECTRON CORPORATION
Ladies and Gentlemen:
This Additional Borrower Request and Assumption Agreement is made
and delivered pursuant to Section 5.09 of the Credit Agreement, dated as
of April 30, 1997 (as amended, modified, renewed or extended from time
to time, the "Credit Agreement"), among Solectron Corporation (the
"Company") and each Additional Borrower party to the Credit Agreement
(each a "Borrower" and, collectively, the "Borrowers"), the several
financial institutions party to the Credit Agreement (the "Banks") and
Bank of America National Trust and Savings Association, as Agent for the
Banks, and reference is made thereto for full particulars of the matters
described herein. All capitalized terms used in this Additional
Borrower Request and Assumption Agreement and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement.
Each of ______________________ (the "Additional Borrower") and the
Borrowers' Agent hereby confirms, represents and warrants to the Agent
and the Banks that the Additional Borrower is a Subsidiary of the
Company.
The documents required to be delivered to the Agent under subsec-
tions 2.01(b) and 5.09(b) of the Credit Agreement will be furnished to
the Agent in accordance with the requirements of the Credit Agreement.
The parties hereto hereby confirm that with effect from the date
hereof, the Additional Borrower shall have obligations, duties and
liabilities towards each of the other parties to the Credit Agreement
identical to those which the Additional Borrower would have had if the
Additional Borrower had been an original party to the Credit Agreement
as a Borrower. The Additional Borrower confirms its acceptance of, and
consents to, all representations and warranties, covenants, and other
terms and provisions of the Credit Agreement.
The parties hereto hereby request that the Additional Borrower be
entitled to request Revolving Loans and Letters of Credit, in each case
denominated in Offshore Currencies, under the Credit Agreement, and
understand, acknowledge and agree that neither the Additional Borrower
nor the Borrowers' Agent on its behalf shall have any rights to request
any Loans or to have any Letters of Credit issued for its account unless
and until the effective date designated by the Agent in an Additional
Borrower Notice delivered to the Borrowers' Agent and the Banks pursuant
to subsection 2.01(b) of the Credit Agreement.
This Additional Borrower Request and Assumption Agreement shall
constitute a Loan Document under the Credit Agreement.
THIS ADDITIONAL BORROWER REQUEST AND ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT, THE ISSUING BANK AND THE BANKS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Additional
Borrower Request and Assumption Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the day and
year first above written.
[______________________]*
By:
Title:
SOLECTRON CORPORATION, as
Borrowers' Agent
By:
Title:
* Insert name of Additional Borrower
<PAGE>
EXHIBIT H
ADDITIONAL BORROWERS: SEE SCHEDULE 1
GUARANTOR: Solectron Corporation
FORM OF CONTINUING GUARANTY (MULTICURRENCY)
To: Bank of America National Trust
and Savings Association, as Agent
II. Definitions
A. "Agent" means Bank of America National Trust and Savings
Association, in its capacity as agent for the "Banks" from time to time
party to the Credit Agreement dated as of April 30, 1997, among
Solectron Corporation, the "Additional Borrowers" party thereto, the
Banks, and the Agent.
B. "Additional Borrowers" means those subsidiaries of Guarantors set
forth in SCHEDULE 1 hereto, as such schedule may be supplemented or
amended in writing by Guarantors and agreed to by Agent.
C. "Guarantors" means the persons or entities signing this Guaranty
as Guarantors.
D. "Indebtedness" means any and all indebtedness of Additional
Borrowers under the Credit Agreement or any Loan Document, including but
not limited to any and all Borrowings in Offshore Currencies, Letters of
Credit, advances, debts, obligations, and liabilities of Additional
Borrowers or any one or more of them, heretofore, now, or hereafter
made, incurred or created, whether voluntary or involuntary and however
arising, whether direct or acquired by any Bank by assignment or
succession, whether due or not due, absolute or contingent, liquidated
or unliquidated, determined or undetermined, and whether Additional
Borrowers may be liable individually or jointly with others, or whether
recovery upon such indebtedness may be or hereafter become barred by any
statute of limitations, or whether such indebtedness may be or hereafter
become otherwise unenforceable.
E. "Judgment Currency" means the currency in which any judgment on
any claim arising under or related to this Guaranty is denominated.
F. "Obligation Currencies" means the currencies in which the
Indebtedness is denominated.
G. The "U.S. Dollar Equivalent" of any amount denominated in any
currency other than U.S. Dollars shall be calculated at the spot rate
for the purchase of the other currency with U.S. Dollars quoted by Agent
in San Francisco, California, at approximately 8:00 a.m. on the date for
determination specified in this Guaranty.
III. For valuable consideration, Guarantors jointly and severally
unconditionally guarantee and promise to pay to Agent for the benefit of
the Banks or order, on demand, at the place for payment of the
Indebtedness or at such other location as Agent may designate:
A. any and all Indebtedness of Additional Borrowers, in the
Obligation Currencies, or
B. if Agent so notifies Guarantors in writing, at Agent's sole and
absolute discretion, the greater of: (i) the U.S. Dollar Equivalent of
the Indebtedness or any portion thereof, determined as of the date or
dates the Indebtedness was loaned to or incurred by Additional
Borrowers, or (ii) such U.S. Dollar Equivalent determined as of the date
payment is made.
IV. (a) The liability of Guarantors under this Guaranty (exclusive of
liability under any other guaranties executed by Guarantors) shall not
exceed at any time the total of (i) ____________ U.S. Dollars (U.S.
$__________) for the sum of the principal amount of any Indebtedness
denominated in U.S. Dollars and the U.S. Dollar Equivalent of the
principal amount of any Indebtedness denominated in an Obligation
Currency other than U.S. Dollars, determined as of the date or dates
such principal amount was loaned to or incurred by Additional Borrowers,
and (ii) all interest, fees, costs, expenses, payments, and indemnities
relating to or arising out of this Guaranty or the Indebtedness or such
part of the Indebtedness as shall not exceed the foregoing limitation.
A. Agent may permit the Indebtedness to exceed Guarantors'
liability, and may apply any amounts received from any source, other
than from Guarantors, to the unguaranteed portion of the Indebtedness.
This is a continuing guaranty relating to any Indebtedness, including
that arising under successive transactions which shall either continue
the Indebtedness or from time to time renew it after it has been
satisfied.
B. Any payment by Guarantors shall reduce their maximum obligation
hereunder only to the extent that any payment constitutes a payment of
principal, and only if written notice to the effect that the amount of
principal paid reduces Guarantors' maximum obligation hereunder is
actually received by Agent at or prior to the time of such payment. If
such principal payment is made in a currency other than U.S. Dollars,
the amount of any reduction of Guarantors' maximum obligation hereunder
shall be the lesser of: (i) the U.S. Dollar Equivalent of such
principal payment determined as of the date or dates the principal
Indebtedness being paid was loaned to or incurred by Additional
Borrowers, or (ii) such U.S. Dollar Equivalent as of the date such
principal payment is made.
C. The entry of any judgment against Guarantors of their obligations
hereunder shall reduce their maximum obligation hereunder in an amount
equal to the sum of the portion of the amount of such judgment
representing principal amounts of Indebtedness denominated in U.S.
Dollars, and the lesser of: (i) the U.S. Dollar Equivalent of each
principal amount of Indebtedness denominated in an Obligation Currency
other than U.S. Dollars included in such judgment, determined as of the
date or dates such amount was loaned to or incurred by Additional
Borrowers, or (ii) such U.S. Dollar Equivalent determined as of the date
of entry of such judgment.
V. Intentionally Omitted.
VI. (a) If any claim arising under or related to this Guaranty is
reduced to a judgment denominated in a Judgment Currency other than the
Obligation Currency, the judgment shall be for the greater of (i) the
equivalent in the Judgment Currency of the amount of the claim
denominated in the Obligation Currency (or each Obligation Currency, if
more than one) included in the judgment, determined as of the date or
dates the Indebtedness related to such claim was loaned to or incurred
by Additional Borrowers, or (ii) such equivalent determined as of the
date of entry of such judgment. The equivalent of any Obligation
Currency amount in any Judgment Currency shall be calculated at the spot
rate for the purchase of the Obligation Currency with the Judgment
Currency quoted by Agent in San Francisco, California, at approximately
8:00 a.m. on the date for determination specified above.
A. Guarantors shall indemnify Agent and each Bank against and hold
Agent and each Bank harmless from all loss and damage resulting from any
change in exchange rates between the date any claim is reduced to
judgment and the date of payment (or, in the case of partial payments,
the date of each partial payment) thereof by Guarantors. This indemnity
shall constitute an obligation separate and independent from the other
obligations contained in this Guaranty, shall give rise to a separate
and independent cause of action, shall apply irrespective of any
indulgence granted by Agent from time to time, and shall continue in
full force and effect notwithstanding any judgment or order for a
liquidated sum in respect of an amount due hereunder or under any
judgment or order.
VII. (a) Guarantors represent and warrant that all payments under or in
respect of this Guaranty are exempt from tax other than taxes on net
income imposed by the country or any subdivision of the country in which
any Bank's principal office or actual lending office is located.
A. (i) If any taxes (other than taxes on net income (A) imposed by
the country or any subdivision of the country in which any Bank's
principal office or actual lending office is located and (B) measured by
the United States taxable income such Bank would have received if all
payments under or in respect of this Guaranty were exempt from taxes
levied by Guarantors' country) are at any time imposed on any payments
under or in respect of this Guaranty including, but not limited to,
payments made pursuant to this paragraph, Guarantors shall pay all such
taxes and shall also pay to such Bank, on demand, all additional amounts
which such Bank specifies as necessary to preserve the after-tax yield
such Bank would have received if such taxes had not been imposed.
1. The additional amounts necessary to preserve the after-tax
yield such Bank would have received if such taxes had not been imposed
shall be calculated pursuant to the formula:
(w)(t)(i)
y = -------------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to Bank
w = withholding tax rate levied by foreign government
t = Bank's combined Federal and state tax rate
i - stated interest to be paid on Indebtedness
(base rate plus quoted spread)
1 = one
B. Guarantors will provide Agent with original tax receipts,
notarized copies of tax receipts, or such other documentation as will
prove payment of tax in a court of law applying the United States
Federal Rules of Evidence, for all taxes paid by Guarantors pursuant to
subparagraph (b) above Guarantors will deliver receipts to Agent within
30 days after the due date for the related tax.
VIII. The obligations hereunder are joint and several, and independent
of the obligations of Additional Borrowers, and shall not be affected by
any acts of any governmental authority affecting Additional Borrowers,
including but not limited to any restrictions on the conversion of
currency or repatriation or control of funds or any total or partial
expropriation of Additional Borrowers' property, or by economic,
political, regulatory, or other events in the countries where Additional
Borrowers are located. A separate action or actions may be brought and
prosecuted against Guarantors whether action is brought against
Additional Borrowers or whether Additional Borrowers be joined in any
such action or actions; and Guarantors waive the benefit of any statute
of limitations affecting their liability hereunder.
IX. Guarantors authorize Agent and each Bank, without notice or demand
and without affecting their liability hereunder, from time to time,
either before or after revocation hereof, to (a) renew, compromise,
extend, accelerate, or otherwise change the time for payment of, or
otherwise change the terms of the Indebtedness or any part thereof,
including increase or decrease of the rate of interest thereon; (b)
receive and hold security for the payment of this Guaranty or any of the
Indebtedness, and exchange, enforce, waive, release, fail to perfect,
sell, or otherwise dispose of any such security; (c) apply such security
and direct the order or manner of sale thereof as Agent in its
discretion may determine; and (d) release or substitute any one or more
of the endorsers or guarantors.
X. Guarantors waive any right to require Agent to (a) proceed against
Additional Borrowers; (b) proceed against or exhaust any security held
from Additional Borrowers; or (c) pursue any other remedy in Agent's
power whatsoever. Guarantors waive any defense arising by reason of any
disability or other defense of Additional Borrowers, or the cessation
from any cause whatsoever of the liability of Additional Borrowers, or
any claim that Guarantors' obligations exceed or are more burdensome
than those of Additional Borrowers. Until the Indebtedness shall have
been paid in full, even though the Indebtedness is in excess of
Guarantors' liability hereunder, Guarantors waive any right of
subrogation, reimbursement, indemnification, and contribution
(contractual, statutory, or otherwise) including, without limitation,
any claim or right of subrogation under the Bankruptcy Code (Title 11,
United States Code) or any successor statute, arising from the existence
or performance of this Guaranty, and Guarantors waive any right to
enforce any remedy which Agent now has or may hereafter have against
Additional Borrowers and waive any benefit of, and any right to
participate in, any security now or hereafter held by Agent. Guarantors
waive all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance of this Guaranty and of the existence, creation,
or incurring of new or additional Indebtedness.
XI. (a) Guarantors understand and acknowledge that if Agent
forecloses, either by judicial foreclosure or by exercise of power of
sale, any deed of trust securing the Indebtedness, that foreclosure
could impair or destroy any ability that Guarantors may have to seek
reimbursement, contribution, or indemnification from Additional
Borrowers or others based on any right Guarantors may have of
subrogation, reimbursement, contribution, or indemnification for any
amounts paid by Guarantors under this Guaranty. Guarantors further
understand and acknowledge that in the absence of this paragraph, such
potential impairment or destruction of Guarantors' rights, if any, may
entitle Guarantors to assert a defense to this Guaranty based on Section
580d of the California Code of Civil Procedure as interpreted in UNION
AGENT V. GRADSKY, 265 Cal. App. 2d. 40 (1968). By executing this
Guaranty, Guarantors freely, irrevocably, and unconditionally:
(i) waive and relinquish that defense and agree that Guarantors will be
fully liable under this Guaranty even though Agent may foreclose, either
by judicial foreclosure or by exercise of power of sale, any deed of
trust securing the Indebtedness; (ii) agree that Guarantors will not
assert that defense in any action or proceeding which Agent may commence
to enforce this Guaranty; (iii) acknowledge and agree that the rights
and defenses waived by Guarantors in this Guaranty include any right or
defense that Guarantors may have or be entitled to assert based upon or
arising out of any one or more of Sections 580a, 580b, 580d, or 726 of
the California Code of Civil Procedure or Section 2848 of the California
Civil Code; and (iv) acknowledge and agree that Agent is relying on this
waiver in creating the Indebtedness, and that this waiver is a material
part of the consideration which Agent is receiving for creating the
Indebtedness.
A. Guarantors waive any rights and defenses that are or may become
available to Guarantors by reason of Sections 1432 to 3433, inclusive,
of the California Civil Code.
B. Guarantors waive all rights and defenses that Guarantors may have
because any of the Indebtedness is secured by real property. This
means, among other things: (i) Agent may collect from Guarantors
without first foreclosing on any real or personal property collateral
pledged by Additional Borrowers; and (ii) if Agent forecloses on any
real property collateral pledged by Additional Borrowers: (1) the
amount of the Indebtedness may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the collateral
is worth more than the sale price, and (2) Agent may collect from
Guarantors even if Agent, by foreclosing on the real property
collateral, has destroyed any right Guarantors may have to collect from
Additional Borrowers. This is an unconditional and irrevocable waiver
of any rights and defenses Guarantors may have because any of the
Indebtedness is secured by real property. These rights and defenses
include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure.
C. Guarantors waive any right or defense they may have at law or
equity, including California Code of Civil Procedure Section 580a, to a
fair market value hearing or action to determine a deficiency judgment
after a foreclosure.
D. No provision or waiver in this Guaranty shall be construed as
limiting the generality of any other waiver contained in this Guaranty.
XII. Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Additional Borrowers such information
concerning Additional Borrowers' financial conditions or business
operations as Guarantors may require, and that Agent has no duty at any
time to disclose to Guarantors any information relating to the business
operations or financial conditions of Additional Borrowers.
XIII. To secure all of Guarantors' obligations hereunder, Guarantors
assign and grant to Agent a security interest in all moneys, securities,
and other property of Guarantors now or hereafter in the possession of
Agent, all deposit accounts of Guarantors maintained with Agent, and all
proceeds thereof. Upon default or breach of any of Guarantors'
obligations to Agent, Agent may apply any deposit account to reduce the
Indebtedness, and may foreclose any collateral as provided in the
Uniform Commercial Code and in any security agreements between Agent and
Guarantors.
XIV. Any obligations of Additional Borrowers to Guarantors, now or
hereafter existing, including but not limited to any obligations to
Guarantors as subrogees of Agent or resulting from Guarantors'
performance under this Guaranty, are hereby subordinated to the
Indebtedness. Such obligations of Additional Borrowers to Guarantors if
Agent so requests shall be enforced and performance received by
Guarantors as trustees for Agent, and the proceeds thereof shall be paid
over to Agent on account of the Indebtedness, but without reducing or
affecting in any manner the liability or Guarantors under the other
provisions of this Guaranty.
XV. This Guaranty may be revoked at any time by Guarantors in respect
to future transactions, unless there is a continuing consideration as to
such transactions which Guarantors do not renounce. Such revocation
shall be effective upon actual receipt by Agent, at the address shown
below or at such other address as may have been provided to Guarantors
by Agent, of written notice of revocation. Revocation shall not affect
any of Guarantors' obligations or Agent's rights with respect to
transactions which precede Agent's receipt of such notice, regardless of
whether or not the Indebtedness related to such transactions, before or
after revocation, has been renewed, compromised, extended, accelerated,
or otherwise changed as to any of its terms, including time for payment
or increase or decrease of the rate of interest thereon, and regardless
of any other act or omission of Agent authorized hereunder. Revocation
by any one or more of Guarantors shall not affect any obligations of any
nonrevoking Guarantors. If this Guaranty is revoked, returned, or
canceled, and subsequently any payment or transfer of any interest in
property by Additional Borrowers to Agent is rescinded or must be
returned by Agent to Additional Borrowers, this Guaranty shall be
reinstated with respect to any such payment or transfer, regardless of
any such prior revocation, return, or cancellation.
XVI. Where any one or more of Additional Borrowers are corporations,
partnerships, or limited liability companies, it is not necessary for
Agent to inquire into the powers of Additional Borrowers or of the
officers, directors, partners, members, managers, or agents acting or
purporting to act on their behalf, and any Indebtedness made or created
in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
XVII. Guarantors authorize Agent to verity or check any information
given by Guarantors to Agent, check Guarantors' credit references,
verify employment, and obtain credit reports (including any individual
general partner of any Guarantor and including any Guarantor's spouse
and any such general partner's spouse if such Guarantor or such general
partner is married and lives in a community property state).
XVIII. Agent may, without notice to Guarantors and without affecting
Guarantors' obligations hereunder, assign the Indebtedness and this
Guaranty, in whole or in part. Guarantors agree that Agent may disclose
to any assignee or purchaser, or any prospective assignee or purchaser,
of all or part of the Indebtedness any and all information in Agent's
possession concerning Guarantors, this Guaranty, and any security for
this Guaranty.
XIX. Guarantors agree to pay all reasonable attorneys' fees, including
allocated costs of Agent's in-house counsel, and all other costs and
expenses which may be incurred by Agent (a) in the enforcement of this
Guaranty or (b) in the preservation, protection, or enforcement of any
rights of Agent in any case commenced by or against Guarantors under the
Bankruptcy Code (Title 11, United States Code) or any similar or
successor statute.
XX. Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall
be deemed to have been used in the singular where the context and
construction so require; and when there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor,
the words "Additional Borrowers" and "Guarantors" respectively shall
mean all and any one or more of them.
XXI. This Guaranty shall be governed by and construed according to the
laws of the State of California, United States of America, to the
jurisdiction of which State the parties hereto submit.
XXII. (a) Any controversy or claim between or among the parties,
including but not limited to those arising out of or relating to this
Guaranty or any agreements or instruments relating hereto or delivered
in connection herewith and any claim based on or arising from an alleged
tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Guaranty, and under the Commercial Rules of the
American Arbitration Association ("AAA"). The arbitrators shall give
effect to statutes of limitation in determining any claim, except as
expressly waived hereunder by Guarantors. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrators.
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
A. Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the
consent of all parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to Agent
which is secured by real property collateral located in California. If
all parties do not consent to submission of such a controversy or claim
to arbitration, the controversy or claim shall be determined as provided
in subparagraph (c).
B. A controversy or claim which is not submitted to arbitration as
provided and limited in subparagraphs (a) and (b) shall, at the request
of any party, be determined by a reference in accordance with California
Code of Civil Procedure Sections 638 ET SEQ. If such an election is
made, the parties shall designate to the court a referee or referees
selected under the auspices of the AAA in the same manner as arbitrators
are selected in AAA-sponsored proceedings. The presiding referee of the
panel, or the referee if there is a single referee, shall be an active
attorney or retired judge. Judgment upon the award rendered by such
referee or referees shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
C. No provision of this paragraph shall limit the right of any party
to this Guaranty to exercise self-help remedies such as setoff, to
foreclose against or sell any real or personal property collateral or
security, or to obtain provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of a remedy does not
waive the right of either party to resort to arbitration or reference.
At Agent's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust
or mortgage or by judicial foreclosure.
Executed this _____ day of ______________, 19___.
Witnessed
______________________________ ________________________
Witness
______________________________ ________________________
Address Print Name
________________________
Address
______________________________
Witness
______________________________ ________________________
Address Print Name
________________________
Address
Address for notices to Agent: Address for notices to Guarantors:
______________________________ ________________________
______________________________ ________________________
______________________________ ________________________
<PAGE>
Schedule 1
ADDITIONAL BORROWERS
*Insert name of Additional Borrower
EXHIBIT 10.15a
PURCHASE AND SALE AGREEMENT
among
SOLECTRON CORPORATION,
as Originator, Servicer and Guarantor,
SOLECTRON CALIFORNIA CORPORATION,
as Originator,
and
SOLECTRON FUNDING CORPORATION,
as the Initial Purchaser
Dated as of September 17, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1 Agreement to Purchase and Sell -1-
SECTION 1.2 Timing of Purchases -2-
SECTION 1.3 Calculation of Purchase Price -2-
SECTION 1.4 Definitions and Calculations Related to Purchase
Discount -3-
SECTION 1.5 Purchase Price Payments -5-
SECTION 1.6 The Initial Purchaser Notes -5-
SECTION 1.7 Deemed Collections, Etc. -5-
SECTION 1.8 No Recourse -6-
SECTION 1.9 True Sales -6-
SECTION 1.10 Payments and Computations, Etc -7-
ARTICLE II CONDITIONS TO PURCHASES; REPRESENTATIONS AND WARRANTIES;
COVENANTS; PURCHASE AND SALE TERMINATION EVENTS
SECTION 2.1 Conditions to Purchases -8-
SECTION 2.2 Representations and Warranties; Covenants -8-
SECTION 2.3 Purchase and Sale Termination Events -8-
ARTICLE III INDEMNIFICATION
SECTION 3.1 Indemnities by each Originator -9-
SECTION 3.2 Contribution -10-
ARTICLE IV ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS AND
OBLIGATIONS IN RESPECT OF THE RECEIVABLES
SECTION 4.1 Servicing of Receivables and Related Assets -11-
SECTION 4.2 Rights of the Initial Purchaser; Enforcement Rights -11-
SECTION 4.3 Responsibilities of each Originator -12-
SECTION 4.4 Further Action Evidencing Purchases -13-
ARTICLE V MISCELLANEOUS
SECTION 5.1 Amendments, Etc. -14-
SECTION 5.2 Notices, Etc. -14-
SECTION 5.3 Acknowledgment and Consent -14-
SECTION 5.4 Binding Effect; Assignability -15-
SECTION 5.5 Costs, Expenses and Taxes -15-
SECTION 5.6 No Proceedings; Limitation on Payments -16-
SECTION 5.7 GOVERNING LAW AND JURISDICTION -16-
SECTION 5.8 Execution in Counterparts -17-
SECTION 5.9 Survival of Termination -17-
SECTION 5.10 WAIVER OF JURY TRIAL -17-
SECTION 5.11 Entire Agreement -18-
SECTION 5.12 Headings -18-
ARTICLE VI GUARANTEE
SECTION 6.1 Guarantee -18-
SECTION 6.2 Representation and Warranty -20-
SECTION 6.3 Subrogation -20-
EXHIBIT I CONDITIONS OF PURCHASES
EXHIBIT II REPRESENTATIONS AND WARRANTIES
EXHIBIT III COVENANTS
EXHIBIT IV PURCHASE AND SALE TERMINATION EVENTS
ANNEX A FORM OF INITIAL PURCHASER NOTE
<PAGE>
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is entered into as
of September 17, 1997 among SOLECTRON CORPORATION, a Delaware
corporation ("SOLECTRON"), as Servicer (in such capacity, the
"SERVICER"), as an Originator (in such capacity, an "ORIGINATOR") and as
Guarantor (in such capacity, the "GUARANTOR"), SOLECTRON CALIFORNIA
CORPORATION, a California corporation, as an Originator (in such
capacity, an "ORIGINATOR") and SOLECTRON FUNDING CORPORATION, a Delaware
corporation, as Initial Purchaser (the "INITIAL PURCHASER").
PRELIMINARY STATEMENTS
A. Unless otherwise defined herein or the context otherwise
requires, certain terms that are used throughout this Agreement
(including the Exhibits hereto) are defined in Exhibit I to the
Receivables Purchase Agreement, dated of even date herewith, among the
Initial Purchaser, Solectron, individually and as the Servicer,
Receivables Capital Corporation, as Issuer, and Bank of America National
Trust and Savings Association, as Administrator (as the same may be
amended, amended and restated or otherwise modified from time to time,
the "RECEIVABLES PURCHASE AGREEMENT"). Any reference to "this
Agreement" or "the Purchase and Sale Agreement", including any such
reference in any Exhibit hereto, shall mean this Agreement in its
entirety, including the Exhibits and other attachments hereto, as
amended, modified or supplemented from time to time in accordance with
the terms hereof.
B. Each Originator wishes to sell Receivables that it now owns and
from time to time hereafter will own to the Initial Purchaser, and the
Initial Purchaser is willing, on the terms and subject to the conditions
contained in this Agreement, to purchase such Receivables from the such
Originator at such time.
C. The Initial Purchaser has entered into the Receivables Purchase
Agreement, pursuant to which, among other things, the Initial Purchaser
may sell to the Issuer undivided ownership interests in the Receivables
and the other items specified in Section 1.2(c) of the Receivables
Purchase Agreement.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. AGREEMENT TO PURCHASE AND SELL. On the terms and
conditions hereinafter set forth, the each Originator agrees to sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from
such Originator, at the times set forth in SECTION 1.2, but prior to the
Purchase and Sale Termination Date, all of such Originator's right,
title, and interest in, to and under (a) all Receivables of such
Originator, (b) all Related Security with respect to such Receivables,
and (c) all Collections with respect to, and other proceeds of, such
Receivables and Related Security. The items listed in CLAUSES (b) and
(c) of the preceding sentence in relation to any Receivables are herein
collectively called the "RELATED ASSETS" or, with respect to any such
Receivable, the "RELATED ASSET".
SECTION 1.2. TIMING OF PURCHASES
(a) INITIAL PURCHASE. All of the Receivables and the Related Assets
of each Originator that exist at the opening of such Originator's
business on the date of the initial purchase by the Issuer under
Section 1.2 of the Receivables Purchase Agreement (the "Initial Purchase
Date") (other than, in the case of Solectron California Corporation,
Receivables contributed to the Initial Purchaser pursuant to the
Subscription Agreement) shall be deemed to have been sold to the Initial
Purchaser on such date without any formal or other instrument of
assignment and without further action by any Person.
(b) REGULAR PURCHASES. After the date of the initial purchase
hereunder until the Purchase and Sale Termination Date, each Receivable
and Related Asset of each Originator shall be deemed to have been sold
to the Initial Purchaser pursuant hereto immediately (and without any
formal or other instrument of assignment and without further action by
any Person) upon the creation of such Receivable.
(c) LOCK-BOX ACCOUNTS. Effective as of the Initial Purchase Date,
each Originator hereby sells to the Initial Purchaser, and the Initial
Purchaser hereby purchases from such Originator, all of such
Originator's right, title and interest in the Lock-Box Accounts and any
related deposit accounts and post office boxes, all monies, instruments,
and other property from time to time held or on deposit therein, all
certificates and instruments, if any, from time to time evidencing such
Lock-Box Accounts, related deposit accounts and post office boxes and
all related agreements between such Originator and the applicable Lock-
Box Banks.
SECTION 1.3. CALCULATION OF PURCHASE PRICE. As soon as available and
in any event not later than the tenth calendar day of each month or, if
such day is not a Business Day, the first Business Day thereafter, the
Servicer shall deliver to the Initial Purchaser, the Administrator and
each Originator a Seller Report with respect to the Initial Purchaser's
purchases of Receivables and Related Assets from such Originator during
the immediately preceding Purchase Period. "PURCHASE PERIOD" means,
with respect to any Month-End Date, the calendar month ending on such
Month-End Date. "PAYMENT DATE" means the third Business Day following
the day upon which the Seller Report was delivered by the Servicer as
provided in this SECTION 1.3. The "PURCHASE PRICE" to be paid to such
Originator on each Payment Date for the Receivables and Related Assets
sold by such Originator pursuant to SECTION 1.2 during the Purchase
Period immediately preceding such Payment Date shall be set forth in the
relevant Seller Report and shall be determined in accordance with the
following formula:
PP = AOB - PD
where:
PP = the Purchase Price to be paid to such Originator on the
relevant Payment Date;
AOB = the aggregate Outstanding Balance of the Receivables that
were purchased from such Originator during the Purchase Period
immediately preceding such Payment Date. (For purposes of this
calculation, the Outstanding Balance of a Receivable shall be measured
only at the time of such Receivable's creation and sale to the Initial
Purchaser.)
PD = the Purchase Discount as measured on such Payment Date
pursuant to SECTION 1.4.
SECTION 1.4. DEFINITIONS AND CALCULATIONS RELATED TO PURCHASE DISCOUNT
(a) PURCHASE DISCOUNT. "PURCHASE DISCOUNT" for the Receivables and
Related Assets that were purchased from each Originator during the
Purchase Period immediately preceding a Payment Date shall be determined
in accordance with the following formula:
PD = AOB x (LD + FD)
where:
PD = the Purchase Discount as measured on such Payment Date;
AOB, in respect of such Originator, has the meaning set forth in
SECTION 1.3;
LD = the Loss Discount as measured on such Payment Date, as
determined pursuant to PARAGRAPH (b) below; and
FD = the Funding Discount as measured on such Payment Date, as
determined pursuant to PARAGRAPH (c) below.
(b) LOSS DISCOUNT. "LOSS DISCOUNT" in effect for any day with
respect to an Originator shall mean the lesser of (i) fifteen percent
(15%) and (ii) the result, expressed as a percentage, calculated as of
the most recent Month-End Date, of the quotient of (a) the aggregate
Outstanding Amount of Receivables originated by such Originator that
became Defaulted Receivables during the Purchase Period ending on such
Month-End Date DIVIDED BY (b) the aggregate Outstanding Balance of
Receivables that were originated by such Originator during the Purchase
Period that occurred six calendar months prior to the Purchase Period
ending on such Month-End Date.
(c) FUNDING DISCOUNT. "FUNDING DISCOUNT" with respect to an
Originator, as measured on any Payment Date, means a percentage
determined in accordance with the following formula:
FD = (AM/360) x FR
where:
FD = the Funding Discount as measured on such Payment Date;
AM = the Average Maturity of the Receivables as of the most recent
Month End Date; and
FR = the Funding Rate as measured on such Payment Date, as
determined pursuant to PARAGRAPH (d) below.
(d) FUNDING RATE. "FUNDING RATE" as measured on any Payment Date
means a per annum percentage rate determined in accordance with the
following formula:
FR = 0.02% + DRP + SFP + EXP
where:
FR = the Funding Rate as measured on such Payment Date;
DRP = the "DISCOUNT RATE PERCENTAGE", which shall be equal to a
fraction (expressed as a percentage) (x) the NUMERATOR of which is the
SUM of the PRODUCTS obtained by MULTIPLYING (A) each CP Rate or
Alternate Rate applicable to each Portion of Capital outstanding as of
the first day of the Purchase Period ending on the Month-End Date
immediately preceding such Payment Date, TIMES (B) the amount of the
Portion of Capital to which such CP Rate or Alternate Rate applied on
such first day, and (y) the DENOMINATOR of which is the aggregate
outstanding amount of Capital on such first day;
SFP = the "SERVICER'S FEE PERCENTAGE", which shall be equal to the
per annum percentage rate contemplated by the definition of Servicing
Fee; and
EXP = the amount, expressed as a per annum percentage rate, of any
fees, costs and expenses incurred by the Initial Purchaser during the
Purchase Period preceding such Payment Date (and not accounted for in
the Discount Rate Percentage), including without limitation reserve
costs, tax payments and indemnity obligations of the Initial Purchaser
for which the Initial Purchaser is not indemnified pursuant to this
Agreement; PROVIDED, HOWEVER, that, for purposes of minimizing
fluctuations in the rate calculated as the Funding Rate, the Servicer
may allocate and spread any unscheduled or unaccruable costs and
expenses of the Initial Purchaser over several Payment Dates at the
Servicer's reasonable discretion, subject to the requirement that such
allocation be reasonably calculated to allow the Initial Purchaser to
recover such costs and expenses over a reasonable period of time.
SECTION 1.5. PURCHASE PRICE PAYMENTS. On each Payment Date falling
after the date of the initial purchase pursuant to SECTION 1.2, on the
terms and subject to the conditions of this Agreement, the Initial
Purchaser shall pay to each Originator the Purchase Price for the
Receivables and Related Assets purchased from such Originator during the
immediately preceding Purchase Period as follows:
(i) FIRST, by making a cash payment to or at the direction of
such Originator to the extent that the Initial Purchaser has cash
available to make such payment subject to the terms of clause (m) of
Exhibit IV to the Receivables Purchase Agreement; and
(ii) SECOND, to the extent any portion of the Purchase Price
remains unpaid, the principal amount outstanding under the Initial
Purchaser Note issued to such Originator automatically shall be
increased in an amount equal to such remaining Purchase Price.
SECTION 1.6. THE INITIAL PURCHASER NOTES
(a) On or prior to the date hereof, the Initial Purchaser shall
deliver to each Originator a promissory note in the form of ANNEX A to
this Agreement payable to the order of such Originator (each such
promissory note, as it may be amended, amended and restated, endorsed or
otherwise modified from time to time, together with any promissory notes
issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, being called the "INITIAL
PURCHASER NOTE"). The obligations of the Initial Purchaser to each
Originator under the related Initial Purchaser Note shall be
subordinated in accordance with the terms of such Initial Purchaser
Note.
(b) The Servicer shall hold the Initial Purchaser Notes for the
benefit of the Originators, and shall make all appropriate record-
keeping entries with respect to the Initial Purchaser Notes or otherwise
to reflect the payments on and adjustments of such Initial Purchaser
Notes. The Servicer's books and records shall constitute rebuttable
presumptive evidence of the principal amount of and accrued interest on
the Initial Purchaser Notes at any time. By its execution of this
Agreement, the Servicer acknowledges receipt of the Initial Purchaser
Notes relating to the Originators. Each Originator hereby irrevocably
authorizes the Servicer to mark its Initial Purchaser Note "CANCELLED"
and to return such Initial Purchaser Note to the Initial Purchaser upon
the full and final payment thereof after the Purchase and Sale
Termination Date.
SECTION I.7. DEEMED COLLECTIONS, ETC. On and after the Initial Purchase
Date:
(a) if on any day the Outstanding Balance of any Receivable is
reduced or adjusted as a result of any defective, rejected, returned,
repossessed, goods or services, or any discount or other adjustment made
by an Originator, or any setoff or dispute between such Originator and
an Obligor, such Originator shall be deemed to have received on such day
a Collection of such Receivable in an amount equal to the amount of such
reduction or adjustment and shall deliver to the Servicer for
application in accordance with Section 1.4(b) of the Receivables
Purchase Agreement in same day funds an amount equal to the amount of
such reduction or adjustment;
(b) if on any day any of the representations or warranties in
PARAGRAPH (h) of EXHIBIT II hereto is not true with respect to any
Receivable, the applicable Originator shall be deemed to have received
on such day a Collection of such Receivable in an amount equal to the
Outstanding Balance of such Receivable and shall deliver to the Servicer
in same day funds an amount equal to the Outstanding Balance of such
Receivable for application in accordance with Section 1.4(b) of the
Receivables Purchase Agreement;
(c) except as provided in PARAGRAPH (a) or (b) of this Section, or
as otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivables originated by an
Originator shall be applied to such Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(d) if and to the extent the Initial Purchaser shall be required for
any reason to pay over to an Obligor (or any trustee, receiver,
custodian or similar official in any Insolvency Proceeding) any amount
received by it hereunder, such amount shall be deemed not to have been
so received but rather to have been retained by the applicable
Originator and, accordingly, the Initial Purchaser shall have a claim
against such Originator for such amount, payable immediately.
SECTION 1.8. NO RECOURSE. Except as specifically provided in this
Agreement, the purchase and sale of Receivables and Related Assets under
this Agreement shall be without recourse to the Originators; PROVIDED
that each Originator shall be liable to the Initial Purchaser for all
representations, warranties, covenants and indemnities made by such
Originator pursuant to the terms of this Agreement, it being understood
that, under the terms of this Agreement, such obligations of such
Originator will not arise on account of the failure of the Obligor for
credit reasons to make any payment in respect of a Receivable.
SECTION 1.9. TRUE SALES.
(a) Each Originator and the Initial Purchaser intend the
transactions hereunder to constitute true sales (or where the
Subscription Agreement applies, true conveyances in the form of capital
contributions) of Receivables, Related Assets and the Lock-Box Accounts
(and the other items described in SECTION 1.2(c)) by such Originator to
the Initial Purchaser providing the Initial Purchaser with the full
benefits of ownership thereof, and no party hereto intends the
transactions contemplated hereunder to be, or for any purpose to be
characterized as, a loan from the Initial Purchaser to the Originators.
(b) In the event (but only to the extent) that the conveyance of
Receivables and Related Assets hereunder is characterized by a court or
other Governmental Authority as a loan rather than a sale, each
Originator shall be deemed hereunder to have granted to the Initial
Purchaser, and such Originator hereby grants to the Initial Purchaser, a
security interest in all of such Originator's right, title and interest
in, to and under all of the following, whether now or hereafter owned,
existing or arising: (A) all Receivables of such Originator, (B) all
Related Security with respect to each such Receivable, (C) all
Collections with respect to each such Receivable, (D) the Lock-Box
Accounts, all amounts on deposit therein, all certificates and
instruments, if any, from time to time evidencing such Lock-Box Accounts
and amounts on deposit therein, and all related agreements between such
Originator and the Lock-Box Banks, and (E) all proceeds of, and all
amounts received or receivable under any or all of, the foregoing. Such
security interest shall secure all of such Originator's obligations
(monetary or otherwise) under this Agreement and the other Transaction
Documents to which it is a party, whether now or hereafter existing or
arising, due or to become due, direct or indirect, absolute or
contingent. In the event (but only to the extent) that the conveyance
of Receivables and Related Assets hereunder is characterized by a court
or other Governmental Authority as a loan rather than a sale, the
Initial Purchaser shall have, with respect to the property described in
this SECTION 1.9(b), and in addition to all the other rights and
remedies available to the Initial Purchaser under this Agreement and
applicable law, any additional rights and remedies of a secured party
specified under any applicable UCC, and this Agreement shall constitute
a security agreement under applicable law.
SECTION 1.10. PAYMENTS AND COMPUTATIONS, ETC.
(a) All amounts to be paid or deposited by each Originator or the
Servicer hereunder shall be paid or deposited no later than 12:00 noon
(New York City time) on the day when due in same day funds in United
States dollars. All amounts received after 12:00 noon (New York City
time) will be deemed to have been received on the immediately succeeding
Business Day.
(b) Each Originator shall, to the extent permitted by law, pay
interest on any amount not paid or deposited by such Originator when due
hereunder, at an interest rate per annum equal to 2.0% per annum above
the Base Rate, payable on demand.
(c) All computations of interest under SECTION 1.10(b) and all
computations of the Purchase Price, fees, and other amounts hereunder
shall be made on the basis of a 360-day year and actual days elapsed.
Whenever any payment or deposit to be made hereunder shall be due on a
day other than a Business Day, such payment or deposit shall be made on
the next succeeding Business Day and such extension of time shall be
included in the computation of such payment or deposit.
ARTICLE II
CONDITIONS TO PURCHASES; REPRESENTATIONS AND WARRANTIES; COVENANTS;
PURCHASE AND SALE TERMINATION EVENTS
SECTION 2.1. CONDITIONS TO PURCHASES. The obligation of the Initial
Purchaser to make any purchase of Receivables and Related Assets
hereunder is subject to satisfaction of the conditions to purchase set
forth in EXHIBIT I hereto.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each
Originator hereby makes the representations and warranties set forth in
Exhibit II, and hereby agrees to perform and observe the covenants set
forth in EXHIBIT III hereto.
SECTION 2.3. PURCHASE AND SALE TERMINATION EVENTS. If any Purchase and
Sale Termination Event shall occur, the Initial Purchaser may, with the
prior written consent of the Administrator, by notice to each Originator
(with a copy to the Administrator), declare the Purchase and Sale
Termination Date to have occurred; PROVIDED that automatically upon the
occurrence of an event (without any requirement for the passage of time
or the giving of notice) described in CLAUSE (f) of EXHIBIT IV hereto
the Purchase and Sale Termination Date shall occur.
The agreement of each Originator to sell Receivables and Related Assets
hereunder, and the agreement of the Initial Purchaser to purchase
Receivables and Related Assets from such Originator hereunder, shall
terminate automatically on the earlier to occur of (i) the Purchase and
Sale Termination Date and (ii) the Facility Termination Date; provided
that in the event that any such Purchase and Sale Termination Date shall
cease to exist, such agreements of the Originators and Initial Purchaser
shall be automatically reinstated as though such Purchase and Sale
Termination Date had never occurred. Notwithstanding the occurrence of
the Purchase and Sale Termination Date, all obligations of each
Originator under the Transaction Documents that shall have arisen prior
to the Purchase and Sale Termination Date shall survive until each such
obligation has been finally and fully paid and performed by such
Originator.
Upon the occurrence of a Purchase and Sale Termination Event, the
Initial Purchaser shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of each applicable jurisdiction and
other applicable laws, which rights and remedies shall be cumulative.
Without limiting the foregoing, the occurrence of a Purchase and Sale
Termination Event hereunder shall not deny to the Initial Purchaser any
remedy to which the Initial Purchaser may be otherwise appropriately
entitled, whether by statute or applicable law, at law or in equity.
ARTICLE III
INDEMNIFICATION
SECTION 3.1. INDEMNITIES BY EACH ORIGINATOR. Without limiting any
other rights which the Initial Purchaser or any Indemnified Party may
have hereunder or under applicable law, each Originator hereby agrees to
indemnify the Initial Purchaser and each Indemnified Party from and
against any and all Indemnified Amounts arising out of or resulting from
this Agreement (whether directly or indirectly) or the use of proceeds
of purchases or the ownership of any Receivable or Related Asset,
excluding, however, (a) Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of the Initial
Purchaser or such Indemnified Party, (b) recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Receivables
or (c) any overall net income taxes or franchise taxes imposed on the
Initial Purchaser or such Indemnified Party by the jurisdiction under
the laws of which such Indemnified Party is organized or any political
subdivision thereof. Without limiting or being limited by the
foregoing, but subject to the exclusions set forth in the preceding
sentence, each Originator shall pay on demand to the Initial Purchaser
and each Indemnified Party any and all amounts necessary to indemnify
the Initial Purchaser and such Indemnified Party from and against any
and all Indemnified Amounts relating to or resulting from any of the
following:
(i) the failure of any information provided by such Originator
to the Initial Purchaser, the Issuer, the Administrator or the Servicer
with respect to Receivables or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or statement
made or deemed made by such Originator under or in connection with this
Agreement to have been true and correct in all respects when made;
(iii) the failure by such Originator to comply with any applicable
law, rule or regulation with respect to any Receivable or any Related
Asset; or the failure of any Receivable or Related Asset to conform to
any such applicable law, rule or regulation;
(iv) the failure to vest in the Initial Purchaser a valid and
enforceable (A) perfected ownership interest in each Receivable
originated by such Originator at any time existing and the Related
Assets with respect thereto and in the items covered by SECTION 1.2(c)
and (B) a first priority perfected security interest in the items
described in SECTION 1.9(b) to the extent SECTION 1.9(b) is applicable,
in each case free and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to any
Receivables originated by such Originator and the Related Assets in
respect thereof, whether at the time of any purchase or at any
subsequent time;
(vi) any dispute, claim, offset, billing adjustment or defense
(other than discharge in bankruptcy of the Obligor) of the Obligor to
the payment of any Receivable originated by such Originator (including,
without limitation, a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the goods or services related to such
Receivable or the furnishing or failure to furnish such goods or
services or relating to collection activities with respect to such
Receivable (if such collection activities were performed by such
Originator, or any of its Affiliates, acting as Servicer or by any agent
or independent contractor retained by such Originator or any of its
Affiliates);
(vii) any failure of such Originator to perform its duties or
obligations in accordance with the provisions hereof or to perform its
duties or obligations under the Contracts;
(viii) any breach of warranty, products liability or other claim,
investigation, litigation or proceeding arising out of or in connection
with merchandise, insurance or services which are the subject of any
Contract relating to a Receivable originated by such Originator;
(ix) the commingling by any Solectron Party of any portion of
Collections of Receivables at any time with other funds;
(x) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or the ownership of any
Receivable or Related Asset;
(xi) any requirement that all or a portion of the payments or
distributions made to the Initial Purchaser pursuant to this Agreement
shall be rescinded or otherwise must be returned to such Originator for
any reason; or
(xii) the breach of any covenant or any representation and
warranty made by Solectron in the Solectron Credit Agreement.
For purposes of this Article III, in determining whether any
representation or warranty or information was true and correct, any
qualification or limitation in such representation and warranty or
information as to materiality, material adverse effect, knowledge or
limitation on enforcement shall be disregarded.
SECTION 3.2. CONTRIBUTION. If for any reason the indemnification
provided above in this ARTICLE III (and subject to the exceptions set
forth therein) is unavailable to the Initial Purchaser or an Indemnified
Party or is insufficient to hold the Initial Purchaser or an Indemnified
Party harmless, then each Originator shall contribute to the maximum
amount of Indemnified Amount payable or paid by the Initial Purchaser or
such Indemnified Party in such proportion as is appropriate to reflect
not only the relative benefits received by the Initial Purchaser or such
Indemnified Party on the one hand and such Originator on the other hand,
but also the relative fault of such Indemnified Party (if any) and such
Originator and any other relevant equitable considerations.
ARTICLE IV
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE RECEIVABLES
SECTION 4.1. SERVICING OF RECEIVABLES AND RELATED ASSETS. Consistent
with the Initial Purchaser's ownership of the Receivables and the
Related Assets, the Initial Purchaser shall have the sole right to
service, administer and collect the Receivables, to assign such right
and to delegate such right to others. In consideration of the Initial
Purchaser's purchase of the Receivables and the Related Assets, each
Originator agrees to cooperate fully with the Initial Purchaser to
facilitate the full and proper performance of such servicing,
administering and collecting for the benefit of the Initial Purchaser,
the Issuer and the Administrator. To the extent that the Initial
Purchaser, individually or through the Servicer, has granted or grants
powers of attorney to the Administrator under the Receivables Purchase
Agreement, each Originator hereby grants a corresponding power of
attorney on the same terms to the Initial Purchaser. Each Originator
hereby acknowledges and agrees that the Initial Purchaser, in all of its
capacities, shall assign to the Administrator for the benefit of the
Issuer and the Administrator such powers of attorney and other rights
and interests granted by such Originator to the Initial Purchaser
hereunder, and agrees to cooperate fully with the Administrator in the
exercise of such rights.
SECTION 4.2. RIGHTS OF THE INITIAL PURCHASER; ENFORCEMENT RIGHTS.
(a) The Initial Purchaser shall have no obligation to account for,
to replace, to substitute or to return any Receivables or Related Assets
to any Originator. Without limiting the foregoing, the Initial
Purchaser shall have no obligation to account for, or to return to any
Originator, Collections, or any interest or other finance charge
collected pursuant thereto, without regard to whether such Collections
and charges are in excess of the Purchase Price for such Receivables and
Related Assets.
(b) The Initial Purchaser shall have the unrestricted right to
further assign, transfer, deliver, hypothecate, subdivide or otherwise
deal with the Receivables and Related Assets (and other items covered by
Section 1.2(c)), and all of the Initial Purchaser's right, title and
interest in, to and under this Agreement, on whatever terms the Initial
Purchaser shall determine, pursuant to the Receivables Purchase
Agreement or otherwise.
(c) The Initial Purchaser shall have the sole right to retain any
gains or profits created by buying, selling or holding the Receivables
and Related Assets and shall have the sole risk of and responsibility
for losses or damages created by such buying, selling or holding, it
being understood that this Section shall not limit the Initial
Purchaser's rights and remedies pursuant to Article III or other
provisions of this Agreement or pursuant to applicable law.
(d) At any time following the designation of a Servicer (other than
Solectron) pursuant to Section 4.1 of the Receivables Purchase
Agreement:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct any Originator to give notice
of the Initial Purchaser's or the Issuer's interest in Receivables to
each Obligor, which notice shall direct that payments be made directly
to the Administrator or its designee, and upon such instruction from the
Administrator such Originator shall give such notice at the expense of
such Originator; provided, that if such Originator fails to so notify
each Obligor, the Administrator may so notify the Obligors; and
(iii) the Administrator may request such Originator to, and upon
such request such Originator shall, (A) assemble all of the records
necessary or desirable to collect the Receivables and the Related
Assets, and transfer or license the use of, to the new Servicer, all
software necessary or desirable to collect the Receivables and the
Related Assets, and make the same available to the Administrator or its
designee at a place selected by the Administrator, and (B) segregate all
cash, checks and other instruments received by it from time to time
constituting Collections with respect to the Receivables in a manner
acceptable to the Administrator and, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Administrator or its designee.
(e) Each Originator hereby authorizes the Initial Purchaser, and
irrevocably appoints the Initial Purchaser as its attorney-in-fact with
full power of substitution and with full authority in the place and
stead of such Originator, which appointment is coupled with an interest,
to take any and all steps in the name of such Originator and on behalf
of such Originator necessary or desirable, in the determination of such
Originator, to collect any and all amounts or portions thereof due under
any and all Receivables originated by such Originator or Related Assets,
including, without limitation, endorsing the name of such Originator on
checks and other instruments representing Collections and enforcing such
Receivables and Related Assets. Notwithstanding anything to the
contrary contained in this SUBSECTION (e), none of the powers conferred
upon such attorney-in-fact pursuant to the immediately preceding
sentence shall subject such attorney-in-fact to any liability if any
action taken by it shall prove to be inadequate or invalid, nor shall
they confer any obligations upon such attorney-in-fact in any manner
whatsoever.
SECTION 4.3. RESPONSIBILITIES OF EACH ORIGINATOR. On and after the
Initial Purchase Date, anything herein to the contrary notwithstanding:
(a) Each Originator agrees to deliver any Collections that it
receives, in the form so received, to Lock-Box Accounts in accordance
with clause (j) of Exhibit III and agrees that all such Collections
shall be deemed to be received in trust for the Initial Purchaser and
shall be maintained and segregated separate and apart from all other
funds and moneys of such Originator until such delivery; and
(b) Each Originator shall (i) perform all of its obligations
hereunder and under the Contracts related to the Receivables and Related
Assets (and under its agreements with the Lock-Box Banks) to the same
extent as if the Receivables, Related Assets and Lock-Box Accounts (and
the other items described in SECTION 1.2(c)) had not been sold
hereunder, and the exercise by the Initial Purchaser or its designee or
assignee of the Initial Purchaser's rights hereunder or in connection
herewith shall not relieve such Originator from such obligations and
(ii) pay when due any taxes, including, without limitation any sales
taxes, payable in connection with the Receivables and their creation and
satisfaction. Notwithstanding anything to the contrary in this
Agreement, the Initial Purchaser, the Administrator and the Issuer shall
not have any obligation or liability with respect to any Receivable,
Related Asset, or Lock-Box Account (or any other item described in
SECTION 1.2(c)) nor shall any of them be obligated to perform any of the
obligations of such Originator under any of the foregoing.
SECTION 4.4. FURTHER ACTION EVIDENCING PURCHASES. Each Originator
agrees that from time to time, at its expense, it will promptly execute
and deliver all further instruments, UCC financing statements and
documents, and take all further action, reasonably requested by the
Initial Purchaser or the Administrator in order to perfect, protect or
more fully evidence the purchase of the Receivables and the Related
Assets and Lock-Box Accounts (and the other items described in SECTION
1.2(c)) by the Initial Purchaser hereunder, or to enable the Initial
Purchaser or the Administrator, the Issuer or any other Indemnified
Party to exercise or enforce any of its or their respective rights or
remedies hereunder or under any other Transaction Document or Program
Support Agreement; provided that the Originators shall not be required
pursuant to this SECTION 4.4 to take any action that conflicts with any
other provision of this Agreement or of the Receivables Purchase
Agreement. Without limiting the generality of the foregoing, upon the
request of the Initial Purchaser or the Administrator, such Originator
will:
(a) execute and file such UCC financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments
or notices, as the Initial Purchaser or the Administrator may reasonably
determine to be necessary or appropriate; and
(b) legend the related Contracts, to reflect the sale of the
Receivables and Related Assets pursuant to this Agreement and the
Receivables Purchase Agreement.
Each Originator hereby authorizes the Initial Purchaser or its designee
or assignee to file one or more UCC financing or continuation
statements, and amendments thereto and assignments thereof, relative to
all or any of the Receivables and Related Assets, in each case whether
now existing or hereafter generated. If any Originator fails to perform
any of its agreements or obligations under this Agreement, the Initial
Purchaser or its designee or assignee may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation,
and the reasonable expenses of the Initial Purchaser or its designee or
assignee incurred in connection therewith shall be payable by such
Originator under SECTION 5.5.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or consent to any departure by an Originator or the
Servicer therefrom shall be effective unless in a writing signed by the
Administrator (and, in the case of an amendment, by the Administrator,
such Originator and the Servicer), and any such waiver or consent shall
be effective only in the specific instance and for the specific purpose
for which given. No failure on the part of the Initial Purchaser or
Administrator to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
SECTION 5.2. NOTICES, ETC. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which
shall include facsimile communication) and sent or delivered, to each
party hereto, at its address set forth under its name on the signature
pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. Notices and
communications by facsimile shall be effective when sent (and shall be
followed by hard copy sent by first class mail), and notices and
communications sent by other means shall be effective when received.
SECTION 5.3. ACKNOWLEDGMENT AND CONSENT.
(a) Each of the Originators and the Guarantor acknowledges that,
contemporaneously herewith or at any time hereafter, the Initial
Purchaser (i) is assigning or will assign to the Issuer, pursuant to the
Receivables Purchase Agreement, one or more undivided interests in all
of the Initial Purchaser's rights, title and interest in, to and under
the Receivables and Related Assets, and (ii) is assigning to the
Administrator, pursuant to the Receivables Purchase Agreement, all of
the Initial Purchaser's right, title and interest in, to and under this
Agreement and the other Transaction Documents (and all rights, remedies,
powers, privileges and claims of the Initial Purchaser under this
Agreement (including Article VI) and the other Transaction Documents),
it being understood that such assignment shall not relieve any party
hereto from (or require the Issuer or the Administrator to undertake)
the performance of any term, covenant or agreement on the part of any
party hereto to be performed or observed under or in connection with
this Agreement, any other Transaction Document, and any Pool Receivable
or any Related Security. Each of the Originators and the Guarantor
hereby consents to such assignments, including, without limitation, the
assignment by the Initial Purchaser to the Administrator for its benefit
and the benefit of the Issuer of (i) the right of the Initial Purchaser,
at any time, to enforce this Agreement and any other Transaction
Documents against such Originator and the Servicer, (ii) the right to
appoint a successor to the Servicer as set forth therein, (iii) the
right, at any time, to give or withhold any and all consents, requests,
notices, directions, approvals, demands, extensions or waivers under or
with respect to this Agreement, any other Transaction Document or the
obligations in respect of such Originator or Guarantor thereunder to the
same extent as the Initial Purchaser may do, and (iv) all of the Initial
Purchaser's rights, remedies, powers, privileges, and claims under or
with respect to this Agreement and the other Transaction Documents
(whether arising pursuant to the terms of this Agreement or any other
Transaction Document or otherwise available at law or in equity). Each
of the parties hereto acknowledges and agrees that the Issuer, the
Administrator and the other Affected Persons are third party
beneficiaries of the rights of the Initial Purchaser arising hereunder
and under the other Transaction Documents to which such Originator and
the Guarantor is a party.
(b) Each of the Originators and the Guarantor hereby agrees to
execute all agreements, instruments and documents, and to take all other
action, that the Initial Purchaser or the Administrator reasonably
determines is necessary or reasonably desirable to evidence its consent
described in SECTION 5.3(a); provided that neither the Originators nor
the Guarantor shall be required pursuant to this Section 5.3 to execute
any agreements, instruments or documents, or take any actions, that
conflict with any other provision of this Agreement or of the
Receivables Purchase Agreement.
(c) Each of the Originators and the Guarantor hereby acknowledges
that its obligations to the Administrator for its benefit and the
benefit of the Issuer are and shall be, to the extent permitted by
applicable law or not prohibited by any order of any court or
administrative or regulatory authority, absolute and unconditional under
any and all circumstances and shall be unaffected by any claims, offsets
or other defenses such Originator or the Guarantor may have against the
Initial Purchaser (other than in respect of the Initial Purchaser Note),
and each of such Originator and the Guarantor agrees that it shall not
interpose any such claims, offsets or defenses as a defense to its
performance of its obligations under the Transaction Documents to which
it is a party.
SECTION 5.4. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No Originator shall assign
any of its rights or delegate its obligations hereunder or under any
other Transaction Document or any interest herein or therein without the
prior written consent of the Initial Purchaser and the Administrator.
Without limiting any other rights that may be available under applicable
law, the rights of the Initial Purchaser may be enforced through it or
by its agents.
SECTION 5.5. COSTS, EXPENSES AND TAXES. In addition to the rights of
indemnification granted under ARTICLE III, each Originator agrees to pay
on demand all costs and expenses in connection with the preparation,
execution, delivery and administration (including, without limitation,
periodic auditing of Receivables) of this Agreement and the other
Transaction Documents, and any amendment, modification or waiver of any
of the foregoing, including, without limitation, Attorney Costs for the
Administrator, the Initial Purchaser and their respective Affiliates and
agents with respect thereto and with respect to advising the
Administrator, the Initial Purchaser and their respective Affiliates and
agents as to their rights and remedies under this Agreement and the
other Transaction Documents, and all costs and expenses, if any
(including, without limitation, Attorney Costs), of the Administrator,
the Initial Purchaser and their respective Affiliates and agents, in
connection with the enforcement of this Agreement and the other
Transaction Documents.
SECTION 5.6. NO PROCEEDINGS; LIMITATION ON PAYMENTS.
(a) Each party hereto hereby agrees that it will not institute
against, or join any other Person in instituting against, the Initial
Purchaser or the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and one day
after the latest maturing Note is paid in full.
(b) Notwithstanding any provisions contained in this Agreement to
the contrary, the Initial Purchaser shall not, and shall not be
obligated to, pay any amount pursuant to this Agreement unless the
Initial Purchaser has excess cash flow from operations or has received
funds with respect to such obligation which may be used to make such
payment.
SECTION 5.7. GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE
PERFECTION (OR THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE
INTERESTS OF THE INITIAL PURCHASER IN THE RECEIVABLES AND THE OTHER
ITEMS DESCRIBED IN SECTION 1.9(b) IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
(b) EACH SOLECTRON PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION
OF THE COURT OF THE STATE OF CALIFORNIA SITTING IN SAN FRANCISCO AND OF
THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH CALIFORNIA STATE COURT OR, TO THE EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATOR OR THE ISSUER MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AGAINST ANY SOLECTRON PARTY
OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. EACH SOLECTRON
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT IN ANY COURT REFERRED TO IN THIS CLAUSE (b). EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. EACH PARTY
TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 5.2. NOTHING IN THIS AGREEMENT
WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
SECTION 5.8. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
SECTION 5.9. SURVIVAL OF TERMINATION. The provisions of SECTION 1.10,
SECTION 2.3, ARTICLE III, ARTICLE IV, SECTION 5.3, SECTION 5.5, SECTION
5.6, SECTION 5.7, SECTION 5.10, ARTICLE VI and of this SECTION 5.9,
shall survive any termination of this Agreement.
SECTION 5.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR INDEMNIFIED PARTY, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY
HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE
PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, AMENDMENTS AND RESTATEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
(INCLUDING WITHOUT LIMITATION ANY EXTENSION OF THE FACILITY TERMINATION
DATE).
SECTION 5.11. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto, and supersedes all
prior or contemporaneous agreements and understandings of such Persons,
verbal or written, relating to the subject matter hereof. The Exhibits,
Schedules and Annexes to this Agreement shall be deemed incorporated by
reference into this Agreement as if set forth herein.
SECTION 5.12. HEADINGS. The captions and headings of this Agreement
and in any Exhibit hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
SECTION 5.13. SEVERAL OBLIGATIONS. The obligations of the Originators
under this Agreement are several but not joint obligations.
ARTICLE VI
GUARANTEE
SECTION 6.1. GUARANTEE. (a) Guarantor hereby unconditionally and
irrevocably covenants and agrees that it will cause Solectron California
Corporation duly and punctually to perform and observe all of the terms,
conditions, covenants, agreements (including, without limitation,
agreements to make payments or deemed Collections) and indemnities under
this Agreement and the other Transaction Documents strictly in
accordance with the terms hereof and thereof and that if for any reason
whatsoever Solectron California Corporation shall fail to so perform and
observe such terms, conditions, covenants, agreements and indemnities,
Guarantor will duly and punctually perform and observe the same.
(b) The liabilities and obligations of Guarantor under this SECTION
6.1 shall be absolute and unconditional under all circumstances and
shall be performed by Guarantor regardless of (i) whether the Initial
Purchaser, the Administrator, or the Issuer shall have taken any steps
to collect from Solectron California Corporation any of the amounts
payable by Solectron California Corporation to the Initial Purchaser or
shall otherwise have exercised any of their rights or remedies under
this Agreement or the other Transaction Documents against Solectron
California Corporation or against any Obligor under any of the Pool
Receivables, (ii) the validity, legality or enforceability of this
Agreement or any other Transaction Documents, or the disaffirmance of
any thereof in any event of bankruptcy relating to Solectron California
Corporation, (iii) any law, regulation or decree now or hereafter in
effect which might in any manner affect any of the terms or provisions
of this Agreement or any other Transaction Document or any of the rights
of Initial Purchaser, the Administrator or the Issuer as against
Solectron California Corporation or as against any Obligor under any of
such Pool Receivables or which might cause or permit to be invoked any
alteration in time, amount, manner of payment or performance of any
amount payable by Solectron California Corporation to the Initial
Purchaser, the Administrator or the Issuer under the Transaction
Documents, (iv) the merger or consolidation of Solectron California
Corporation into or with any corporation or any sale or transfer by
Solectron California Corporation or all or any part of its property, (v)
the existence or assertion of any Adverse Claim with respect to any Pool
Receivable, or (vi) any other circumstance whatsoever (with or without
notice to or knowledge of Guarantor) which may or might in any manner or
to any extent vary the risk of Guarantor, or might otherwise constitute
a legal or equitable discharge of a surety or guarantor, it being the
purpose and intent of Guarantor that the liabilities and obligations of
Guarantor under this SECTION 6.1 shall be absolute and unconditional
under any and all circumstances, and shall not be discharged except by
payment and performance as in this Agreement provided. The guaranty set
forth in this SECTION 6.1 is a guaranty of payment and performance and
not just of collection.
(c) Without in any way affecting or impairing the liabilities and
obligations of Guarantor under this SECTION 6.1, the Initial Purchaser,
the Administrator and the Issuer may at any time and from time to time
in its discretion, without the consent of, or notice to, Guarantor, and
without releasing or affecting Guarantor's liability hereunder, (i)
extend or change the time, manner, place or terms of any Transaction
Document, (ii) settle or compromise any of the amounts payable by
Solectron California Corporation to the Initial Purchaser, the
Administrator or the Issuer under any Transaction Document or
subordinate the same to the claims of others, (iii) retain or obtain a
lien upon or security interest in any property to secure any of the
obligations under any Transaction Document, (iv) retain or obtain the
primary or secondary obligation of any obligor or obligors, in addition
to Guarantor, with respect to any of the obligations due under any
Transaction Document, or (v) release or fail to perfect any lien upon or
security interest in, or impair, surrender, release or permit any
substitution in exchange for, all or any part of any property securing
any of the obligations under any Transaction Document, IT BEING
UNDERSTOOD that nothing contained in this SECTION 6.1(c) shall give the
Initial Purchaser, the Administrator or the Issuer the right to take any
of the foregoing actions if not permitted by the other provisions of
this Agreement, by law or otherwise.
(d) The provisions of this SECTION 6.1 shall continue to be
effective or be reinstated, as the case may be, if at any time payment
of any of the amounts payable by Solectron California Corporation, to
the Initial Purchaser, the Administrator or the Issuer under any
Transaction Document is rescinded or must otherwise be restored or
returned by any of such Persons, as the case may be, upon any event of
bankruptcy involving Solectron California Corporation, or otherwise, all
as though such payment had not been made. Guarantor hereby waives (i)
notices of the occurrence of any default under any Transaction Document,
(ii) any requirement of diligence or promptness on the part of the
Initial Purchaser, the Administrator or the Issuer in making demand,
commencing suit or exercising any other right or remedy under any
Transaction Document, or otherwise, and (iii) any right to require the
Initial Purchaser, the Administrator or the Issuer to exercise any right
or remedy against Solectron California Corporation or the Pool
Receivables prior to enforcing any of their rights against Guarantor
under this SECTION 6.1. Guarantor agrees that, in the event of an event
of bankruptcy with respect to Solectron California Corporation, and if
such event shall occur at a time when all of the indemnified amounts and
other amounts due under any Transaction Document may not then be due and
payable, Guarantor will pay to Initial Purchaser or the Administrator or
the Issuer, as the case may be, forthwith the full amount which would be
payable hereunder by Guarantor if all such indemnified amounts and other
obligations were then due and payable. Without limiting the foregoing,
Guarantor hereby expressly waives any and all benefits of California
Civil Code Sections 2787 through 2855, inclusive, 2899 and 3433 and
California Code of Civil Procedure Sections 580(a), 580(b), 580(d) and
726.
Nothing in this Section 6.1 shall be construed to impose any liability
or obligation on Guarantor for any losses in respect of the
collectibility of any Receivable that would constitute credit recourse
to Solectron California Corporation for the amount of any Receivable or
Related Asset not paid by the applicable Obligor.
SECTION 6.2. REPRESENTATION AND WARRANTY. Guarantor represents and
warrants that it now has, and will continue to have, independent means
of obtaining information concerning the affairs, financial condition and
business of Solectron California Corporation and the Initial Purchaser.
Neither the Administrator or the Issuer shall have any duty or
responsibility to provide Guarantor with any credit or other information
concerning the affairs, financial condition or business of Solectron
California Corporation and the Initial Purchaser which may come into the
possession of the Administrator or the Issuer.
SECTION 6.3. SUBROGATION. Guarantor will not exercise or assert any
rights which it may acquire by way of subrogation under any Transaction
Document unless and until all of the obligations of Solectron California
Corporation shall have been paid and performed in full. If any payment
shall be made to Guarantor on account of any subrogation rights at any
time when all of the obligations of Solectron California Corporation
shall not have been paid and performed in full, each and every amount so
paid will be held in trust for the benefit of the Initial Purchaser, the
Administrator and the Issuer and any other applicable Person and
forthwith be paid to the Administrator to be credited and applied to the
obligations of Solectron California Corporation to the extent then
unsatisfied, in accordance with the terms of the Transaction Documents
or any document delivered in connection with the Transaction Documents,
as the case may be.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of
the date first above written.
SOLECTRON CORPORATION, as the Guarantor,
an Originator and as Servicer
s/s By: /s/ Susan Wang
Name: Susan Wang
Title: Senior Vice President and Chief
Financial Officer
847 Gibraltar Drive, Building 5
Milpitas, California 95035
Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
SOLECTRON CALIFORNIA CORPORATION,
as an Originator
s/s By: /s/ Susan Wang
Name: Susan Wang
Title: Senior Vice President and Chief
Financial Officer
847 Gibraltar Drive, Building 5
Milpitas, California 95035
Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
SOLECTRON FUNDING CORPORATION, as Initial
Purchaser
s/s By: /s/ Phil Kagel
Name: Phil Kagel
Title: Secretary
847 Gibraltar Drive, Building 5
Milpitas, California 95035
Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
<PAGE>
EXHIBIT I
CONDITIONS OF PURCHASES
1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial purchase
under the Purchase and Sale Agreement is subject to the condition
precedent that the Initial Purchaser shall have received each of the
following (with copies to the Administrator), on or before the date of
such purchase, each in form and substance (including the date thereof)
satisfactory to the Initial Purchaser and the Administrator:
(a) The Receivables Purchase Agreement, duly executed by the parties
thereto, together with evidence reasonably satisfactory to the Initial
Purchaser that all conditions precedent to the initial purchase of an
undivided interest thereunder shall have been met;
(b) Duly executed counterparts of the Lock-Box Agreements;
(c) A duly executed counterpart of a subscription and stockholder
agreement (the "SUBSCRIPTION AGREEMENT"), together with evidence that a
capital contribution of Receivables having an aggregate Outstanding
Balance of not less than $30,000,000 shall have been made to the Initial
Purchaser thereunder by Solectron California Corporation in exchange for
common stock of the Initial Purchaser; and
(d) Such other agreements, instruments, UCC financing statements,
certificates, opinions and other documents as the Initial Purchaser or
the Administrator may reasonably request.
2. CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. Each
Originator, by accepting the Purchase Price paid for each purchase of
Receivables and Related Assets on any day, shall be deemed to have
certified that its representations and warranties contained in
PARAGRAPHS (e), (f), (h), (j), (k), (o), (p) and (q), EXHIBIT II to the
Purchase and Sale Agreement are true and correct on and as of such day,
with the same effect as though made on and as of such day.
3. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment of the
Purchase Price (whether in cash or by an increase in the principal
amount outstanding under the applicable Initial Purchaser Note) for any
purchase of Receivables and Related Assets, title to such Receivables
and Related Assets shall vest in the Initial Purchaser, whether or not
the conditions precedent to such purchase were in fact satisfied;
PROVIDED that the Initial Purchaser shall not be deemed to have waived
any claim it may have under the Purchase and Sale Agreement for the
failure by any Originator in fact to satisfy any such condition
precedent.
4. CONDITIONS PRECEDENT TO ALL PURCHASES. Each purchase under the
Purchase and Sale Agreement is subject to the condition precedent that
the agreement of each Originator to sell Receivables and Related Assets,
and the agreement of the Initial Purchaser to purchase Receivables and
Related Assets, shall not have terminated pursuant to Section 2.3 of the
Purchase and Sale Agreement.
<PAGE>
EXHIBIT II
REPRESENTATIONS AND WARRANTIES
In order to induce the Initial Purchaser to enter into the Purchase and
Sale Agreement and to make purchases thereunder, each Originator hereby
represents and warrants as follows:
(a) ORGANIZATION AND GOOD STANDING. Such Originator is a
corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its organization, and is duly
qualified to do business, and is in good standing, in every other
jurisdiction where the failure to so qualify could reasonably be
expected to result in a material adverse effect on the business, assets,
operations, prospects or condition, financial or otherwise, of such
Originator and any of its subsidiaries taken as a whole, the ability of
such Originator to perform its obligations under the Purchase and Sale
Agreement, or the rights of or benefits available to the Initial
Purchaser hereunder.
(b) DUE QUALIFICATION; NO CONFLICTS. The execution, delivery and
performance by such Originator of the Purchase and Sale Agreement and
the other Transaction Documents to which it is a party, including,
without limitation, such Originator's use of the proceeds of purchases,
(i) are within such Originator's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not contravene or
result in a default under or conflict with (1) such Originator's
certificate of incorporation or by-laws, (2) any material law, rule or
regulation applicable to such Originator, (3) any contractual
restriction binding on or affecting such Originator or its property
(including, without limitation, the Solectron Credit Agreement) or
(4) any order, writ, judgment, award, injunction or decree binding on or
affecting such Originator or its property and (iv) do not result in or
require the creation of any Adverse Claim upon or with respect to any of
its properties. The Purchase and Sale Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by such Originator.
(c) CONSENTS. No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority or any other
Person is required for the due execution, delivery and performance by
such Originator of the Purchase and Sale Agreement or any other
Transaction Document to which it is a party (other than UCC financing
statements filed on or prior to the date of the initial purchase under
the Purchase and Sale Agreement, all of which have been filed in the
appropriate jurisdiction).
(d) BINDING OBLIGATIONS. Each of the Purchase and Sale Agreement
and the other Transaction Documents to which it is a party constitutes
the legal, valid and binding obligation of such Originator enforceable
against such Originator in accordance with its terms.
(e) FINANCIAL STATEMENTS. The balance sheets of Solectron and its
subsidiaries, in each case as at August 31, 1996, and the related
statements of income and retained earnings of Solectron and its
subsidiaries, in each case for the fiscal year then ended, copies of
which have been furnished to the Administrator, fairly present the
financial condition of Solectron and its subsidiaries, as at such date
and the results of the operations of Solectron and its subsidiaries, for
the period ended on such date, all in accordance with generally accepted
accounting principles consistently applied, and since August 31, 1996
there has been no material adverse change in the business, operations,
property or financial or other condition or operations of Solectron any
of its subsidiaries, the ability of either Originator to perform its
obligations under the Purchase and Sale Agreement or the other
Transaction Documents, the collectibility of the Receivables, or which
affects the legality, validity or enforceability of the Purchase and
Sale Agreement or the other Transaction Documents.
(f) NO PROCEEDINGS. There is no pending or threatened action or
proceeding affecting such Originator or any of its subsidiaries before
any Governmental Authority or arbitrator which could reasonably be
expected to materially adversely affect the business, operations,
property, financial or other condition or operations of such Originator
or any of its subsidiaries, the ability of such Originator to perform
its obligations under the Purchase and Sale Agreement or the other
Transaction Documents or the collectibility of the Receivables, or which
affects or purports to affect the legality, validity or enforceability
of the Purchase and Sale Agreement or the other Transaction Documents.
(g) SECURITIES EXCHANGE ACT. No proceeds of any purchase will be
used to acquire any equity security of a class which is registered or
required to be registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
(h) QUALITY OF TITLE; VALID SALE; ETC. Upon its creation and prior
to its sale (or contribution) to the Initial Purchaser under the
Purchase and Sale Agreement, such Originator is the legal and beneficial
owner of each of the Receivables and Related Assets and the items
described in Section 1.2(c) of the Purchase and Sale Agreement free and
clear of any Adverse Claim; and (i) upon each purchase (or contribution)
the Initial Purchaser shall acquire a valid and enforceable first
priority perfected ownership interest in each Receivable then existing
or thereafter arising, in the Related Assets with respect thereto, and
the items described in Section 1.2(c) of the Purchase and Sale
Agreement, free and clear of any Adverse Claim; or (ii) the Purchase and
Sale Agreement creates a security interest in favor of the Initial
Purchaser in the items described in Section 1.9(b) of the Purchase and
Sale Agreement, and the Initial Purchaser has a first priority perfected
security interest in such items, free and clear of any Adverse Claims.
Each Receivable constitutes an "account" as such term is defined in the
UCC. No effective UCC financing statement or other instrument similar
in effect covering any Receivable or Related Asset with respect thereto
or any Lock-Box Account or any other item described in Section 1.9(b) of
the Purchase and Sale Agreement is on file in any recording office,
except those filed in favor of the Initial Purchaser pursuant to the
Purchase and Sale Agreement and in favor of the Administrator pursuant
to the Receivables Purchase Agreement.
(i) ACCURACY OF INFORMATION. Each report, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of such Originator to the Initial
Purchaser or the Administrator in connection with this Agreement is or
will be accurate in all material respects as of its date or (except as
otherwise disclosed to the Administrator at such time) as of the date so
furnished, and no such item contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
(j) PRINCIPAL PLACE OF BUSINESS. The principal place of business
and chief executive office (as such terms are used in the UCC) of such
Originator and the office where such Originator keeps its records
concerning the Receivables are located at the address referred to in
paragraph (b) of Exhibit III to the Purchase and Sale Agreement (or at
such other addresses designated in accordance with such paragraph (b)),
and during the six years prior to the initial purchase under the
Purchase and Sale Agreement such principal place of business, chief
executive office and office were located at such address.
(k) LOCK-BOX BANKS, ACCOUNTS. Such Originator has irrevocably
instructed all of the Obligors to make payments on the Receivables only
to the Lock-Box Accounts or to one or more post office boxes covered by
a Lock-Box Agreement; PROVIDED that, consistent with its efforts to
maximize Collections and its month-end collection practices in effect as
of the date of the Purchase and Sale Agreement, such Originator may
permit Obligors to make payments on Receivables directly to such
Originator so long as the Rated Long Term Debt of Solectron is
Investment Grade or otherwise with the prior written consent of the
Administrator. Except as contemplated by the Lock-Box Agreements, no
Person other than employees of such Originator has signing authority
with respect to, or otherwise has the power to withdraw funds from or to
direct amounts on deposit in, the Lock-Box Accounts and any related
deposit accounts or post office boxes. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Schedule II to the
Receivables Purchase Agreement (except as permitted by paragraph (i) of
EXHIBIT III to the Purchase and Sale Agreement). Each Lock-Box Bank has
complied with all the terms of its Lock-Box Agreement.
(l) NO VIOLATION. Such Originator is not in violation of any order
of any court, arbitrator or Governmental Authority.
(m) PROCEEDS. No proceeds of any purchase will be used for any
purpose that violates any applicable law, rule or regulation, including,
without limitation, Regulations G or U of the Federal Reserve Board.
(n) NO PURCHASE AND SALE TERMINATION EVENTS. No event has occurred
and is continuing, or would result from a purchase, in respect of the
Receivables or Related Assets or from the application of the proceeds
therefrom, which constitutes a Purchase and Sale Termination Event.
(o) MAINTENANCE OF BOOKS AND RECORDS; TAXES. Such Originator has
accounted for each sale (and contribution) of Receivables and Related
Assets in its books and financial statements as sales (or, in the case
of contributions, as capital contributions), consistent with Generally
Accepted Accounting Principles. In addition, each Originator shall
treat, and, to the extent such treatment affects its returns or tax
liabilities, report, the sale of Receivables and Related Assets as a
true sale for tax purposes.
(p) CREDIT AND COLLECTION POLICY. Such Originator has complied in
all material respects with the Credit and Collection Policy with regard
to each Receivable.
(q) SOLVENCY. Such Originator is Solvent; and at the time of (and
immediately after) each purchase pursuant to the Purchase and Sale
Agreement, such Originator shall have been Solvent.
(r) COMPLIANCE WITH TRANSACTION DOCUMENTS. Such Originator has
complied with all of the terms, covenants and agreements contained in
the Purchase and Sale Agreement and the other Transaction Documents and
applicable to it.
(s) CORPORATE NAME. Such Originator's complete corporate name is
set forth in the preamble to the Purchase and Sale Agreement, and such
Originator does not use and has not during the last six years used any
other corporate name, trade name, doing business name or fictitious
name, except for names first used after the date of the Purchase and
Sale Agreement and set forth in a notice delivered to the Administrator
pursuant to clause (b) of Exhibit III to the Purchase and Sale
Agreement.
(t) NO LABOR DISPUTES. There are no strikes, lockouts or other
labor disputes against such Originator or any of its subsidiaries, or,
to the best of such Originator's knowledge, threatened against or
affecting such Originator or any of its subsidiaries, and no significant
unfair labor practice complaint is pending against such Originator or
any of its subsidiaries or, to the best knowledge of such Originator,
threatened against any of them by or before any Governmental Authority.
(u) PENSION PLANS. During the preceding twelve months, no steps
have been taken to terminate any Pension Plan, and no contribution
failure has occurred with respect to any Pension Plan sufficient to give
rise to a lien under section 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to any Pension Plan which
could result in the incurrence by such Originator of any material
liability, fine or penalty. Such Originator has no contingent liability
with respect to any post-retirement benefit under a Welfare Plan, other
than liability for continuation coverage described in Part 6 of title I
of ERISA.
(v) INVESTMENT COMPANY ACT. Such Originator is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
<PAGE>
EXHIBIT III
COVENANTS
Until the later of the Purchase and Sale Termination Date and the Final
Payout Date each Originator covenants and agrees, as to itself, as
follows:
(a) COMPLIANCE WITH LAWS, ETC. Such Originator shall comply in all
material respects with all applicable laws, rules, regulations and
orders, and preserve and maintain its corporate existence, rights,
franchises, qualifications, and privileges except to the extent that the
failure so to comply with such laws, rules and regulations or the
failure so to preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect the
collectibility of the Receivables or the enforceability of any related
Contract or the ability of such Originator to perform its obligations
under any related Contract or under the Purchase and Sale Agreement.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT; ETC. Such Originator:
(i) shall keep its principal place of business and chief
executive office (as such terms are used in the UCC) and the office
where it keeps its records concerning the Receivables at the address of
such Originator set forth under its name on the signature page to the
Purchase and Sale Agreement or, upon at least 30 days' prior written
notice of a proposed change to the Administrator, at any other locations
in jurisdictions where all actions reasonably requested by the
Administrator to protect and perfect the interest of the Initial
Purchaser, the Administrator and the Issuer in the Receivables and
related items (including without limitation the items described in
Section 1.9(b) of the Purchase and Sale Agreement) have been taken and
completed; and
(ii) shall provide the Administrator with at least 30 days'
written notice prior to making any change in such Originator's name or
making any other change in such Originator's identity or corporate
structure (including, without limitation, a merger) which could render
any UCC financing statement filed in connection with the Purchase and
Sale Agreement "seriously misleading" as such term is used in the UCC;
each notice to the Administrator pursuant to this sentence shall set
forth the applicable change and the effective date thereof.
Such Originator also will maintain and implement administrative and
operating procedures (including, without limitation, an ability to
recreate records evidencing Receivables and related Contracts in the
event of the destruction of the originals thereof), and keep and
maintain all documents, books, records, computer tapes and disks and
other information reasonably necessary or advisable for the collection
of all Receivables (including, without limitation, records adequate to
permit the daily identification of each Receivable and all Collections
of and adjustments to each existing Receivable).
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND
COLLECTION POLICY. Such Originator shall at its expense, timely and
fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Contracts related
to the Receivables, and timely and fully comply in all material respects
with the Credit and Collection Policy with regard to each Receivable and
the related Contract.
(d) OWNERSHIP INTEREST, ETC. Such Originator shall, at its expense,
take all action necessary or desirable to establish and maintain a valid
and enforceable first priority perfected ownership interest in the
Receivables, the Related Assets, and the items described in Section
1.2(c) of the Purchase and Sale Agreement to the extent transferred
pursuant to the terms of Section 1.2 of the Purchase and Sale Agreement,
or a first priority perfected security interest in the items described
in Section 1.9(b) of the Purchase and Sale Agreement, in each case free
and clear of any Adverse Claim, in favor of the Initial Purchaser,
including, without limitation, taking such action to perfect, protect or
more fully evidence the interest of the Initial Purchaser under the
Purchase and Sale Agreement as the Administrator may reasonably request.
(e) SALES, LIENS, ETC. Other than a sale to the Initial Purchaser
as contemplated by the Purchase and Sale Agreement, such Originator
shall not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with
respect to, any or all of its right, title or interest in, to or under,
(i) any item described in Section 1.2(c) or Section 1.9(b) of the
Purchase and Sale Agreement or (ii) any post office box to which any
payments in respect of any Receivable are sent, including, without
limitation, any assignment of any right to receive income in respect of
items contemplated by clause (i) or (ii) of this paragraph (e).
(f) EXTENSION OR AMENDMENT OF RECEIVABLES. On and after the Initial
Purchase Date, such Originator shall not extend the maturity or adjust
the Outstanding Balance or otherwise modify the terms of any Receivable,
or amend, modify or waive any term or condition of any related Contract;
PROVIDED that this clause (f) shall not limit the ability of the
Servicer to take such actions pursuant to the Receivables Purchase
Agreement.
(g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Such
Originator shall not make any material change in the character of its
business or in the Credit and Collection Policy that would adversely
affect the collectibility of the Receivables or the enforceability of
any related Contract or the ability of such Originator to perform its
obligations under any related Contract or under the Purchase and Sale
Agreement without the prior written consent of the Administrator.
(h) AUDITS. Such Originator shall, from time to time during regular
business hours with prior written notice to it as reasonably requested
by the Administrator, permit the Administrator, or its agents or
representatives, (i) to examine and make copies of and abstracts from
all books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under the control of such
Originator relating to Receivables and the Related Assets (including,
without limitation, the related Contracts and any books, records and
documents relating to the identification of Obligors and agings, charge-
offs, offsets and delinquencies of Receivables), and (ii) to visit the
offices and properties of such Originator for the purpose of examining
such materials described in clause (i) above, and to discuss matters
relating to Receivables and the Related Assets or such Originator's
performance hereunder or under the Contracts with any of the officers,
employees, agents or contractors of such Originator having knowledge of
such matters.
(i) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT
INSTRUCTIONS TO OBLIGORS. Such Originator shall not add or terminate
any bank as a Lock-Box Bank or any account as a Lock-Box Account from
those listed in Schedule II to the Receivables Purchase Agreement, or
make any change in its instructions to Obligors regarding payments to be
made to such Originator or payments to be made to any Lock-Box Account
(or related post office box), unless the Administrator shall have
consented thereto in writing and the Administrator shall have received
copies of all agreements and documents (including, without limitation,
Lock-Box Agreements) that it may reasonably request in connection
therewith.
(j) DEPOSITS TO LOCK-BOX ACCOUNTS. Such Originator shall
(i) instruct all Obligors to make payments of all Receivables only to
one or more Lock-Box Accounts or to post office boxes which are covered
by Lock-Box Agreements and to which only Lock-Box Banks have access,
PROVIDED that, consistent with its efforts to maximize Collections and
its month-end collection practices in effect as of the date of the
Purchase and Sale Agreement, such Originator may permit Obligors to make
payments on Receivables directly to such Originator so long as the Rated
Long Term Debt of Solectron is Investment Grade or otherwise with the
prior written consent of the Administrator, (ii) instruct the Lock-Box
Banks to cause all items and amounts relating to such Receivables
received in such post office boxes to be removed and deposited into a
Lock-Box Account on a daily basis, and (iii0 deposit, or cause to be
deposited, any Collections of Receivables received by it into Lock-Box
Accounts not later than three Business Days after receipt thereof. Each
Originator will not deposit or otherwise credit, or cause or permit to
be deposited or credited, to any Lock-Box Account cash or cash proceeds
other than Collections of Receivables or interest accruing on amounts
held in such account.
(k) MARKING OF RECORDS. At its expense, on or before the Initial
Purchase Date, such Originator shall mark its master data processing
records relating to Receivables and related Contracts, including with a
legend evidencing that the Receivables and related Contracts (and
interests therein) have been sold (or, in the case of contributions,
transferred as a capital contribution) in accordance with the Purchase
and Sale Agreement and the Receivables Purchase Agreement.
(l) ERISA MATTERS. Such Originator shall notify the Administrator
as soon as is practicable and in any event not later than two Business
Days after (i) the institution of any steps by such Originator or any
other Person to terminate any Pension Plan, (ii) the failure to make a
required contribution to any Pension Plan if such failure is sufficient
to give rise to a lien under section 302(f) of ERISA, (iii) the taking
of any action with respect to a Pension Plan which could result in the
requirement that such Originator furnish a bond or other security to the
PBGC or such Pension Plan or (iv) the occurrence of any other event
concerning any Pension Plan which is reasonably likely to result in a
material adverse effect on the business, operations, property or
financial or other condition of such Originator or any other Solectron
Party.
(m) SEPARATE CORPORATE EXISTENCE OF THE INITIAL PURCHASER. Each of
the Initial Purchaser, such Originator and Solectron hereby acknowledges
that the Initial Purchaser, the Issuer and the Administrator are
entering into the transactions contemplated by this Agreement and by the
Receivables Purchase Agreement in reliance upon the Initial Purchaser's
identity as a legal entity separate from its Affiliates. Therefore,
each of the Initial Purchaser, such Originator and Solectron shall take
all steps to continue the Initial Purchaser's identity as such a
separate legal entity and to make it apparent to third Persons that the
Initial Purchaser is an entity with assets and liabilities distinct from
those of its Affiliates and those of any other Person, and not a
division of any of its Affiliates or any other Person. Without limiting
the generality of the foregoing, each of the Initial Purchaser, each
Originator and Solectron will, and will cause its Affiliates to, take
such actions as shall be required in order that:
(i) The Initial Purchaser will be a limited purpose corporation
whose primary activities are restricted in its articles of incorporation
to purchasing Pool Receivables from such Originator (or other Persons
approved in writing by the Administrator), entering into agreements for
the servicing of such Pool Receivables, selling undivided interests in
the Pool Receivables to the Issuer and conducting such other activities
as it deems necessary or appropriate to carry out its primary
activities;
(ii) At all times, at least one member of the Initial Purchaser's
Board of Directors shall be an individual who is and has never been a
direct, indirect or beneficial stockholder, officer, director (except in
his capacity as a member of the Initial Purchaser's Board of Directors),
employee, Affiliate, associate, customer or supplier of any of the
Initial Purchaser or of any of the Initial Purchaser's Affiliates;
(iii) No director or officer of the Initial Purchaser shall at any
time serve as a trustee in bankruptcy for any of its Affiliates;
(iv) Any employee, consultant or agent of the Initial Purchaser
will be compensated from the Initial Purchaser's own bank accounts for
services provided to the Initial Purchaser except as provided in the
Agreement in respect of the Servicing Fee. The Initial Purchaser will
engage no agents other than a Servicer for the Pool Receivables, which
Servicer (if an Affiliate) will be fully compensated for its services to
the Initial Purchaser by payment of the Servicing Fee;
(v) The Initial Purchaser may incur indirect or overhead
expenses for items shared between the Initial Purchaser and any of its
Affiliates which are not reflected in the Servicing Fee, such as legal,
auditing and other professional services, but such expenses will be
allocated to the extent practical on the basis of cost, it being
understood that Solectron shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including legal and other fees;
(vi) The Initial Purchaser's operating expenses will not be paid
by any of its Affiliates;
(vii) The Initial Purchaser will have its own separate telephone
number, stationery and bank checks signed by it and in its own name and,
if it uses premises leased, owned or occupied by any of its Affiliates,
its portion of such premises will be defined and separately identified
and it will pay such other Affiliates reasonable compensation for the
use of such premises;
(viii) The books and records of the Initial Purchaser will be
maintained separately from those of its Affiliates;
(ix) The assets of the Initial Purchaser will be maintained in a
manner that facilitates their identification and segregation from those
of its Affiliates; and the Initial Purchaser will strictly observe
corporate formalities in its dealings with each of its Affiliates;
(x) The Initial Purchaser shall not maintain joint bank accounts
with any of its Affiliates or other depository accounts to which any of
its Affiliates (other than Solectron (or any of its Affiliates) in its
capacity as the Servicer under this Agreement or under the Receivables
Purchase Agreement) has independent access;
(xi) The Initial Purchaser shall not, directly or indirectly, be
named and shall not enter into any agreement to be named as a direct or
contingent beneficiary or loss payee on any insurance policy covering
the property of any other Solectron Party or any Affiliate of any other
Solectron Party unless it pays a proportional share of the premium
relating to any such insurance policy;
(xii) The Initial Purchaser will maintain arm's-length relationships
with each of its Affiliates. Any of its Affiliates that renders or
otherwise furnishes services or merchandise to the Initial Purchaser
will be compensated by the Initial Purchaser at market rates for such
services or merchandise;
(xiii) Neither the Initial Purchaser, on the one hand, nor any of
its Affiliates, on the other hand, will be or will hold itself out to be
responsible for the debts of the other or the decisions or actions in
respect of the daily business and affairs of the other; and
(xiv) Every representation and warranty of the Initial Purchaser,
such Originator and Solectron contained in the officer's certificates
delivered in connection with the opinion of Murphy, Wier & Butler
pursuant to Section 1(j) of Exhibit II of the Receivables Purchase
Agreement, is true and correct in all material respects as of the date
hereof; and each of the Initial Purchaser, such Originator and Solectron
shall comply with all of the assumptions set forth in such opinion and
with all of its respective covenants and other obligations set forth in
such officer's certificates.
<PAGE>
EXHIBIT IV
PURCHASE AND SALE TERMINATION EVENTS
Each of the following events or occurrences described in this EXHIBIT IV
shall constitute a "PURCHASE AND SALE TERMINATION EVENT":
(a) The Servicer shall (i) fail to deliver the Seller Report
pursuant to the Purchase and Sale Agreement and such failure shall
remain unremedied for five days, (ii) fail to make when due any payment
or deposit to be made by it under the Purchase and Sale Agreement, or
(iii) fail to perform or observe any other term, covenant or agreement
under the Purchase and Sale Agreement and such failure shall remain
unremedied for ten (10) days; or
(b) Any Originator or the Guarantor shall fail to make any payment
required under the Purchase and Sale Agreement and such failure shall
remain unremedied for two Business Days; or
(c) Any representation or warranty made or deemed to be made by any
Originator (or any of its officers) under or in connection with the
Purchase and Sale Agreement or any other information or report delivered
by such Originator or the Servicer pursuant to the Purchase and Sale
Agreement shall prove to have been incorrect or untrue in any material
respect when made or deemed made or delivered; or
(d) Any Originator or the Guarantor shall fail to perform or observe
(i) any term, covenant or agreement contained in PARAGRAPHS (d), (f),
(g), (i), (j) and (l) of EXHIBIT III to the Purchase and Sale Agreement
and, in the case of any such failure to PARAGRAPHS (i) and (j) that is
solely the result of the termination of the applicable Lock-Box
Agreement by Bank of America National Trust and Savings Association,
such failure shall remain unremedied for fourteen (14) days or (ii) any
other term, covenant or agreement contained in the Purchase and Sale
Agreement on its part to be performed or observed and the failure to
perform such other term, covenant or agreement referred to in this
clause (ii) shall remain unremedied for thirty (30) days; or
(e) The Purchase and Sale Agreement shall for any reason (other than
pursuant to the terms thereof) (i) cease to create in favor of the
Initial Purchaser a valid and enforceable first priority perfected
ownership interest in each Receivable, the Related Assets, and the items
described in Section 1.2(c) of the Purchase and Sale Agreement, or (ii)
cease to create, with respect to the items described in Section 1.9(b)
of the Purchase and Sale Agreement, a valid and enforceable first
priority perfected security interest in favor of the Initial Purchaser,
in each case free and clear of any Adverse Claim; or
(f) Any Originator or any of its subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by
or against such Originator or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days, or any of the
actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or such Originator or any
of its subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this clause (f); or
(g) Any Change of Control shall occur; or
(h) A Termination Event shall have occurred.
<PAGE>
ANNEX A
FORM OF INITIAL PURCHASER NOTE
NON-NEGOTIABLE PROMISSORY NOTE
Chicago, Illinois
September 17, 1997
FOR VALUE RECEIVED, the undersigned, SOLECTRON FUNDING CORPORATION, a
Delaware corporation (the "INITIAL PURCHASER"), promises to pay to [NAME
OF ORIGINATOR], a [California] [Delaware] corporation (the
"ORIGINATOR"), on the terms and subject to the conditions set forth
herein and in the Purchase and Sale Agreement referred to below, the
aggregate unpaid Purchase Price of all Receivables and Related Assets
purchased and to be purchased by the Initial Purchaser pursuant to the
Purchase and Sale Agreement (subject to adjustment pursuant to Section
1.8 of such Purchase and Sale Agreement).
1. PURCHASE AND SALE AGREEMENT. This Non-Negotiable Promissory Note
(this "NOTE") is the "Initial Purchaser Note" described in, and is
subject to the terms and conditions set forth in, that certain Purchase
and Sale Agreement, dated as of September 17, 1997 (as the same may be
amended, amended and restated, or otherwise modified in accordance with
its terms, the "PURCHASE AND SALE AGREEMENT"), among the Originator, the
other "Originator" referred to therein, Solectron Corporation, as
Servicer and Guarantor, and the Initial Purchaser. Reference is hereby
made to the Purchase and Sale Agreement for a statement of certain other
rights and obligations of the Initial Purchaser and the Originator. In
the case of any conflict or inconsistency between the terms of this Note
and the terms of the Purchase and Sale Agreement, the terms of the
Purchase and Sale Agreement shall control.
2. DEFINITIONS. Capitalized terms used (but not defined) herein have
the meanings ascribed thereto in the Purchase and Sale Agreement. In
addition, as used herein, the following terms have the following
meanings:
"FINAL MATURITY DATE" means the date that falls ninety one (91) days
after the later of (x) the Purchase and Sale Termination Date and (y)
the date all amounts due to the Issuer, the Administrator, any
Indemnified Party or any Affected Person under the Receivables Purchase
Agreement have been paid in full.
"JUNIOR LIABILITIES" means all obligations of the Initial Purchaser to
the Originator under this Note.
"SENIOR AGENT" means the Administrator.
"SENIOR INTERESTS" means (a) the undivided percentage ownership
interests acquired by the Issuer pursuant to the Receivables Purchase
Agreement and (b) all obligations of the Initial Purchaser to the Senior
Interest Holders, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due on or before the Final Maturity Date.
"SENIOR INTEREST HOLDERS" means, collectively, the Issuer, the
Administrator, and the other Affected Persons and Indemnified Parties.
"SUBORDINATION PROVISIONS" means, collectively, CLAUSES (a) through (k)
of Section 7 hereof.
3. INTEREST. Subject to the Subordination Provisions, the Initial
Purchaser promises to pay interest on the aggregate unpaid principal
amount of this Note outstanding on each day (a) prior to the final
payment in full and in cash of the Senior Interests, at a variable rate
PER ANNUM equal to the Discount Rate Percentage, determined as of the
then most recent Payment Date, and (b) after such final payment, at a
variable rate PER ANNUM equal to the Base Rate, as determined by the
Servicer.
4. INTEREST PAYMENT DATES. Subject to the Subordination Provisions,
the Initial Purchaser shall pay accrued interest on this Note on June 1
and November 1 of each calendar year and on the Final Maturity Date (or,
if any such day is not a Business Day, the next succeeding Business
Day). The Initial Purchaser also shall pay accrued interest on the
principal amount of each prepayment hereof on the date of each such
prepayment.
5. BASIS OF COMPUTATION. Interest accrued hereunder shall be computed
for the actual number of days elapsed on the basis of a 360-day year.
6. PRINCIPAL PAYMENT DATES. Subject to the Subordination Provisions,
any unpaid principal of this Note shall be paid on the Final Maturity
Date (or, if such date is not a Business Day, the next succeeding
Business Day). Subject to the Subordination Provisions, the principal
amount of and accrued interest on this Note may be prepaid on any
Business Day without premium or penalty.
7. SUBORDINATION PROVISIONS. The Initial Purchaser covenants and
agrees, and the [name of Originator], by its acceptance of this Note,
likewise covenants and agrees, that the payment of all Junior
Liabilities is hereby expressly subordinated in right of payment to the
payment and performance of the Senior Interests to the extent and in the
manner set forth in the following clauses of this SECTION 7:
(a) No payment or other distribution of the Initial Purchaser's
assets of any kind or character, whether in cash, securities, or other
rights or property, shall be made on account of this Note except to the
extent such payment or other distribution is permitted under (i) clause
(m) of Exhibit IV to the Receivables Purchase Agreement and (ii) SECTION
4 or SECTION 6 of this Note;
(b) (i) In the event of any Insolvency Proceeding with respect to
the Initial Purchaser, and (ii) on and after the occurrence of the
Purchase and Sale Termination Date, the Senior Interests shall first be
paid and performed in full and in cash before each Originator shall be
entitled to receive and to retain any payment or distribution in respect
of the Junior Liabilities. In order to implement the foregoing: (x) all
payments and distributions of any kind or character in respect of the
Junior Liabilities to which the Originator would be entitled except for
this SUBSECTION 7(b) shall be made directly to the Senior Agent (for the
benefit of the Senior Interest Holders); and (y) the Originator hereby
irrevocably agrees that the Issuer (or the Senior Agent acting on its
behalf), in the name of the Originator or otherwise, may demand, sue
for, collect, receive and receipt for any and all such payments or
distributions, and file, prove and vote or consent in any such
Insolvency Proceeding with respect to any and all claims of the
Originator relating to the Junior Liabilities, in each case until the
Senior Interests shall have been paid and performed in full and in cash.
(c) In the event that the Originator receives any payment or other
distribution of any kind or character from the Initial Purchaser or from
any other source whatsoever in respect of the Junior Liabilities, other
than as expressly permitted by the terms of this Note, such payment or
other distribution shall be received in trust for the Senior Interest
Holders and shall be turned over by the Originator to the Senior Agent
(for the benefit of the Senior Interest Holders) forthwith. All
payments and distributions received by the Senior Agent in respect of
this Note, to the extent received in or converted into cash, may be
applied by the Senior Agent (for the benefit of the Senior Interest
Holders) first to the payment of any and all reasonable expenses
(including, without limitation, reasonable attorneys' fees and other
legal expenses) paid or incurred by the Senior Agent or the Senior
Interest Holders in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Junior Liabilities, and any
balance thereof shall, solely as between the Originator and the Senior
Interest Holders, be applied by the Senior Agent toward the payment of
the Senior Interests in a manner determined by the Senior Agent to be in
accordance with the Receivables Purchase Agreement; but as between the
Initial Purchaser and its creditors, no such payments or distributions
of any kind or character shall be deemed to be payments or distributions
in respect of the Senior Interests.
(d) Upon the final payment in full and in cash of all Senior
Interests, the Originator shall be subrogated to the rights of the
Senior Interest Holders to receive payments or distributions from the
Initial Purchaser that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Originator, on the one
hand, and the Senior Interest Holders, on the other hand. Nothing
contained in the Subordination Provisions or elsewhere in this Note is
intended to or shall impair, as between the Initial Purchaser, its
creditors (other than the Senior Interest Holders) and the Originator,
the Initial Purchaser's obligation, which is unconditional and absolute,
to pay the Junior Liabilities as and when the same shall become due and
payable in accordance with the terms hereof and of the Purchase and Sale
Agreement or to affect the relative rights of such Originator and
creditors of the Initial Purchaser (other than the Senior Interest
Holders).
(f) The Originator shall not, until the Senior Interests have been
finally paid and performed in full and in cash, (i) cancel, waive,
forgive, transfer or assign, or commence legal proceedings to enforce or
collect, or subordinate to, any obligation of the Initial Purchaser,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to
become due, (other than as permitted by this Note) or (ii) convert the
Junior Liabilities into an equity interest in the Initial Purchaser,
unless, in the case of each of CLAUSES (i) and (ii) above, the
Originator shall have received the prior written consent of the
Administrator in each case.
(g) The Originator shall not, without the advance written consent of
the Administrator, commence, or join with any other Person in
commencing, any Insolvency Proceedings with respect to the Initial
Purchaser until at least one year and one day shall have passed since
the Senior Interests shall have been finally paid and performed in full
and in cash.
(h) If, at any time, any payment (in whole or in part) made with
respect to any Senior Interest is rescinded or must be restored or
returned by a Senior Interest Holder (whether in connection with any
Insolvency Proceedings or otherwise), these Subordination Provisions
shall continue to be effective or shall be reinstated, as the case may
be, as though such payment had not been made.
(i) Each of the Senior Interest Holders may, from time to time, at
its sole discretion, without notice to the Originator, and without
waiving any of its rights under these Subordination Provisions, take any
or all of the following actions: (i) retain or obtain an interest in
any property to secure any of the Senior Interests; (ii) retain or
obtain the primary or secondary obligations of any other obligor or
obligors with respect to any of the Senior Interests; (iii) extend or
renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Interests, or release or
compromise any obligation of any nature with respect to any of the
Senior Interests; (iv) amend, supplement, or otherwise modify any
Transaction Document; and (v) release its security interest in, or
surrender, release or permit any substitution or exchange for all or any
part of any rights or property securing any of the Senior Interests, or
extend or renew for one or more periods (whether or not longer than the
original period), or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such rights
or property.
(j) The Originator hereby waives: (i) notice of acceptance of these
Subordination Provisions by any of the Senior Interest Holders;
(ii) notice of the existence, creation, non-payment or non-performance
of all or any of the Senior Interests; and (iii) all diligence in
enforcement, collection or protection of, or realization upon the Senior
Interests, or any thereof, or any security therefor.
(k) These Subordination Provisions constitute a continuing offer
from the Initial Purchaser to all Persons who become the holders of, or
who continue to hold, Senior Interests; and these Subordination
Provisions are made for the benefit of the Senior Interest Holders, and
the Senior Agent may proceed to enforce such provisions on behalf of
each of such Persons.
8. AMENDMENTS, ETC. No failure or delay on the part of the Originator,
the Senior Agent or the Senior Interest Holders in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other
or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to,
any provision of this Note shall in any event be effective unless
(a) the same shall be in writing and signed and delivered by the Initial
Purchaser and the Originator and the Senior Agent, and (b) all consents
required for such actions under the Transaction Documents shall have
been received by the appropriate Persons.
9. LIMITATION ON INTEREST. Notwithstanding anything in this Note to
the contrary, the Initial Purchaser shall never be required to pay
unearned interest on any amount outstanding hereunder, and shall never
be required to pay interest on the principal amount outstanding
hereunder, at a rate in excess of the maximum interest rate that may be
contracted for, charged or received without violating applicable federal
or state law.
10. NO NEGOTIATION. This Note is not negotiable.
11. GOVERNING LAW. THIS NOTE SHALL GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
12. CAPTIONS. Paragraph captions used in this Note are provided solely
for convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Note.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer thereunto duly authorized on the date first above
written.
SOLECTRON FUNDING CORPORATION,
a Delaware corporation
By:
Title:
EXHIBIT 10.15b
RECEIVABLES PURCHASE AGREEMENT
among
SOLECTRON FUNDING CORPORATION,
as Seller,
SOLECTRON CORPORATION,
individually and as Servicer,
RECEIVABLES CAPITAL CORPORATION,
as Issuer
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrator
Dated as of September 17, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1 Purchase Facility -1-
Section 1.2 Making Purchases -2-
Section 1.3 Purchased Interest Computation -3-
Section 1.4 Settlement Procedures -3-
Section 1.5 Fees -6-
Section 1.6 Payments and Computations, Etc. -6-
Section 1.7 Dividing or Combining Portions of the Capital of
the Purchased Interest -7-
Section 1.8 Increased Costs -7-
Section 1.9 Additional Discount on Portions of Purchased
Interest Bearing a Eurodollar Rate -7-
Section 1.10 Requirements of Law -8-
Section 1.11 Inability to Determine Eurodollar Rate -9-
ARTICLE II REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1 Representations and Warranties; Covenants -9-
Section 2.2 Termination Events -9-
ARTICLE III INDEMNIFICATION
Section 3.1 Indemnities by the Seller -10-
Section 3.2 Indemnities by the Servicer -11-
Section 3.3 Contribution -12-
ARTICLE IV ADMINISTRATION AND COLLECTIONS
Section 4.1 Appointment of Servicer -12-
Section 4.2 Duties of Servicer -13-
Section 4.3 Lock-Box Arrangements -14-
Section 4.4 Enforcement Rights -15-
Section 4.5 Responsibilities of the Seller and Servicer -15-
Section 4.6 Servicing Fee -16-
ARTICLE V MISCELLANEOUS
Section 5.1 Amendments, Etc. -16-
Section 5.2 Notices, Etc. -16-
Section 5.3 Assignability -17-
Section 5.4 Costs, Expenses and Taxes -17-
Section 5.5 No Proceedings; Limitation on Payments -18-
Section 5.6 Confidentiality -18-
Section 5.7 GOVERNING LAW AND JURISDICTION -18-
Section 5.8 Execution in Counterparts -19-
Section 5.9 Survival of Termination -19-
Section 5.10 WAIVER OF JURY TRIAL -19-
Section 5.11 Entire Agreement -20-
Section 5.12 Headings -20-
Section 5.13 Issuer's Liabilities -20-
Section 5.14 Purchase and Sale Agreement -20-
EXHIBIT I DEFINITIONS
EXHIBIT II CONDITIONS OF PURCHASES
EXHIBIT III REPRESENTATIONS AND WARRANTIES
EXHIBIT IV COVENANTS
EXHIBIT V TERMINATION EVENTS
SCHEDULE I CREDIT AND COLLECTION POLICY
SCHEDULE II LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
SCHEDULE III TRADE NAMES
ANNEX A FORM OF LOCK-BOX AGREEMENT
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (this "AGREEMENT") is entered into
as of September 17, 1997 among SOLECTRON FUNDING CORPORATION, a Delaware
corporation, as seller (the "SELLER"), SOLECTRON CORPORATION, a Delaware
corporation, in its individual capacity ("SOLECTRON") and as initial
Servicer (in such capacity, together with its successors and permitted
assigns in such capacity, the "SERVICER"), RECEIVABLES CAPITAL
CORPORATION, a Delaware corporation (together with its successors and
permitted assigns, the "ISSUER"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, as administrator
(in such capacity, together with its successors and assigns in such
capacity, the "ADMINISTRATOR") for the Issuer pursuant to an agreement
between the Issuer and the Administrator.
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in EXHIBIT I to this Agreement.
References in the Exhibits hereto to "the Agreement" or "this
Agreement" refer to this Agreement, as amended, amended and restated,
modified or supplemented from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to
acquire such undivided variable percentage interest, as such percentage
interest shall be adjusted from time to time based upon, in part,
reinvestment payments which are made by the Issuer and additional
incremental payments made to the Seller.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. PURCHASE FACILITY (a) On the terms and conditions
hereinafter set forth, the Issuer hereby agrees to purchase and make
reinvestments in the Purchased Interest from the Seller from time to
time during the period from the date hereof to the Facility Termination
Date; PROVIDED, that nothing herein shall be deemed or construed as a
commitment by the Issuer to fund the purchase or reinvestment with
regard to the Purchased Interest through the issuance of Notes, and it
is hereby expressly acknowledged and agreed that such funding is, and
shall continue to be, wholly discretionary on the part of the Issuer.
Under no circumstances shall the Issuer make any such purchase or
reinvestment if after giving effect to such purchase or reinvestment the
aggregate outstanding Capital of the Purchased Interest would exceed the
Purchase Limit.
(b) The Seller may, upon at least 5 days' notice to the
Administrator, terminate the purchase facility provided in this SECTION
1 in whole or, from time to time, irrevocably reduce in part the unused
portion of the Purchase Limit; PROVIDED that each partial reduction
shall be in the amount of at least $5,000,000 or an integral multiple of
$1,000,000 in excess thereof.
Section 1.2. MAKING PURCHASES. (a) Each purchase (but not
reinvestments) of undivided ownership interests with regard to the
Purchased Interest hereunder shall be made upon the Seller's irrevocable
written notice delivered to the Administrator in accordance with
SECTION 5.2 (which notice must be received by the Administrator prior to
11:00 a.m., San Francisco time) (i) three Business Days prior to the
requested purchase date, in the case of a purchase to be funded at the
Alternate Rate and based on the Eurodollar Rate, (ii) one Business Day
prior to the requested purchase date, in the case of a purchase to be
funded at the Alternate Rate and based on the Base Rate and (iii) one
Business Day prior to the requested purchase date, in the case of a
purchase to be funded at the CP Rate, which notice shall specify (A) the
amount requested to be paid to the Seller (such amount, which shall not
be less than $5,000,000, being the "CAPITAL" relating to the undivided
ownership interest then being purchased), (B) the date of such purchase
(which shall be a Business Day) and (C) the desired funding basis for
such purchase (which shall be either the Alternate Rate or the CP Rate)
and (unless such purchase shall be funded at the CP Rate) the duration
of the initial Fixed Period(s) for such purchase. If such terms relate
to the CP Rate, the Administrator shall promptly thereafter notify the
Seller whether such terms are acceptable to the Issuer. If the
Administrator notifies the Seller that such terms relating to the CP
Rate are unacceptable to the Issuer due to market conditions, then the
Seller shall be deemed to have requested that the purchase be funded at
the Alternate Rate and based on the Base Rate.
(b) On the date of each purchase (but not reinvestment) of undivided
ownership interests with regard to the Purchased Interest hereunder, the
Issuer shall, upon satisfaction of the applicable conditions set forth
in EXHIBIT II hereto, make available to the Seller in same day funds, at
Bank of America National Trust and Savings Association, account #
1233056289, an amount equal to the Capital relating to the undivided
ownership interest then being purchased.
(c) Effective on the date of each purchase pursuant to this
SECTION 1.2 and each reinvestment pursuant to SECTION 1.4, the Seller
hereby sells and assigns to the Issuer an undivided percentage ownership
interest in all its right, title and interest in (i) each Pool
Receivable then existing, (ii) all Related Security with respect to such
Pool Receivables, and (iii) Collections with respect to, and other
proceeds of, such Pool Receivables and Related Security; provided that
the foregoing shall not include any Excluded Property.
(d) To secure all of the Seller's obligations (monetary or
otherwise) under this Agreement and the other Transaction Documents to
which it is a party, whether now or hereafter existing or arising, due
or to become due, direct or indirect, absolute or contingent, the Seller
hereby grants to the Administrator, for its benefit and the benefit of
the Issuer, a security interest in all of the Seller's right, title and
interest (including without limitation any undivided interest of the
Seller) in, to and under all of the following, whether now or hereafter
owned, existing or arising (A) all Pool Receivables, (B) all Related
Security with respect to each such Pool Receivable, (C) all Collections
with respect to each such Receivable, (D) the Lock-Box Accounts and any
related deposit accounts and post office boxes and all amounts on
deposit therein and all certificates and instruments, if any, from time
to time evidencing such Lock-Box Accounts, related deposit accounts and
post office boxes and amounts held or on deposit therein, and (E) all
proceeds of, and all amounts received or receivable under any or all of,
the foregoing; provided that the foregoing shall not include any
Excluded Property. The Administrator and the Issuer shall have, with
respect to the property described in this SECTION 1.2(d), and in
addition to all the other rights and remedies available to the
Administrator and the Issuer, all the rights and remedies of a secured
party under any applicable UCC.
Section 1.3. PURCHASED INTEREST COMPUTATION. The Purchased Interest
shall be initially computed on the date of the initial purchase
hereunder. Thereafter until the Termination Date, the Purchased
Interest shall be automatically recomputed (or deemed to be recomputed)
on each Business Day other than a Termination Day. The Purchased
Interest, as computed (or deemed recomputed) as of the day immediately
preceding the Termination Date, shall thereafter remain constant.
Notwithstanding the preceding sentence, the Purchased Interest shall
become zero when the Capital thereof and Discount thereon shall have
been paid in full, all the amounts owed by the Seller hereunder to the
Issuer, the Administrator, and any other Indemnified Party or Affected
Person, are paid in full and the Servicer shall have received the
accrued Servicing Fee thereon.
Section 1.4. SETTLEMENT PROCEDURES. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with the
terms of this Agreement. The Seller shall provide to the Servicer on a
timely basis all information needed for such administration, including
notice of the occurrence of any Termination Day and current computations
of the Purchased Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or Servicer
or an Originator (including pursuant to Section 1.7 of the Purchase and
Sale Agreement):
(i) set aside and hold in trust (and, at the request of the
Administrator, segregate) for the Issuer, out of the percentage of such
Collections represented by the Purchased Interest, FIRST an amount equal
to the Discount accrued through such day for each Portion of Capital and
not previously set aside and SECOND, to the extent funds are available
therefor, an amount equal to the Servicing Fee accrued through such day
for the Purchased Interest and not previously set aside; and
(ii) subject to SECTION 1.4(f), if such day is not a Termination
Day, remit to the Seller, on behalf of the Issuer, the remainder of the
percentage of such Collections, represented by the Purchased Interest,
to the extent representing a return of Capital; such Collections shall
be automatically deemed reinvested in Pool Receivables, and in the
Related Security and Collections and other proceeds with respect
thereto, and the Purchased Interest shall be automatically recomputed
pursuant to SECTION 1.3;
(iii) if such day is a Termination Day, set aside, segregate and
hold in trust for the Issuer the entire remainder of the percentage of
the Collections represented by the Purchased Interest; PROVIDED that if
amounts are set aside and held in trust on any Termination Day and
thereafter, the conditions set forth in SECTION 2 of EXHIBIT II are
satisfied or are waived by the Administrator, such previously set aside
amounts shall, to the extent representing a return of Capital, be
reinvested in accordance with the preceding PARAGRAPH (ii) on the day of
such subsequent satisfaction or waiver of conditions; and
(iv) during such times as amounts are required to be reinvested in
accordance with the foregoing PARAGRAPH (ii) or the proviso to PARAGRAPH
(iii), release to the Seller (subject to SECTION 1.4(f)) for its own
account any Collections in excess of (x) such amounts, (y) the amounts
that are required to be set aside pursuant to PARAGRAPH (i) above and
(z) any other obligations of the Seller hereunder which are then due and
owing.
(c) The Servicer shall deposit into the Administration Account, on
the last day of each Settlement Period relating to a Portion of Capital
(or at such other times as the Administrator shall require upon the
occurrence and during the continuation of (i)any Unmatured Termination
Event or Termination Event or (ii) at any time when the Rated Long Term
Debt of Solectron is not rated at least Investment Grade, any event that
materially and adversely affects the Servicer's ability to perform its
obligations hereunder or the collectibility of the Receivables),
Collections held for the Issuer pursuant to SECTION 1.4(b)(i) or SECTION
1.4(f) with respect to such Portion of Capital and the lesser of (x) the
amount of Collections then held for the Issuer pursuant to SECTION
1.4(b)(iii) and (y) such Portion of Capital.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to SECTION 1.4(c) with respect to any Portion of Capital, the
Administrator shall cause such funds to be distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day, FIRST to the Issuer (x) in payment in full of all
accrued Discount with respect to such Portion of Capital and (y) as a
reduction of such Portion of Capital pursuant to SECTION 1.4(f), if
applicable, and SECOND, from amounts set aside in respect of the
Servicing Fee pursuant to SECTION 1.4(b)(i), to the Servicer (payable in
arrears on the last day of each calendar month) in payment in full of
accrued Servicing Fees so set aside with respect to such Portion of
Capital; and
(ii) if such distribution occurs on a Termination Day, FIRST to
the Issuer in payment in full of all accrued Discount with respect to
such Portion of Capital, SECOND to the Issuer in payment in full of such
Portion of Capital, THIRD, if the Servicer is not Solectron or an
Affiliate thereof, to the Servicer in payment in full of all accrued
Servicing Fees with respect to such Portion of Capital, FOURTH, if the
Capital and accrued Discount with respect to each Portion of Capital has
been reduced to zero, and all accrued Servicing Fees payable to the
Servicer (if other than Solectron or an Affiliate thereof) have been
paid in full, to the Issuer, the Administrator and any other Indemnified
Party or Affected Person in payment in full of any other amounts owed
thereto by the Seller hereunder and then to the Servicer (if Solectron
or an Affiliate thereof) in payment in full of all accrued Servicing
Fees.
After the Capital and Discount and Servicing Fees with respect to the
Purchased Interest, and any other amounts payable by the Seller to the
Issuer, the Administrator or any other Indemnified Party or Affected
Person hereunder, have been paid in full, all additional Collections
with respect to the Purchased Interest shall be paid to the Seller for
its own account.
(e) For the purposes of this SECTION 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable
is reduced or adjusted as a result of any defective, rejected, returned,
repossessed goods or services, or any discount or other adjustment made
by the Seller, or any setoff or dispute between the Seller and an
Obligor, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in the amount of such reduction or
adjustment;
(ii) if on any day any of the representations or warranties in
PARAGRAPHS (h) or (o) of EXHIBIT III is not true with respect to any
Pool Receivable, the Seller shall be deemed to have received on such day
a Collection of such Pool Receivable in full;
(iii) except as provided in PARAGRAPH (i) or (ii) of this
SECTION 1.4(e), or as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivable shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(iv) if and to the extent the Administrator or the Issuer shall be
required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding)
any amount received by it hereunder, such amount shall be deemed not to
have been so received but rather to have been retained by the Seller
and, accordingly, the Administrator or the Issuer, as the case may be,
shall have a claim against the Seller for such amount, payable
immediately.
(f) except for reductions in connection with the division or
combination of Portions of Capital pursuant to SECTION 1.7 hereof, if at
any time the Seller shall wish to cause the reduction of a Portion of
Capital (but not to commence the liquidation, or reduction to zero, of
the entire Capital of the Purchased Interest), the Seller may do so as
follows:
(i) the Seller shall give the Administrator at least five
Business Days' prior written notice thereof (including the amount of
such proposed reduction and the proposed date on which such reduction
will commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, the Servicer shall cause Collections with respect
to such Portion of Capital not to be reinvested pursuant to SECTION
1.4(b)(ii) until the amount thereof not so reinvested shall equal the
desired amount of reduction, and
(iii) the Servicer shall hold such Collections in trust for the
Issuer, for payment to the Administrator on the last day of the current
Settlement Period relating to such Portion of Capital, and the
applicable Portion of Capital shall be deemed reduced in the amount to
be paid to the Administrator only when in fact finally so paid;
provided that,
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $100,000, and the entire
Capital of the Purchased Interest after giving effect to such reduction
shall be not less than $10,000,000 and shall be in an integral multiple
of $1,000,000,
B. the Seller shall choose a reduction amount, and the date
of commencement thereof, so that to the extent practicable such
reduction shall commence and conclude in the same Fixed Period, and
C. if two or more Portions of Capital shall be outstanding at
the time of any proposed reduction, such proposed reduction shall be
applied, unless the Seller shall otherwise specify in the notice given
pursuant to SECTION 1.4(f)(i), to the Portion of Capital with the
shortest remaining Fixed Period.
Section 1.5. Fees. The Seller shall pay to the Administrator certain
fees in the amounts and on the dates set forth in a letter dated
September 17, 1997 between the Seller and the Administrator delivered
pursuant to SECTION 1 of EXHIBIT II, as such letter agreement may be
amended, amended and restated or otherwise modified from time to time.
Section 1.6. PAYMENTS AND COMPUTATIONS, ETC. (a) All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid
or deposited no later than 11:00 a.m. (San Francisco time) on the day
when due in same day funds in United States dollars to
the Administration Account. All amounts received after 11:00 a.m. (San
Francisco time) will be deemed to have been received on the immediately
succeeding Business Day.
(b) The Seller shall, to the extent permitted by law, pay interest
on any amount not paid or deposited by the Seller (whether as Servicer
or otherwise) when due hereunder, at an interest rate equal to 2.0% PER
ANNUM above the Base Rate, payable on demand.
(c) All computations of interest under SUBSECTION (b) above and all
computations of Discount, fees, and other amounts hereunder shall be
made on the basis of a year of 360 days for the actual number of days
elapsed. Whenever any payment or deposit to be made hereunder shall be
due on a day other than a Business Day, such payment or deposit shall be
made on the next succeeding Business Day and such extension of time
shall be included in the computation of such payment or deposit.
Section 1.7. DIVIDING OR COMBINING PORTIONS OF THE CAPITAL OF THE
PURCHASED INTEREST. The Seller may, on the last day of any Fixed
Period, either (i) divide the Capital of the Purchased Interest into two
or more portions (each, a "PORTION OF CAPITAL") equal, in aggregate, to
the Capital of the Purchased Interest, PROVIDED that after giving effect
to such division the amount of each such Portion of Capital shall not be
less than $5,000,000, or (ii) combine any two or more Portions of
Capital outstanding on such last day and having Fixed Periods ending on
such last day into a single Portion of Capital equal to the aggregate of
the Capital of such Portions of Capital.
Section 1.8. INCREASED COSTS. (a) If the Administrator, the Issuer,
any Purchaser, any other Program Support Provider or any of their
respective Affiliates (each an "AFFECTED PERSON") determines that the
existence of or compliance with (i) any law or regulation or any change
therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof or (ii) any request,
guideline or directive from any central bank or other Governmental
Authority (whether or not having the force of law) issued or occurring
after the date of this Agreement affects or would affect the amount of
capital required or expected to be maintained by such Affected Person
and such Affected Person determines that the amount of such capital is
increased by or based upon the existence of any commitment to make
purchases of or otherwise to maintain the investment in Pool Receivables
related to this Agreement or any related liquidity facility or credit
enhancement facility and other commitments of the same type, then, upon
demand by such Affected Person (with a copy to the Administrator), the
Seller shall immediately pay to the Administrator, for the account of
such Affected Person, from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person
in the light of such circumstances, to the extent that such Affected
Person reasonably determines such increase in capital to be allocable to
the existence of any of such commitments. A certificate as to such
amounts submitted to the Seller and the Administrator by such Affected
Person shall be conclusive and binding for all purposes, absent manifest
error.
(b) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
referred to in SECTION 1.9) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to any Affected
Person of agreeing to purchase or purchasing, or maintaining the
ownership of the Purchased Interest in respect of which Discount is
computed by reference to the Eurodollar Rate, then, upon demand by such
Affected Person, the Seller shall immediately pay to such Affected
Person, from time to time as specified, additional amounts sufficient to
compensate such Affected Person for such increased costs. A certificate
as to such amounts submitted to the Seller by such Affected Person shall
be conclusive and binding for all purposes, absent manifest error.
Section 1.9. ADDITIONAL DISCOUNT ON PORTIONS OF PURCHASED INTEREST
BEARING A EURODOLLAR RATE. The Seller shall pay to any Affected Person,
so long as such Affected Person shall be required under regulations of
the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional Discount on the unpaid
Capital of the applicable Portion of Capital during each Fixed Period in
respect of which Discount is computed by reference to the Eurodollar
Rate, for such Fixed Period, at a rate per annum equal at all times
during such Fixed Period to the remainder obtained by subtracting (i)
the Eurodollar Rate for such Fixed Period from (ii) the rate obtained by
dividing such Eurodollar Rate referred to in clause (i) above by that
percentage equal to 100% minus the Eurodollar Reserve Percentage for
such Fixed Period, payable on each date on which Discount is payable on
the applicable Portion of Capital. Such additional Discount shall be
determined by the Affected Person and notified to the Seller through the
Administrator within 60 days after any Discount payment is made with
respect to which such additional Discount is requested. A certificate
as to such additional Discount submitted to the Seller by the Affected
Person shall be conclusive and binding for all purposes, absent manifest
error.
Section 1.10. REQUIREMENTS OF LAW. In the event that any Affected
Person determines that the existence of or compliance with (a) any law
or regulation or any change therein or in the interpretation or
application thereof, in each case adopted, issued or occurring after the
date hereof or (b) any request, guideline or directive from any central
bank or other Governmental Authority (whether or not having the force of
law) issued or occurring after the date of this Agreement:
(i) does or shall subject such Affected Person to any tax of any
kind whatsoever with respect to this Agreement, any increase in the
Purchased Interest or in the amount of Capital relating thereto, or does
or shall change the basis of taxation of payments to such Affected
Person on account of Collections, Discount or any other amounts payable
hereunder (excluding taxes imposed on the overall net income of such
Affected Person, and franchise taxes imposed on such Affected Person, by
the jurisdiction under the laws of which such Affected Person is
organized or has a lending office or a political subdivision thereof);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
purchases, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Affected Person which
are not otherwise included in the determination of the Eurodollar Rate
or the Base Rate hereunder; or
(iii) does or shall impose on such Affected Person any other
condition;
and the result of any of the foregoing is (x) to increase the cost to
such Affected Person of acting as Administrator, or of agreeing to
purchase or purchasing or maintaining the ownership of undivided
ownership interests with regard to the Purchased Interest (or interests
therein) or any Portion of Capital in respect of which Discount is
computed by reference to the Eurodollar Rate or the Base Rate or (y) to
reduce any amount receivable hereunder (whether directly or indirectly)
funded or maintained by reference to the Eurodollar Rate or the Base
Rate, then, in any such case, upon demand by such Affected Person the
Seller shall promptly pay such Affected Person any additional amounts
necessary to compensate such Affected Person for such increased cost or
reduced amount receivable. All such amounts shall be payable as
incurred. A certificate from such Affected Person to the Seller
certifying, in reasonably specific detail, the basis for, calculation
of, and amount of such increased costs or reduced amount receivable
shall be conclusive in the absence of manifest error; PROVIDED, however,
that no Affected Person shall be required to disclose any confidential
or tax planning information in any such certificate.
Section 1.11. INABILITY TO DETERMINE EURODOLLAR RATE. In the event
that the Administrator shall have determined prior to the first day of
any Fixed Period (which determination shall be conclusive and binding
upon the parties hereto) by reason of circumstances affecting the
interbank Eurodollar market, either (a) dollar deposits in the relevant
amounts and for the relevant Fixed Period are not available, (b)
adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Fixed Period or (c) the Eurodollar Rate
determined pursuant hereto does not accurately reflect the cost to the
Issuer (as conclusively determined by the Administrator) of maintaining
any Portion of Capital during such Fixed Period, the Administrator shall
promptly give telephonic notice of such determination, confirmed in
writing, to the Seller prior to the first day of such Fixed Period.
Upon delivery of such notice (a) no Portion of Capital shall be funded
thereafter at the Alternate Rate determined by reference to the
Eurodollar Rate, unless and until the Administrator shall have given
notice to the Seller that the circumstances giving rise to such
determination no longer exist, and (b) with respect to any outstanding
Portions of Capital then funded at the Alternate Rate determined by
reference to the Eurodollar Rate, such Alternate Rate shall
automatically be converted to the Alternate Rate determined by reference
to the Base Rate at the respective last days of the then current Fixed
Periods relating to such Portions of Capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
Seller and the Servicer hereby makes the representations and warranties
set forth in EXHIBIT III, and each of the Seller and the Servicer hereby
agrees to perform and observe the covenants set forth in EXHIBIT IV.
Section 2.2. TERMINATION EVENTS. If any Termination Event shall occur
and be continuing, the Administrator may, by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred);
PROVIDED that, automatically upon the occurrence of any event (without
any requirement for the passage of time or the giving of notice)
described in SUBSECTION (g) of EXHIBIT V, the Facility Termination Date
shall occur. Upon any such declaration, occurrence or deemed occurrence
of the Facility Termination Date, the Issuer and the Administrator shall
have, in addition to the rights and remedies which they may have under
this Agreement or otherwise, all other rights and remedies provided
after default under the UCC and under other applicable law, which rights
and remedies shall be cumulative.
ARTICLE III
INDEMNIFICATION
Section 3.1. INDEMNITIES BY THE SELLER. Without limiting any other
rights that the Administrator or the Issuer or any of their respective
Affiliates, employees, agents, successors, transferees or assigns (each,
an "INDEMNIFIED PARTY") may have hereunder or under applicable law, the
Seller hereby agrees to indemnify each Indemnified Party from and
against any and all claims, damages, expenses, losses and liabilities
(including Attorney Costs) (all of the foregoing being collectively
referred to as "INDEMNIFIED AMOUNTS") arising out of or resulting from
this Agreement (whether directly or indirectly) or the use of proceeds
of purchases or reinvestments or the ownership of the Purchased
Interest, or any interest therein, or in respect of any Receivable or
any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of
such Indemnified Party, or (b) any overall net income taxes or franchise
taxes imposed on such Indemnified Party by the jurisdiction under the
laws of which such Indemnified Party is organized or any political
subdivision thereof. Without limiting or being limited by the
foregoing, but subject to the exclusions set forth in the preceding
sentence, the Seller shall pay on demand to each Indemnified Party any
and all amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting from
any of the following:
(i) the failure of any Receivable included in the calculation of
the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Seller Report to be true and correct, or the failure of any other
information provided to the Issuer or the Administrator with respect to
Receivables or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or statement
made or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct in all
respects when made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract; or the failure of any Pool Receivable or the related Contract
to conform to any such applicable law, rule or regulation;
(iv) the failure to vest (A) in the Issuer a valid and enforceable
perfected undivided percentage ownership interest, to the extent of the
Purchased Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections with respect
thereto and (B) in the Administrator, on its behalf and on behalf of the
Issuer, a first priority perfected security interest in the items
described in SECTION 1.2(d), in each case, free and clear of any Adverse
Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool and the
Related Security and Collections in respect thereof, whether at the time
of any purchase or reinvestment or at any subsequent time;
(vi) any dispute, claim, offset, billing adjustment or defense of
the Obligor to the payment of any Receivable in, or purporting to be in,
the Receivables Pool (including, without limitation, a defense based on
such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the goods
or services related to such Receivable or the furnishing or failure to
furnish such goods or services or relating to collection activities with
respect to such Receivable (if such collection activities were performed
by the Seller or any of its Affiliates acting as Servicer or by any
agent or independent contractor retained by the Seller or any of its
Affiliates);
(vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions hereof or to perform its
duties or obligations under the Contracts;
(viii) any breach of warranty, products liability or other claim,
investigation, litigation or proceeding arising out of or in connection
with merchandise, insurance or services which are the subject of any
Contract;
(ix) the commingling of any portion of Collections of Pool
Receivables at any time with other funds;
(x) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or reinvestments or the
ownership of the Purchased Interest or in respect of any Receivable,
Related Security or Contract;
(xi) any reduction in Capital as a result of the distribution of
Collections pursuant to SECTION 1.4(d), in the event that all or a
portion of such distributions shall thereafter be rescinded or otherwise
must be returned for any reason; or
(xii) any action or omission by the Seller which constitutes or
results in the breach of any covenant or any representation and warranty
made by Solectron in the Solectron Credit Agreement.
For purposes of this Article III, in determining whether any
representation or warranty or information was true and correct, any
qualification or limitation in such representation and warranty or
information as to materiality, material adverse effect, knowledge or
limitation on enforcement shall be disregarded.
Section 3.2. INDEMNITIES BY THE SERVICER. Without limiting any other
rights that the Administrator or the Issuer or other Indemnified Party
may have hereunder or under applicable law, the Servicer hereby agrees
to indemnify each Indemnified Party from and against any and all
Indemnified Amounts arising out of or resulting from the breach by the
Servicer of any of the covenants or representations and warranties made
by it herein or in any other Transaction Document or from the
negligence, willful misconduct or bad faith of the Servicer in the
performance of its duties hereunder or under any other Transaction
Document.
Section 3.3. CONTRIBUTION. If for any reason the indemnification
provided above in this Article III is unavailable to an Indemnified
Party or is insufficient to hold an Indemnified Party harmless, then the
Seller or the Servicer, as the case may be, shall contribute to the
maximum amount payable or paid to such Indemnified Party in such
proportion as is appropriate to reflect not only the relative benefits
received by such Indemnified Party on the one hand and the Seller or the
Servicer, as the case may be, on the other hand, but also the relative
fault of such Indemnified Party (if any) and the Seller or the Servicer,
as the case may be, and any other relevant equitable considerations.
ARTICLE IV
ADMINISTRATION AND COLLECTIONS
Section 4.1. APPOINTMENT OF SERVICER. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person
so designated from time to time as Servicer in accordance with this
SECTION 4.1. Until the Administrator gives notice to the Seller and the
Servicer (in accordance with this SECTION 4.1) of the designation of a
new Servicer, Solectron is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Servicer pursuant to the
terms hereof. Upon the occurrence and during the continuation of (i)
any Unmatured Termination Event or Termination Event or (ii) at any time
when the Rated Long Term Debt of Solectron is not rated at least
Investment Grade, any event that materially and adversely affects the
Servicer's ability to perform its obligations hereunder or the
collectibility of the Receivables, the Administrator may designate as
Servicer any Person (including itself) to succeed Solectron or any
successor Servicer, on the condition in each case that any such Person
so designated shall agree to perform the duties and obligations of the
Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in
SECTION 4.1(a) hereof, Solectron (or any successor Servicer) agrees that
it will terminate its activities as Servicer hereunder in a manner which
the Administrator determines will facilitate the transition of the
performance of such activities to the new Servicer, and Solectron shall
cooperate with and assist such new Servicer. Such cooperation shall
include (without limitation) access to and transfer of records and use
by the new Servicer of all books, records, other relevant data,
licenses, hardware or software necessary or desirable to collect the
Pool Receivables and the Related Security.
(c) Solectron acknowledges that the Administrator and the Issuer
have relied on Solectron's agreement to act as Servicer hereunder in
making their decision to execute and deliver this Agreement.
Accordingly, Solectron agrees that it will not voluntarily resign as
Servicer and the Seller agrees that it will not terminate Solectron as
Servicer without the prior written consent of the Administrator.
(d) The Servicer may delegate its duties and obligations hereunder
to any subservicer (each, a "SUB-SERVICER"); provided that, in each such
delegation, (i) such Sub-Servicer shall agree in writing to perform the
duties and obligations of the Servicer pursuant to the terms hereof,
(ii) the Servicer shall remain primarily liable to the Issuer for the
performance of the duties and obligations so delegated, (iii) the
Seller, the Administrator and the Issuer shall have the right to look
solely to the Servicer for performance and (iv) the terms of any
agreement with any Sub-Servicer shall provide that the Administrator may
terminate such agreement upon the termination of the Servicer hereunder
by giving notice of its desire to terminate such agreement to the
Servicer (and the Servicer shall provide appropriate notice to such Sub-
Servicer).
Section 4.2. DUTIES OF SERVICER. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to collect
each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance with the Credit and
Collection Policy. The Servicer shall set aside (and, if applicable,
segregate) and hold in trust for the accounts of the Seller and the
Issuer the amount of the Collections to which each is entitled in
accordance with ARTICLE I hereto. The Servicer may, in accordance with
the Credit and Collection Policy, extend the maturity of any Pool
Receivable (but not beyond thirty (30) days) and extend the maturity or
adjust the Outstanding Balance of any Defaulted Receivable as the
Servicer may determine to be appropriate to maximize Collections
thereof; PROVIDED, HOWEVER, that (i) such extension or adjustment shall
not alter the status of such Pool Receivable as a Delinquent Receivable
or a Defaulted Receivable or limit the rights of the Issuer or the
Administrator under this Agreement and (ii) if a Termination Event has
occurred and is continuing and Solectron is still serving as Servicer,
Solectron may make such extension or adjustment only upon the prior
written approval of the Administrator. The Seller shall deliver (and
shall cause each Originator to deliver) to the Servicer and the Servicer
shall hold for the benefit of the Seller and the Administrator (for the
benefit of the Issuer and individually) in accordance with their
respective interests, all records and documents (including without
limitation computer tapes or disks) with respect to each Pool
Receivable. Notwithstanding anything to the contrary contained herein,
the Administrator may direct the Servicer (whether the Servicer is
Solectron or any other Person) to commence or settle any legal action to
enforce collection of any Pool Receivable or to foreclose upon or
repossess any Related Security; PROVIDED, HOWEVER, that no such
direction may be given unless a Termination Event has occurred and is
continuing.
(b) The Servicer shall as soon as practicable following actual
receipt of collected funds turn over to the Seller the collections of
any indebtedness that is not a Pool Receivable, less, in the event that
Solectron or one of its Affiliates is not the Servicer, all reasonable
and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering such collections; PROVIDED,
HOWEVER, the Servicer shall not be under any obligation to remit any
such funds to the Seller unless and until the Servicer has received from
the Seller evidence satisfactory to the Administrator and the Servicer
that the Seller is entitled to such funds hereunder and under applicable
law. The Servicer, if other than Solectron or one of its Affiliates,
shall as soon as practicable upon demand, deliver to the Seller all
records in its possession which evidence or relate to any indebtedness
that is not a Pool Receivable, and copies of records in its possession
which evidence or relate to any indebtedness that is a Pool Receivable.
(c) Notwithstanding anything to the contrary contained in this
ARTICLE IV, the Servicer, if not Solectron or one of its Affiliates,
shall have no obligation to collect, enforce or take any other action
described in this ARTICLE IV with respect to any indebtedness that is
not a Pool Receivable other than to deliver to the Seller the
collections and documents with respect to any such indebtedness as
described in SECTION 4.2(b). It is expressly understood and agreed by
the parties that such Servicer's duties in respect of any indebtedness
that is not a Pool Receivable are set forth in this SECTION 4.2 in their
entirety. Upon delivery by such Servicer of funds or records relating
to any indebtedness that is not a Pool Receivable to the Seller, such
Servicer shall have discharged in full all of its responsibilities to
make any such delivery.
(d) The Servicer's obligations (other than indemnity obligations)
hereunder shall terminate on the later of (i) the Facility Termination
Date and (ii) the date on which all amounts required to be paid to the
Issuer, the Administrator and any other Indemnified Party or Affected
Person hereunder shall have been paid in full. After such termination,
the Servicer shall promptly deliver to the Seller all books, records and
related materials that the Seller previously provided to the Servicer in
connection with this Agreement.
Section 4.3. LOCK-BOX ARRANGEMENTS. Prior to the initial purchase
hereunder, in accordance with SECTION 1 of EXHIBIT II, the Seller and
the Servicer shall enter into Lock-Box Agreements with all of the Lock-
Box Banks, and deliver original counterparts thereof to the
Administrator. Upon the occurrence and during the continuance of a
Termination Event, the Administrator may at any time thereafter (i)
give notice to each Lock-Box Bank that the Administrator is assuming
exclusive ownership and control of the Lock-Box Accounts, and (ii) take
any or all other actions permitted under the applicable Lock-Box
Agreement or under applicable law, including causing the proceeds that
are sent to the respective Lock-Box Accounts to be redirected pursuant
to the Administrator's instructions rather than deposited in the
applicable Lock-Box Account. Each of the Seller and the Servicer hereby
agrees that if the Administrator, at any time, takes any action set
forth in the preceding sentence, the Administrator shall have exclusive
control of the proceeds (including Collections) of all Pool Receivables
and each of the Seller and the Servicer hereby further agrees to take
any other action that the Administrator may reasonably request to
transfer such control. Any proceeds of Pool Receivables received by the
Seller or the Servicer thereafter shall be sent immediately to the
Administrator. The parties hereto hereby acknowledge that if at any
time the Administrator takes control of any Lock-Box Account, the
Administrator shall not have any rights to the funds therein in excess
of the unpaid amounts due to the Administrator, the Issuer or any other
Person hereunder and the Administrator shall distribute or cause to be
distributed such funds in accordance with SECTION 4.2(b) hereof
(including the proviso thereto) and ARTICLE I hereof (in each case as if
such funds were held by the Servicer thereunder); PROVIDED, HOWEVER,
that the Administrator shall not be under any obligation to remit any
such funds to the Seller or any other Person unless and until the
Administrator has received from the Seller or such Person evidence
satisfactory to the Administrator that the Seller or such Person is
entitled to such funds hereunder and under applicable law.
Section 4.4. ENFORCEMENT RIGHTS. (a) At any time following the
occurrence of a Termination Event or the designation of a Servicer
(other than Solectron or any of its Affiliates) pursuant to SECTION 4.1
hereof:
(i) the Administrator may direct the Obligors that payment of all
amounts payable under any Pool Receivable be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct the Seller to give notice of
the Issuer's interest in Pool Receivables to each Obligor, which notice
shall direct that payments be made directly to the Administrator or its
designee, and upon such instruction from the Administrator the Seller
shall give such notice at the expense of the Seller; provided, that if
the Seller fails to so notify each Obligor, the Administrator may so
notify the Obligors; and
(iii) the Administrator may request the Seller to, and upon such
request the Seller shall, (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Assets, and
transfer or license the use of, to the new Servicer, all software
necessary or desirable to collect the Pool Receivables and the Related
Assets, and make the same available to the Administrator or its designee
at a place selected by the Administrator, and (B) segregate all cash,
checks and other instruments received by it from time to time
constituting Collections with respect to the Pool Receivables in a
manner acceptable to the Administrator and, promptly upon receipt, remit
all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Administrator or its designee.
(b) Upon the occurrence and during the continuation of any Unmatured
Termination Event or Termination Event or any event that materially and
adversely affects the Servicer's ability to perform its obligations
hereunder or the collectibility of the Receivables, the Seller hereby
authorizes the Administrator, and irrevocably appoints the Administrator
as its attorney-in-fact with full power of substitution and with full
authority in the place and stead of the Seller, which appointment is
coupled with an interest, to take any and all steps in the name of the
Seller and on behalf of the Seller necessary or desirable, in the
determination of the Administrator, to collect any and all amounts or
portions thereof due under any and all Pool Receivables or Related
Assets, including, without limitation, endorsing the name of the Seller
on checks and other instruments representing Collections and enforcing
such Pool Receivables and Related Assets. Notwithstanding anything to
the contrary contained in this SUBSECTION (b), none of the powers
conferred upon such attorney-in-fact pursuant to the immediately
preceding sentence shall subject such attorney-in-fact to any liability
if any action taken by it shall prove to be inadequate or invalid, nor
shall they confer any obligations upon such attorney-in-fact in any
manner whatsoever.
Section 4.5. RESPONSIBILITIES OF THE SELLER AND SERVICER. (a) Anything
herein to the contrary notwithstanding, Solectron shall cause each
Originator to perform all of its obligations under the Contracts related
to the Pool Receivables to the same extent as if interests in such Pool
Receivables had not been transferred hereunder and the exercise by the
Administrator or the Issuer of its rights hereunder shall not relieve
Solectron or such Originator from such obligations, and the Seller shall
pay when due any taxes, including, without limitation, any sales taxes
payable in connection with the Pool Receivables and their creation and
satisfaction. The Administrator and the Issuer shall not have any
obligation or liability with respect to any Pool Receivable or any
Related Assets, nor shall any of them be obligated to perform any of the
obligations of the Seller or Solectron or each Originator under any of
the foregoing.
(b) Solectron hereby irrevocably agrees that if at any time it shall
cease to be the Servicer hereunder, it shall act (if the then current
Servicer so requests) as the data-processing agent of the Servicer and,
in such capacity, Solectron shall conduct the data-processing functions
of the administration of the Receivables and the Collections thereon in
substantially the same way that Solectron conducted such data-processing
functions while it acted as the Servicer.
Section 4.6. SERVICING FEE. For so long as the Servicer is Solectron
or an Affiliate of Solectron, the Servicer shall be paid a fee, through
distributions contemplated by SECTION 1.4(d), equal to 0.50% PER ANNUM
of the average outstanding Capital. If the Servicer is not Solectron or
an Affiliate of Solectron, then the Servicer shall be paid a fee,
through distributions contemplated by SECTION 1.4(d), in an amount
negotiated in good faith by such Servicer and by the Administrator in
the Administrator's sole discretion (which fee shall be based on a per
annum percentage rate agreed upon by such Servicer and the
Administrator).
ARTICLE V
MISCELLANEOUS
Section 5.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or Servicer
therefrom shall be effective unless in a writing signed by the
Administrator, and, in the case of any amendment, by the Seller and the
Servicer and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given. No failure on the part of the Issuer or Administrator to
exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
Section 5.2. NOTICES, ETC. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which
shall include facsimile communication) and sent or delivered, to each
party hereto, at its address set forth under its name on the signature
pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. Notices and
communications by facsimile shall be effective when sent (and shall be
followed by hard copy sent by first class mail), and notices and
communications sent by other means shall be effective when received.
Section 5.3. ASSIGNABILITY. (a) This Agreement and the Issuer's rights
and obligations herein (including ownership of the Purchased Interest)
shall be assignable, in whole or in part, by the Issuer and its
successors and assigns with the prior written consent of the Seller;
PROVIDED, however, that such consent shall not be unreasonably withheld;
and PROVIDED, further, however, that no such consent shall be required
if the assignment is made to Bank of America, any Affiliate of Bank of
America (other than a director or officer of Bank of America), any
Purchaser or other Program Support Provider or any Person which is (i)
in the business of issuing short-term promissory notes and (ii)
associated with or administered by Bank of America or any Affiliate of
Bank of America. Each assignor may, in connection with the assignment,
disclose to the applicable assignee any information relating to
Solectron, the Seller or the Pool Receivables furnished to such assignor
by or on behalf of Solectron, the Seller, the Issuer or the
Administrator.
(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "PURCHASER") party to the Liquidity Asset Purchase
Agreement or to any other Program Support Provider participating
interests in the Purchased Interest. In the event of any such grant by
the Issuer of a participating interest to a Purchaser or other Program
Support Provider, the Issuer shall remain responsible for the
performance of its obligations hereunder. The Seller agrees that each
Purchaser or other Program Support Provider shall be entitled to the
benefits of SECTIONS 1.8, 1.9 and 1.10 with respect to its participating
interest.
(c) This Agreement and the rights and obligations of the
Administrator hereunder shall be assignable, in whole or in part, by the
Administrator and its successors and assigns.
(d) Except as provided in SECTION 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or
any interest herein without the prior written consent of the
Administrator.
(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or
by its agents.
Section 5.4. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification granted under SECTION 3.1 hereof, the Seller agrees
to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including, without
limitation, periodic auditing of Pool Receivables) of this Agreement,
the Purchase and Sale Agreement, the Liquidity Asset Purchase Agreement,
any asset purchase agreement, reimbursement agreement, letter of credit
or similar agreement relating to the sale or transfer of interests in
Purchased Interests and the other documents and agreements to be
delivered hereunder, and of any amendment, modification or waiver of any
of the foregoing, including, without limitation, Attorney Costs for the
Administrator, the Issuer and their respective Affiliates and agents
with respect thereto and with respect to advising the Administrator, the
Issuer and their respective Affiliates and agents as to their rights and
remedies under this Agreement and the other Transaction Documents, and
all costs and expenses, if any (including, without limitation, Attorney
Costs), of the Administrator, the Issuer and their respective Affiliates
and agents, in connection with the enforcement of this Agreement and the
other Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp
and other taxes and fees payable in connection with the execution,
delivery, filing and recording of this Agreement or the other documents
or agreements to be delivered hereunder, and agrees to save each
Indemnified Party harmless from and against any liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes
and fees.
Section 5.5. NO PROCEEDINGS; LIMITATION ON PAYMENTS. Each of the
Seller, the Servicer, the Administrator, each assignee of the Purchased
Interest or any interest therein and each Person which enters into a
commitment to purchase the Purchased Interest or interests therein
hereby covenants and agrees that it will not institute against, or join
any other Person in instituting against, the Issuer any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or
other proceeding under any federal or state bankruptcy or similar law,
for one year and one day after the latest maturing Note issued by the
Issuer is paid in full.
Section 5.6. CONFIDENTIALITY. Unless otherwise required by applicable
law, the Seller and the Servicer each agree to maintain the
confidentiality of this Agreement and the other Transaction Documents
(and all drafts thereof) in communications with third parties and
otherwise; PROVIDED that this Agreement may be disclosed to (a) third
parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably
satisfactory to the Administrator, and (b) the Seller's legal counsel
and auditors if they agree to hold it confidential.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF
PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE ISSUER IN THE
POOL RECEIVABLES, AND THE OTHER ITEMS DESCRIBED IN SECTION 1.2(d), IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
CALIFORNIA.
(b) EACH SOLECTRON PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION
OF THE COURT OF THE STATE OF CALIFORNIA SITTING IN SAN FRANCISCO AND OF
THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH CALIFORNIA STATE COURT OR, TO THE EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATOR OR THE ISSUER MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AGAINST ANY SOLECTRON PARTY
OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. EACH SOLECTRON
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT IN ANY COURT REFERRED TO IN THIS CLAUSE (b). EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. EACH PARTY
TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 5.2. NOTHING IN THIS AGREEMENT
WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
Section 5.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall
constitute one and the same agreement.
Section 5.9. SURVIVAL OF TERMINATION. The provisions of SECTIONS 1.8,
1.9, 1.10, 3.1, 5.4, 5.5, 5.6, 5.7 and 5.10 (and this SECTION 5.9) shall
survive any termination of this Agreement except that the provisions of
SECTIONS 1.8, 1.9 and 1.10 shall survive only for a period of six months
following such termination; provided that the lapse of such six month
period shall not limit or prevent the effectiveness of any request or
demand for payment under SECTION 1.8, 1.9 or 1.10 which has made prior
to the end of such six month period.
Section 5.10. WAIVER OF JURY TRIAL. THE ISSUER, THE SELLER, THE
SERVICER AND THE ADMINISTRATOR EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING
OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR INDEMNIFIED PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE ISSUER, THE SELLER, THE SERVICER
AND THE ADMINISTRATOR EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENT OR ANY PROVISION HEREOF OF THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, AMENDMENTS AND
RESTATEMENTS, OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT (INCLUDING WITHOUT LIMITATION ANY EXTENSION OF THE
FACILITY TERMINATION DATE).
Section 5.11. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the Issuer, the Seller, the Servicer
and the Administrator, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written,
relating to the subject matter hereof, except for that certain letter
referred to in SECTION 1.5. The Exhibits, Schedules and Annex to this
Agreement shall be deemed incorporated into this Agreement as if set
forth herein.
Section 5.12. HEADINGS. The captions and headings of this Agreement
and in any Exhibit, Schedule or Annex hereto are for convenience of
reference only and shall not affect the interpretation hereof or
thereof.
Section 5.13. ISSUER'S LIABILITIES. The obligations of the Issuer
under this Agreement are solely the corporate obligations of the Issuer.
No recourse shall be had for any obligation or claim arising out of or
based upon this Agreement against MLMMI or against any stockholder,
employee, officer, director or incorporator of the Issuer. For purposes
of this paragraph, "MLMMI" shall mean and include Merrill Lynch Money
Markets, Inc. and all affiliates thereof and any employee, officer,
director, incorporator, shareholder or beneficial owner of any of them;
PROVIDED, however, that the Issuer shall not be considered to be an
affiliate of MLMMI; and PROVIDED, FURTHER, that this SECTION 5.13 shall
not relieve any such Person of any liability it might otherwise have for
its own gross negligence or willful misconduct. The agreements provided
in this SECTION 5.13 shall survive termination of this Agreement.
Section 5.14. PURCHASE AND SALE AGREEMENT. In consideration of the
obligations of the Issuer now or hereafter arising under this Agreement,
the Seller hereby sells and assigns to the Administrator, for its
benefit and the benefit of the Issuer, without any formal or other
instrument of assignment all of the Seller's right, title and interest
in, to and under the Purchase and Sale Agreement and the other
Transaction Documents, and all rights, remedies, powers, privileges and
claims of the Seller under the Purchase and Sale Agreement and the other
Transaction Documents (whether arising pursuant to the terms of the
Purchase and Sale Agreement (including Article VI of the Purchase and
Sale Agreement) and the other Transaction Documents or otherwise
available to the Seller at law or in equity) whether against any
Originator, the Guarantor or otherwise, including without limitation,
(i) the right of the Seller, at any time, to enforce the Purchase and
Sale Agreement and any other Transaction Documents against each
Originator and the Servicer, (ii) the right to appoint a successor to
the Servicer, (iii) the right, at any time, to give or withhold any and
all consents, requests, notices, directions, approvals, demands,
extensions or waivers under or with respect to the Purchase and Sale
Agreement, any other Transaction Document or the obligations in respect
of each Originator or Guarantor thereunder to the same extent as the
Seller may do, and (iv) all of the Seller's rights, remedies, powers,
privileges, and claims under or with respect to the Purchase and Sale
Agreement and the other Transaction Documents (whether arising pursuant
to the terms of the Purchase and Sale Agreement or any other Transaction
Document or otherwise available at law or in equity). Notwithstanding
the foregoing, the Seller shall nevertheless be permitted to give all
consents, requests, notices, directions, approvals, demands, extensions
or waivers, if any, which are required by the specific terms of the
Purchase and Sale Agreement and the other Transaction Documents to be
given by the Seller, unless the Administrator shall otherwise direct the
Seller. The assignment pursuant to the first sentence of this SECTION
5.14 shall not relieve the Seller, any Originator, the Guarantor or
Solectron from (or require the Issuer or the Administrator to undertake)
the performance of any term, covenant or agreement on the part of the
Seller, any Originator, the Guarantor or Solectron to be performed or
observed under or in connection with the Purchase and Sale Agreement and
the other Transaction Documents, any Pool Receivable or any Related
Security.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of
the date first above written.
SOLECTRON FUNDING CORPORATION
By: /s/ Phil Kagel
Name: Phil Kagel
Title: Secretary
847 Gibraltar Drive, Building 5
Milpitas, California 95035
Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
SOLECTRON CORPORATION, in its
individual capacity and as initial
Servicer
By: /s/ Susan Wang
Name: Susan Wang
Title: Senior Vice President and
Chief Financial Officer
847 Gibraltar Drive Building 5
Milpitas, California 95035
Attention: Treasurer
Telephone No. (408) 956-6577
Facsimile No. (408) 956-6062
RECEIVABLES CAPITAL CORPORATION
By: /s/ Stewart Cutler
Name: Stewart Cutler
Title:
c/o Merrill Lynch Money Markets Inc.
World Financial Center, North Tower
250 Vesey Street - 11th Floor
New York, New York 10281-1311
Attention: George Roller
Telephone No. (212) 449-1606
Facsimile No. (212) 449-2234
with a copy to:
Bank of America National Trust
and Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization
Group
Telephone No. (312) 828-7421
Facsimile No. (312) 828-7855
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrator
By: /s/ Erle Archer
Name: Erle Archer
Title: Attorney-in-fact
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization
Group
Telephone No. (312) 828-7421
Facsimile No. (312) 828-7855
<PAGE>
EXHIBIT I
DEFINITIONS
As used in the foregoing Receivables Purchase Agreement (including (i)
in its Exhibits and (ii) in any other Transaction Document that refers
to the definitions set forth in this Exhibit)), the following terms
shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).
Unless otherwise indicated, all Section, Annex, Exhibit and Schedule
references in this Exhibit are to Sections of and Annexes, Exhibits and
Schedules to the Agreement.
"ADMINISTRATION ACCOUNT" means the special account (account number
_________________) of the Issuer maintained at the office of Bank of
America at ________________, or such other account as may be so
designated in writing from time to time by the Administrator to the
Seller and the Servicer.
"ADMINISTRATOR" has the meaning set forth in the preamble to the
Agreement.
"ADVERSE CLAIM" means a Lien, security interest or other encumbrance, it
being understood that a Lien, security interest or other encumbrance, in
favor of the Issuer or the Administrator shall not constitute an Adverse
Claim.
"AFFECTED PERSON" has the meaning set forth in SECTION 1.8.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person,
except that with respect to the Issuer, Affiliate shall mean the
holder(s) of its capital stock.
"AGREEMENT" means the Receivables Purchase Agreement dated as of
September 17, 1997 among Solectron Funding Corporation, as Seller,
Solectron Corporation, individually and as Servicer, Receivables Capital
Corporation, as Issuer and Bank of America National Trust and Savings
Association, as Administrator.
"ALTERNATE RATE" for any Fixed Period for any Portion of Capital of the
Purchased Interest means an interest rate per annum equal to (a) 0.55%
PER ANNUM above the Eurodollar Rate for such Fixed Period (or, if such
Portion of Capital has been funded for three consecutive one-month Fixed
Periods at an Alternate Rate based upon the Eurodollar Rate, 0.625% PER
ANNUM above the Eurodollar Rate for such Fixed Period) or (b) the Base
Rate for such Fixed Period; PROVIDED, HOWEVER, that in the case of
(i) any Fixed Period on or prior to the first day of which the
Administrator shall have been notified by the Issuer or a Purchaser or
other Program Support Provider that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or
any central bank or other Governmental Authority asserts that it is
unlawful, for the Issuer or such Purchaser or other Program Support
Provider to fund any Portion of Capital (based on the Eurodollar Rate)
set forth above (and the Issuer or such Purchaser or other Program
Support Provider shall not have subsequently notified the Administrator
that such circumstances no longer exist),
(ii) any Fixed Period of one to (and including) 13 days,
(iii) any Fixed Period as to which the Administrator does not
receive notice, by no later than 11:00 a.m.(San Francisco time) on (w)
the Business Day preceding the first day of such Fixed Period that the
Seller desires that the related Portion of Capital be funded at the CP
Rate, (x) the third Business Day preceding the first day of such Fixed
Period that the Seller desires that the related Portion of Capital be
funded at the Alternate Rate and based on the Eurodollar Rate, or (y)
the Seller has given the notice contemplated by clause (w) of this
CLAUSE (iii) and the Administrator shall have notified the Seller that
funding the related Portion of Capital at the CP Rate is unacceptable to
the Issuer due to market conditions, or
(iv) any Fixed Period relating to a Portion of Capital which is
less than $1,000,000,
the "ALTERNATE RATE" for each such Fixed Period shall be an interest
rate per annum equal to the Base Rate in effect on each day of such
Fixed Period. The "ALTERNATE RATE" for any Termination Day shall be an
interest rate equal to 2% PER ANNUM above the Base Rate in effect on
such day.
"APPLICABLE CONCENTRATION PERCENTAGE" for any Obligor means at any time
(i) 12.0% if (A) its Rated Long Term Debt is rated at least AA- or Aa3
or its Rated Short Term Debt is rated at least A-1+ or P-1, in each case
by Standard & Poor's or Moody's, respectively or (B) such Obligor is a
Designated Obligor; (ii) 8.0% if its Rated Long Term Debt is rated at
least BBB+ or Baa1 or its Rated Short Term Debt is rated at least A-2 or
P-2, in each case by Standard & Poor's or Moody's, respectively; (iii)
6.0% if its Rated Long Term Debt is rated at least Investment Grade; and
(iv) the Normal Concentration Percentage if such Obligor has no
outstanding Investment Grade Rated Long Term Debt; provided, that the
Administrator may at any time, by written notice to the Servicer, reduce
the Applicable Concentration Percentage for any Obligor to the Normal
Concentration Percentage if the Administrator determines in good faith
that the creditworthiness of such Obligor is not sufficient to support a
concentration percentage greater than the Normal Concentration
Percentage.
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
cost of internal legal services and all disbursements of internal
counsel.
"AVERAGE MATURITY" means at any time that period of days equal to the
average maturity of the Pool Receivables calculated by the Servicer in
the then most recent Seller Report; PROVIDED that if the Administrator
shall have a reasonable basis to disagree with any such calculation, the
Administrator may recalculate such Average Maturity, and any such
recalculation shall be prima facie evidence of such Average Maturity.
"BANK OF AMERICA" means Bank of America National Trust and Savings
Association, a national banking association.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. sec. 101, ET SEQ.), as amended from time to time.
"BASE RATE" means for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times
equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America in San Francisco,
California, as its "reference rate." It is a rate set by Bank of
America based upon various factors including Bank of America's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced
at, above, or below such announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
"BUSINESS DAY" means any day on which (i) banks are not authorized or
required to close in Chicago, New York City or San Francisco and (ii) if
this definition of "Business Day" is utilized in connection with the
Eurodollar Rate, dealings are carried out in the London interbank
market.
"CAPITAL" means the amount paid to the Seller in respect of the
Purchased Interest by the Issuer pursuant to the Agreement, or such
amount divided or combined in accordance with SECTION 1.7, in each case
reduced from time to time by Collections distributed and applied on
account of such Capital pursuant to SECTION 1.4(d) and increased from
time to time by reinvestments pursuant to SECTION 1.4(b)(ii); PROVIDED,
that if such Capital shall have been reduced by any distribution and
thereafter all or a portion of such distribution is rescinded or must
otherwise be returned for any reason, such Capital shall be increased by
the amount of such rescinded or returned distribution, as though it had
not been made.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
generally accepted accounting principles, and the amount of such
obligations shall be the capitalized amount thereof determined in
accordance with generally accepted accounting principles.
"CHANGE OF CONTROL" means any of the following events or circumstances:
(a) any Person or "group" (within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended) shall either (i)
acquire beneficial ownership of more than 35% of any outstanding class
of common stock of Solectron having ordinary voting power in the
election of directors of Solectron or (ii) obtain the power (whether or
not exercised) to elect a majority of Solectron's directors;
(b) Solectron or the Seller shall (i) merge with any other Person
and not be the surviving company or (ii) sell all or substantially all
of its assets to another Person; or
(c) a majority of the Board of Directors of Solectron shall not be
Continuing Directors. As used in this definition, "Continuing
Directors" shall mean the directors of Solectron on the date of this
Agreement and each other director of Solectron, if such other director's
nomination for election to the Board of Directors of Solectron is
recommended by a majority of the then Continuing Directors.
"COLLECTIONS" means, with respect to any Pool Receivable, (a) all funds
(regardless of whether in the form of cash, checks, money orders, wire
transfers, money-grams or otherwise) which are received by an
Originator, the Seller, the Servicer or the Administrator in payment of
any amounts owed in respect of such Receivable (including, without
limitation, purchase price, finance charges, interest and all other
charges), or applied to amounts owed in respect of such Receivable
(including, without limitation, insurance payments and net proceeds of
the sale or other disposition of repossessed goods or other collateral
or property of the related Obligor or any other Person directly or
indirectly liable for the payment of such Pool Receivable and available
to be applied thereon), (b) all amounts deemed to have been received
pursuant to SECTION 1.4(e) of the Agreement or SECTION 1.7 of the
Purchase and Sale Agreement and (c) all other proceeds of such
Receivable (regardless of whether in the form of cash, checks, money
orders, wire transfers, money-grams or otherwise).
"CONTRACT" means, with respect to any Receivable, any and all contracts,
understandings, instruments, agreements, leases, invoices, notes, or
other writings pursuant to which such Receivable arises or which
evidences such Receivable or under which an Obligor becomes or is
obligated to make payment in respect of such Receivable.
"CP MARKET DISRUPTION EVENT" means, at any time for any reason
whatsoever, the Issuer shall be unable to raise, or shall be precluded
or prohibited from raising, funds through the issuance of Notes in the
United States' commercial paper market at such time.
"CP RATE" for any Fixed Period for any Portion of Capital of the
Purchased Interest means, to the extent the Issuer funds such Portion of
Capital for such Fixed Period by issuing Notes, the per annum rate
equivalent to the "weighted average cost" (as defined below) related to
the issuance of Notes that are allocated, in whole or in part, by the
Issuer (or by the Administrator) to fund or maintain such Portion of
Capital, all other Portions of Capital of the Purchased Interest held by
the Issuer hereunder and all interests (including security interests) in
receivables or other assets of "Other Pool Sellers" (as defined below)
held by the Issuer; PROVIDED, HOWEVER, that if any component of such
rate is a discount rate, in calculating the "CP RATE" for such Portion
of Capital for such Fixed Period, the Issuer shall for such component
use the rate resulting from converting such discount rate to an interest
bearing equivalent rate per annum. As used in this definition,
(i) "OTHER POOL SELLERS" means all other sellers which transfer
interests (including by borrowing loans secured by such interests) in
receivables or other financial assets to the Issuer to the extent that
such interests in receivables or other financial assets are aggregated
with the Portion of Capital of the Purchased Interest held by the Issuer
hereunder and funded on a pooled basis by the Issuer, and (ii) the
Issuer's "WEIGHTED AVERAGE COST" shall consist of (x) the actual
interest rate paid to purchasers of the Issuer's Notes (which rate shall
reflect and give effect to the commissions of placement agents and
dealers in respect of such Notes, to the extent such commissions are
allocated, in whole or in part, to such Notes by the Issuer (or by the
Administrator)), (y) the costs associated with the issuance of such
Notes, and (z) other borrowings by the Issuer (other than under any
Program Support Agreement), including to fund small or odd dollar
amounts that are not easily accommodated in the commercial paper market.
"CREDIT AND COLLECTION POLICY" means those receivables credit and
collection policies and practices in effect on the date of the Agreement
and described in SCHEDULE I hereto, as modified in compliance with the
Agreement.
"DEFAULTED RECEIVABLE" means a Receivable:
(i) as to which any payment, or part thereof, remains unpaid for
at least 151 days from the original customer billing date for such
payment;
(ii) as to which the Obligor thereof or any other Person obligated
thereon or owning any Related Security in respect thereof has taken any
action, or suffered any event to occur, of the type described in
PARAGRAPH (g) of EXHIBIT V hereto; or
(iii) (a) which, consistent with the Credit and Collection Policy,
would be written off as uncollectible or (b) which has been written off
as uncollectible.
"DELINQUENCY RATIO" means the ratio (expressed as a percentage) computed
as of each Month-End Date having (a) a numerator that is equal to the
aggregate Outstanding Balance of Delinquent Receivables as of that
Month-End Date and (b) a denominator that is the aggregate Outstanding
Balance of Receivables as of that Month-End Date.
"DELINQUENT RECEIVABLE" means any Receivable that is not a Defaulted
Receivable as to which any payment, or part thereof, remains unpaid for
at least 91 days from the original customer billing date for such
Receivable.
"DESIGNATED OBLIGOR" means, as of the date hereof, Cisco Systems, Inc.
and Sun Microsystems, Inc., and thereafter, shall include any other
Obligor designated as such in writing by the Administrator to the
Servicer, until such time as the Administrator shall have notified the
Servicer in writing that such Obligor is no longer a Designated Obligor
hereunder (it being understood that the Administrator shall not notify
the Servicer that an Obligor is no longer a Designated Obligor absent a
good-faith determination on its part that such Obligor's credit has
declined).
"DILUTION HORIZON VARIABLE" means, at any time, a ratio having (a) a
numerator equal to the sum of the aggregate amounts payable pursuant to
invoices giving rise to Receivables (without giving effect to any
payments received with respect to such invoices) and generated by the
Originators during the calendar month ending on the most recent Month-
End Date and (b) a denominator equal to the aggregate Outstanding
Balance of all Eligible Receivables as of the most recent Month-End
Date.
"DILUTION PERCENTAGE" means, for any calendar month, the result
(expressed as a percentage) calculated in accordance with the following
formula:
{(2.0 x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Sales-Based Dilution Ratios during
the period of 12 consecutive calendar months ending on
the related Month-End Date.
DHV = the Dilution Horizon Variable.
HDR = the highest Sales-Based Dilution Ratio for any calendar
month within the 12 consecutive calendar months ending
on the related Month-End Date.
"DISCOUNT" means:
(i) for the Portion of Capital of the Purchased Interest for
any Fixed Period to the extent the Issuer will be funding such Portion
of Capital on the first day of such Fixed Period through the issuance of
Notes,
CPR x C x ED + TF
---
360
(ii) for the Portion of Capital of the Purchased Interest for
any Fixed Period to the extent the Issuer will not be funding such
Portion of Capital on the first day of such Fixed Period through the
issuance of Notes,
ED
---
AR x C x 360 + TF
where:
AR = the Alternate Rate for the Portion of Capital of the
Purchased Interest for such Fixed Period
C = the Portion of Capital of the Purchased Interest during
such Fixed Period
CPR = the CP Rate for the Portion of Capital of the Purchased
Interest for such Fixed Period
ED = the actual number of days during such Fixed Period
TF = the Termination Fee, if any, for the Portion of Capital
of the Purchased Interest for such Fixed Period
; PROVIDED that no provision of the Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted
by applicable law; and PROVIDED, FURTHER, that Discount for the Portion
of Capital of the Purchased Interest shall not be considered paid by any
distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"DISCOUNT RATE PERCENTAGE" has the meaning set forth in SECTION 1.4(d)
of the Purchase and Sale Agreement.
"DISCOUNT RESERVE" for the Purchased Interest at any time means the sum
of (i) the Termination Discount at such time for the Purchased Interest,
and (ii) the then accrued and unpaid Discount for the Purchased
Interest.
"DIVIDEND" means in respect of any corporation or any Solectron Party,
as the case may be, (i) cash distributions or any other distributions
on, or in respect of, any class of capital stock of such corporation or
such Solectron Party, as the case may be, except for distributions made
solely in shares of stock of the same class, and (ii) any and all funds,
cash or other payments made in respect of the redemption, repurchase or
acquisition of such stock, unless such stock shall be redeemed or
acquired through the exchange of such stock with stock of the same
class.
"ELIGIBLE RECEIVABLES" means, at any time, Receivables:
(i) the Obligor of which is a United States resident or a
resident of such other jurisdiction as has been approved in writing by
the Administrator, is not an Affiliate of any Solectron Party, is not a
government or a governmental subdivision or agency or instrumentality,
is not declared ineligible by the Administrator, is not subject to any
action of the type described in PARAGRAPH (g) of EXHIBIT V, and is not
an Excluded Obligor;
(ii) which are denominated and payable only in U.S. dollars in the
United States;
(iii) which have a stated maturity and which stated maturity is not
more than 91 days after the customer billing date of such Receivable;
(iv) which arise in the ordinary course of the applicable
Originator's business;
(v) which arise under a Contract which is in full force and
effect and which is a legal, valid and binding obligation of the related
Obligor, enforceable against such Obligor in accordance with its terms;
(vi) which conform with all applicable laws, rulings and
regulations in effect;
(vii) which are not the subject of any asserted dispute (whether or
not in writing), offset, hold back defense, Adverse Claim or other claim
and which do not arise from the sale of inventory which is subject to
any Adverse Claim (other than Permitted Liens of the types described in
CLAUSES (a), (b) and (h) of the definition of Permitted Liens), it being
understood that if a dispute pertains only to a portion of the
Outstanding Balance of an otherwise Eligible Receivable, such portion
shall be reduced in accordance with Section 1.4(e)(i) of the Agreement
and the remaining portion may continue to be characterized as a Eligible
Receivable, subject to satisfying the other requirements of this
definition of Eligible Receivables;
(viii) which comply with the requirements of the Credit and
Collection Policy;
(ix) which arise from the completion of the sale and delivery of
goods or services performed, and which do not represent an invoice in
advance of such completion;
(x) which are not subject to any contingent performance
requirements of the applicable Originator unless such requirements are
guaranteed or insured by third parties acceptable to the Administrator;
(xi) which do not require the consent of the related Obligor to be
sold or assigned;
(xii) which have not been modified or restructured since their
creation, except as permitted pursuant to SECTION 4.2 of the Agreement;
(xiii) (A) to which the applicable Originator has good and
marketable title immediately prior to the sale thereof to the Seller,
and as to which the Seller has good and marketable title, and (B) which,
immediately prior to the applicable Originator's sale thereof to the
Seller, were freely assignable by such Originator and which are freely
assignable by the Seller;
(xiv) for which the Issuer shall have a valid, perfected and
enforceable undivided percentage ownership interest, to the extent of
the Purchased Interest, and for which the Administrator for its benefit
and the benefit of the Issuer shall have a valid and enforceable first
priority perfected security interest therein and in the Related Security
and Collections with respect thereto, in each case free and clear of any
Adverse Claim;
(xv) which constitute "accounts" as defined in the UCC, and which
are not evidenced by instruments or chattel paper;
(xvi) which are not Defaulted Receivables;
(xvii) for which the applicable Originator has established no offset
arrangements with the related Obligor;
(xviii) for which Defaulted Receivables of the related Obligor do not
exceed 25% of all such Obligor's Receivables;
(xix) which do not represent any amounts owing by any Obligor in
respect of sales taxes, interest, late charges, or similar items;
(xx) which meet the eligibility requirements appropriate to the
specific type of Receivables which the Administrator may set based on
aging, turnover, delinquency, loss, dilution, type or other factor that
are necessary to maintain an A-1+/P-1 rating by S&P and Moody's
respectively, on the Notes;
(xxi) the Obligor of which has been instructed to make payment
thereon to a Lock-Box Account or a post office box to which only Lock-
Box Banks have access or otherwise solely in accordance with CLAUSE (j)
of EXHIBIT IV of this Agreement; and
(xxii) with respect to which the Administrator has not directed the
Servicer (whether the Servicer is Solectron or any other Person) to
commence or settle any legal action to enforce collection of such
Receivable or to foreclose upon or repossess any Related Security which
in good faith the Administrator believes that the failure to commence,
settle, or effect such legal action, foreclosure or repossession could
adversely affect Receivables constituting a material portion of the Pool
Receivables;
PROVIDED that, at any time following the date the rating assigned by any
nationally recognized statistical rating agency to the Rated Long Term
Debt of Solectron is withdrawn or reduced to less than Investment Grade,
the Outstanding Balance of any Eligible Receivable shall be reduced by
the aggregate amount of Indebtedness of the applicable Originator owing
to the related Obligor or any of its Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from
time to time. References to sections of ERISA also refer to any
successor sections.
"EURODOLLAR RATE" means, for any Fixed Period, an interest rate per
annum (rounded upward to the nearest 1/16th of 1%) determined pursuant
to the following formula:
Eurodollar Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means, for any Fixed Period,
the maximum reserve percentage (expressed as a decimal, rounded upward
to the nearest 1/100th of 1%) in effect on the date LIBOR for such Fixed
Period is determined under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities") having a term comparable to such Fixed
Period; and
"LIBOR" means the rate of interest per annum determined by the
Liquidity Agent to be the arithmetic mean (rounded upward to the nearest
1/16th of 1%) of the rates of interest per annum notified to the
Liquidity Agent by each Reference Bank as the rate of interest at which
dollar deposits in the approximate amount of the Capital associated with
such Fixed Period would be offered to major banks in the London
interbank market at their request at or about 11:00 a.m. (London time)
on the second Business Day prior to the commencement of such Fixed
Period.
"EXCLUDED OBLIGOR" means an Obligor, so designated from time to time in
writing as such by the Administrator to the Servicer in the event that
the Administrator reasonably considers such Obligor to be unacceptable
due to the credit risk associated with such Obligor or due to the nature
of such Obligor's business, it being understood that from time to time
the Administrator may revoke its designation of one or more Obligors as
Excluded Obligors by written notice to the Servicer.
"EXCLUDED PROPERTY" means any Collections released to Seller pursuant to
SECTION 1.4(b)(iv).
"FACILITY TERMINATION DATE" means the earliest to occur of (a) September
16, 1998, (b) the Purchase Termination Date, as defined in the Liquidity
Asset Purchase Agreement, which on the date of the Agreement is
September 16, 1998, or such later date designated as the Purchase
Termination Date from time to time pursuant to the Liquidity Asset
Purchase Agreement (it being understood that the Administrator shall
notify the Servicer of the designation of such later date, provided that
failure to provide such notice shall not limit or otherwise affect the
obligations of the Servicer or the rights of the Administrator, the
Issuer, or any other party to the Liquidity Asset Purchase Agreement),
(c) the date of termination of the commitment under any other Program
Support Agreement, (d) the date determined pursuant to SECTION 2.2, (e)
the date the Purchase Limit reduces to zero pursuant to SECTION 1.1(b),
and (f) the Purchase and Sale Termination Date under the Purchase and
Sale Agreement.
"FEDERAL FUNDS RATE" means, for any period, the per annum rate 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, "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 will 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, the "Composite 3:30 p.m. Quotation") for
such day under the caption "Federal Funds Effective Rate". If on any
relevant day the appropriate rate for such previous day is not yet
published in either H.15(519) or the Composite 3:30 p.m. Quotations, the
rate for such day will be the arithmetic mean as determined by the
Administrator of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City
selected by the Administrator.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal
functions.
"Final Payout Date" has the meaning set forth in the introductory
paragraph to EXHIBIT IV.
"FIXED PERIOD" means with respect to each Portion of Capital:
(a) with respect to any Portion of Capital, to the extent the Issuer
funds such Portion of Capital by issuing Notes and the Issuer has funded
such Notes on a pooled basis with Other Pooled Sellers (as defined in
the definition of CP Rate), (x) the period commencing on the date of the
initial purchase of such Portion of Capital and ending on the first day
of the immediately succeeding calendar month, and (y) thereafter, each
period commencing on the last day of the immediately preceding Fixed
Period for such Portion of Capital and ending on the first day of the
immediately succeeding calendar month; and
(b) With respect to any Portion of Capital to the extent the Issuer
funds such Portion of Capital by issuing Notes and the Issuer has not
funded such Notes on a pooled basis with Other Pooled Sellers;
(x) initially the period commencing on the date of the initial
purchase of such Portion of Capital and ending such number of days, but
not exceeding 100 days, as the Administrator shall select in
consultation with the Seller and any applicable commercial paper dealer;
and
(y) thereafter such period commencing on the last day of the
immediately preceding Fixed Period for such Portion of the Capital and
ending such number of days, but not exceeding 100 days, as the
Administrator shall select in consultation with Seller and any
applicable commercial paper dealer; and
(c) with respect to any Portion of Capital, to the extent the Issuer
funds such Portion of Capital other than by issuing Notes, (x) initially
the period commencing on the date of a purchase pursuant to SECTION 1.2
and ending such number of days as the Seller shall select, subject to
the approval of the Administrator pursuant to SECTION 1.2, up to one
month after such date; and (y) thereafter each period commencing on the
last day of the immediately preceding Fixed Period for any Portion of
Capital of the Purchased Interest and ending such number of days (not to
exceed one month) as the Seller shall select, subject to the approval of
the Administrator pursuant to SECTION 1.2, on notice by the Seller
received by the Administrator (including notice by telephone, confirmed
in writing) not later than 9:00 a.m. (San Francisco time) on such last
day, EXCEPT that if the Administrator shall not have received such
notice or approved such period on or before 9:00 a.m. (San Francisco
time) on such last day, such period shall be one day; PROVIDED that
(i) any Fixed Period in respect of which Discount is computed by
reference to the Alternate Rate shall be a period from one to and
including 13 days, or a period of one month, as the Seller may select as
provided above;
(ii) any Fixed Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day; PROVIDED, HOWEVER, if Discount in
respect of such Fixed Period is computed by reference to the Eurodollar
Rate, and such Fixed Period would otherwise end on a day which is not a
Business Day, and there is no subsequent Business Day in the same
calendar month as such day, such Fixed Period shall end on the next
preceding Business Day;
(iii) in the case of any Fixed Period of one day, (A) if such Fixed
Period is the initial Fixed Period for a purchase pursuant to SECTION
1.2, such Fixed Period shall be the day of purchase of the Purchased
Interest; (B) any subsequently occurring Fixed Period which is one day
shall, if the immediately preceding Fixed Period is more than one day,
be the last day of such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the day next following
such immediately preceding Fixed Period; and (C) if such Fixed Period
occurs on a day immediately preceding a day which is not a Business Day,
such Fixed Period shall be extended to the next succeeding Business Day;
(iv) in the case of any Fixed Period for any Portion of Capital of
the Purchased Interest which commences before the Termination Date and
would otherwise end on a date occurring after the Termination Date, such
Fixed Period shall end on such Termination Date and the duration of each
Fixed Period which commences on or after the Termination Date shall be
of such duration as shall be selected by the Administrator;
(v) any Fixed Period in respect of which Discount is computed by
reference to the CP Rate may be terminated at the election of, and upon
notice thereof to the Seller by, the Administrator any time upon the
occurrence and during the continuance of any CP Market Disruption Event;
and
(vi) if at any time after the occurrence and during the
continuance of any CP Market Disruption Event, the Administrator elects
to terminate any Fixed Period in respect of which Discount is computed
by reference to the CP Rate, the Portion of Capital allocated to such
terminated Fixed Period shall be allocated to a new Fixed Period to be
designated by the Administrator (but in no event to exceed 5 days) and
shall accrue Discount at the Alternate Rate.
"FUNDING DISCOUNT" has the meaning set forth in SECTION 1.4(c) of the
Purchase and Sale Agreement.
"FUNDING RATE" has the meaning set forth in SECTION 1.4(d) of the
Purchase and Sale Agreement.
"Generally Accepted Accounting Principles" or "generally accepted
accounting principles" means generally accepted accounting principles at
the time in the United States. Except as otherwise expressly provided,
all references to generally accepted accounting principles shall be
applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any body or entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, including without limitation any court,
and any Person owned or controlled, through stock or capital ownership
or otherwise, by any of the foregoing.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of
any other Person (the "PRIMARY OBLIGOR") in any matter, whether directly
or indirectly, and including any obligation of the guarantor, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to
purchase (or to advance or supply funds for the purchase of) any
security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness or other obligation or (d) as
an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; PROVIDED
that the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business.
"GUARANTOR" has the meaning set forth in the preamble of the Purchase
and Sale Agreement.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily
paid (excluding deferred compensation obligations owed to current and
former directors, officers and employees), (d) all obligations of such
Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable, measured in accordance
with generally accepted accounting principles, incurred in the ordinary
course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent
or otherwise to be secured by) any Lien on property owned or acquired by
such Person, whether or not the Indebtedness secured thereby has been
assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect
of letters of credit and letters of guaranty supporting Indebtedness,
(j) all obligations, contingent or otherwise, of such Person in respect
of bankers' acceptances, and (k) all obligations, contingent or
otherwise, with respect to synthetic leases or securitized assets. The
Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of
such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that
such Person is not liable therefor.
"INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 3.1.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 3.1.
"INITIAL PURCHASE DATE" has the meaning set forth in SECTION 1.2 of the
Purchase and Sale Agreement.
"INITIAL PURCHASER" has the meaning set forth in the preamble to the
Purchase and Sale Agreement.
"INITIAL PURCHASER NOTE" has the meaning set forth in SECTION 1.6 of the
Purchase and Sale Agreement.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidations, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshaling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; in each case (a) and (b)
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"INVESTMENT GRADE" means, with respect to the Rated Long Term Debt of
Solectron or any other Person, a rating of at least BBB- by Standard &
Poor's or, with respect to the Rated Long Term Debt of any Person other
than Solectron a rating of at least Baa3 by Moody's, or at least BBB- by
Duff & Phelps Credit Rating Co.; PROVIDED, that if the Rated Long Term
Debt of any Person other than Solectron is rated by more than one of the
foregoing rating agencies, then at least one of such rating agencies
which rates such securities shall have given them a rating at least
equal to the categories specified above; and PROVIDED FURTHER, that if
Solectron or any such other Person does not have Rated Long-Term Debt
outstanding, the Administrator shall have received written materials
reasonably satisfactory to the Administrator prepared by at least one of
such rating agencies to the effect that if such Person did have Rated
Long Term Debt securities outstanding, such securities would receive at
least such a rating.
"ISSUER" has the meaning set forth in the preamble to the Agreement.
"LIEN" means any mortgage, pledge, hypothecation, assignment deposit
arrangement, security interest, encumbrance, lien (statutory or
otherwise) or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement,
any financing or similar statement or notice filed under the UCC or
other similar recording or notice statute, and any lease in the nature
thereof).
"LIQUIDITY AGENT" means Bank of America in its capacity as Liquidity
Agent pursuant to the Liquidity Asset Purchase Agreement.
"LIQUIDITY ASSET PURCHASE AGREEMENT" means that certain Liquidity Asset
Purchase Agreement dated as of September 17, 1997 among Bank of America
and the other financial institutions listed therein as the Purchasers,
Bank of America, as Liquidity Agent and Administrator, and the Issuer,
as amended, supplemented or otherwise modified from time to time.
"LOCK-BOX ACCOUNT" means a bank account subject to a Lock-Box Agreement.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
ANNEX A, among the Seller, one or more Originators, the Servicer, the
Issuer, the Administrator and a Lock-Box Bank.
"LOCK-BOX BANK" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"LOSS DISCOUNT" has the meaning set forth in SECTION 1.4(b) of the
Purchase and Sale Agreement.
"LOSS PERCENTAGE" means, on any date, the greater of (i) the Loss Ratio
on such date, and (ii) 12%.
"LOSS RATIO" means the result (expressed as a percentage), computed as
of each Month-End Date, of (a) 2.0 multiplied by (b) the highest average
of the Sales-Based Default Ratio for any three consecutive calendar
months that occurred during the preceding 12 consecutive calendar months
ending on such Month-End Date multiplied by (c) a fraction having (i) a
numerator equal to the sum of the aggregate amounts payable pursuant to
invoices giving rise to Receivables (without giving effect to any
payments received with respect to such invoices) that were generated by
each Originator during the six calendar months ending on such Month-End
Date, and (ii) a denominator equal to the aggregate Outstanding Balance
of all Eligible Receivables, as of such Month-End Date.
"LOSS RESERVE" means, for the Purchased Interest, on any date, an amount
equal to the greater of:
(a): (LP + DP) x (AER); and
(b): (16.0%) x (AER)
where:
LP = the Loss Percentage for the Purchased Interest on such
date.
DP = the Dilution Percentage for the Purchased Interest on
such date.
AER = the aggregate Outstanding Balance of all Eligible
Receivables at the close of business of the Servicer on
such date.
"MATERIAL INDEBTEDNESS" means Indebtedness, or obligations in respect of
one or more Hedging Agreements, of any one or more of the Solectron
Parties in an aggregate principal amount exceeding $10,000,000. For
purposes of determining Material Indebtedness, the "principal amount" of
the obligations of any Solectron Party in respect of any Hedging
Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that such Solectron Party would be
required to pay if such Hedging Agreement were terminated at such time.
"MONTH-END DATE" means the last day of a calendar month.
"MOODY'S" means Moody's Investors Service, Inc., or any successor
thereto.
"NET RECEIVABLES POOL BALANCE" means at any time the Outstanding Balance
of Eligible Receivables then in the Receivables Pool reduced by the
aggregate amount by which the Outstanding Balance of Eligible
Receivables (other than Defaulted Receivables) of each Obligor then in
the Receivables Pool exceeds the product of (A) the Applicable
Concentration Percentage for such Obligor multiplied by (B) the
Outstanding Balance of the Eligible Receivables then in the Receivables
Pool.
"NORMAL CONCENTRATION PERCENTAGE" for any Obligor means at any time 3%.
"NOTES" means short-term promissory notes issued or to be issued by the
Issuer to fund its investments in accounts receivable or other financial
assets.
"OBLIGOR" means, with respect to any Receivable, the Person obligated to
make payments pursuant to the Contract relating to such Receivable.
"ORIGINATOR" means each of Solectron Corporation and Solectron
California Corporation.
"OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding principal balance thereof.
"PAYMENT DATE" has the meaning set forth in Section 1.3 of the Purchase
and Sale Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than
a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to
which Solectron, Solectron California Corporation or the Seller or any
corporation, trade or business that is, along with Solectron, Solectron
California Corporation or the Seller, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described
in sections 414(b) and 414(c), respectively, of the Internal Revenue
Code of 1986, as amended or section 4001 of ERISA may have any
liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any
time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"PERMITTED LIENS" means:
(a) Liens imposed by law by any Governmental Authority for taxes
that are not yet due or are being contested in compliance with Section
5.04 of the Solectron Credit Agreement;
(b) carriers', warehousemen's, mechanics', material men's,
repairmen's and other like Liens imposed by law, and any other
involuntary, statutory or common law Lien arising in the ordinary course
of business and securing obligations that are not overdue by more than
30 days or are being contested in compliance with Section 5.04 of the
Solectron Credit Agreement;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the
ordinary course of business;
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of any Solectron Party;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under the Solectron
Credit Agreement;
(g) Liens which constitute rights of set-off of a customary nature
or banker's Liens with respect to amounts on deposit arising by
operation of law in connection with arrangements entered into with banks
in the ordinary course of business;
(h) Liens in favor or customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(i) leases or subleases and licenses and sublicenses granted to
others in the ordinary course of business not interfering in any
material respect with the business of any of the Solectron Parties taken
as a whole, and any interest or title of any lessor or licensor under
any lease or license;
PROVIDED that the term "Permitted Liens" shall not include any Lien
securing Indebtedness.
"PERSON" means an individual, partnership, corporation, joint stock
company, trust (including a business trust), unincorporated association,
joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PORTION OF CAPITAL" has the meaning set forth in SECTION 1.7. In
addition, at any time when the Capital of the Purchased Interest is not
divided into two or more portions, "Portion of Capital" means 100% of
the Capital of the Purchased Interest.
"PROGRAM SUPPORT AGREEMENT" means and includes the Liquidity Asset
Purchase Agreement and any other agreement entered into by any Program
Support Provider providing for the issuance of one or more letters of
credit for the account of the Issuer, the issuance of one or more surety
bonds for which the Issuer is obligated to reimburse the applicable
Program Support Provider for any drawings thereunder, the sale by the
Issuer to any Program Support Provider of the Purchased Interest (or
portions thereof) and/or the making of loans and/or other extensions of
credit to the Issuer in connection with the Issuer's securitization
program, together with any letter of credit, surety bond or other
instrument issued thereunder (but excluding any discretionary advance
facility provided by the Administrator).
"PROGRAM SUPPORT PROVIDER" means and includes any Purchaser and any
other or additional Person (other than any customer of the Issuer) now
or hereafter extending credit or having a commitment to extend credit to
or for the account of, or to make purchases from, the Issuer or issuing
a letter of credit, surety bond or other instrument to support any
obligations arising under or in connection with the Issuer's
securitization program.
"PURCHASE AND SALE AGREEMENT" means the Purchase and Sale Agreement
dated as of September 17, 1997 among Solectron California Corporation,
as an Originator, Solectron Corporation, as an Originator, as Guarantor
and as Servicer, and Solectron Funding Corporation, as the Initial
Purchaser, as the same may be amended, amended and restated or otherwise
modified in accordance with its terms.
"PURCHASE AND SALE TERMINATION DATE" means date determined in accordance
with Section 2.3 of the Purchase and Sale Agreement.
"PURCHASE AND SALE TERMINATION EVENT" has the meaning set forth in
Exhibit IV to the Purchase and Sale Agreement.
"PURCHASE DISCOUNT" has the meaning set forth in Section 1.4 of the
Purchase and Sale Agreement.
"PURCHASE LIMIT" means the lesser of (i) $120,000,000, as such amount
may be reduced pursuant to SECTION 1.1(b) and (ii) (A) the aggregate of
the Maximum Liquidity Purchase (as defined in the Liquidity Asset
Purchase Agreement) of the Purchasers under the Liquidity Asset Purchase
Agreement less (B) the aggregate of the Discount of the existing Fixed
Periods (for the entirety of such Fixed Periods), as such amount may be
reduced pursuant to SECTION 1.1(b). References to the unused portion of
the Purchase Limit shall mean, at any time, the Purchase Limit minus the
then outstanding Capital of the Purchased Interest under the Agreement.
"PURCHASE PERIOD" has the meaning set forth in Section 1.3 of the
Purchase and Sale Agreement.
"PURCHASE PRICE" has the meaning set forth in Section 1.3 of the
Purchase and Sale Agreement.
"PURCHASED INTEREST" means, at any time, the undivided percentage
ownership interest in (i) each and every Pool Receivable now existing or
hereafter arising, other than any Pool Receivable that arises on or
after the Facility Termination Date, (ii) all Related Security with
respect to such Pool Receivables, and (iii) all Collections with respect
to, and other proceeds of, such Pool Receivables and Related Security.
Such undivided percentage interest shall be computed as
C + DR + LR + SFR
-----------------
NRB
where:
C = the Capital of the Purchased Interest at the time of
computation.
DR = the Discount Reserve of the Purchased Interest at the
time of computation.
LR = the Loss Reserve of the Purchased Interest at the
time of computation.
SFR = the Servicing Fee Reserve of the Purchased Interest
at the time of computation.
NRB = the Net Receivables Pool Balance at the time of
computation.
The Purchased Interest shall be determined from time to time pursuant to
the provisions of SECTION 1.3.
"PURCHASER" has the meaning set forth in SECTION 5.3(B).
"RATE VARIANCE FACTOR" means a number greater than one that reflects the
potential variance in selected interest rates over a period of time
designated by the Administrator, as reasonably specified by the
Administrator from time to time, notified to the Seller and set forth in
the Seller Report in accordance with the provisions thereof; PROVIDED
that the "Rate Variance Factor" may be changed from time to time upon at
least five days' prior notice by the Administrator to the Servicer.
"RATED LONG TERM DEBT" means, with respect to any Person, at any time,
the long-term, senior, unsecured, noncredit-enhanced debt of such Person
that is rated by any nationally recognized statistical rating agency.
"RATED SHORT TERM DEBT" means, with respect to any Person, at any time,
the short-term, senior, unsecured, noncredit-enhanced debt of such
Person that is rated by any nationally recognized statistical rating
agency.
"RECEIVABLE" means any indebtedness and other obligations owed to any
Originator or any rights of any Originator to payment from or on behalf
of an Obligor whether constituting an account, chattel paper, instrument
or general intangible, arising in connection with the sale or lease of
goods or the rendering of services by such Originator, and includes,
without limitation, the obligation to pay any finance charges, fees and
other charges with respect thereto. Indebtedness and other obligations
arising from any one transaction, including, without limitation,
indebtedness and other obligations represented by an individual invoice
or agreement, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other obligations arising from any
other transaction.
"RECEIVABLES POOL" means at any time all of the then outstanding
Receivables sold or contributed to the Seller pursuant to the Purchase
and Sale Agreement or the Subscription Agreement.
"REFERENCE BANK" means Bank of America.
"RELATED ASSETS" has the meaning set forth in Section 1.1 of the
Purchase and Sale Agreement.
"RELATED SECURITY" means with respect to any Receivable:
(i) all of any Originator's interest in any goods (including
returned goods), and documentation or title evidencing the shipment or
storage of any goods (including returned goods), relating to any sale
giving rise to such Receivable;
(ii) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all UCC financing statements or similar
filings signed by an Obligor relating thereto; and
(iii) the related Contract and all guaranties, indemnities,
insurance and other agreements or arrangements of whatever character
from time to time supporting or securing payment of such Receivable or
otherwise relating to such Receivable whether pursuant to the Contract
related to such Receivable or otherwise.
"RESTRICTED PAYMENTS" has the meaning given thereto in PARAGRAPH (m) of
EXHIBIT IV.
"SALES-BASED DEFAULT RATIO" means the ratio (expressed as a percentage)
computed as of each Month-End Date having (a) a numerator that is the
sum of (i) the aggregate Outstanding Balance of Receivables that
remained outstanding 151 to 180 days after their respective due dates,
as determined as of such Month-End Date, plus (ii) the aggregate
Outstanding Balance of Receivables that were written off as
uncollectible during the most recently ended calendar month and that, if
not so written off, would have been outstanding not more than 180 days
after their respective due dates, as determined as of that Month-End
Date and (b) a denominator that is the aggregate amount payable pursuant
to invoices giving rise to Receivables (without giving effect to any
payments received on such invoices) that were generated by the
Originators during the calendar month that occurred six calendar months
prior to the calendar month ending on such Month-End Date.
"SALES-BASED DILUTION RATIO" means, for any calendar month, the ratio
(expressed as a percentage) having (a) a numerator equal to the
aggregate amount of payments owed by the Seller pursuant to SECTION
1.4(e) during such period and (b) a denominator equal to the aggregate
amounts payable pursuant to invoices giving rise to Receivables (without
giving effect to any payments received with respect to such invoices)
that were generated by the Originators during the preceding calendar
month (so that, for example, if the calendar month specified in CLAUSE
(a) corresponds to the month of March, the calendar month in this CLAUSE
(b) would be the one corresponding to the month of February).
"SELLER" has the meaning set forth in the preamble to the Agreement.
"SELLER REPORT" means a report, in form and substance satisfactory to
the Administrator, furnished by the Servicer to the Administrator
pursuant to the Agreement.
"SERVICER" has the meaning set forth in the preamble to the Agreement.
"SERVICER'S FEE PERCENTAGE" has the meaning set forth in Section 1.4(d)
of the Purchase and Sale Agreement.
"SERVICING FEE" shall mean the fee referred to in SECTION 4.6.
"SERVICING FEE RESERVE" for the Purchased Interest at any time means the
sum of (i) the unpaid Servicing Fee relating to the Purchased Interest
accrued to such time, plus (ii) an amount equal to (a) the Capital of
the Purchased Interest at the time of computation multiplied by (b) the
product of (x) the percentage per annum at which the Servicing Fee is
accruing on such date and (y) a fraction having as its numerator the
product of (i) the Average Maturity (as in effect on such date) times
(ii) 2.0 and 360 as its denominator.
"SETTLEMENT PERIOD" for each Portion of Capital means each period
commencing on the first day and ending on the last day of each Fixed
Period for such Portion of Capital and, on and after the Termination
Date, such period (including, without limitation, a period of one day)
as shall be selected from time to time by the Administrator or, in the
absence of any such selection, each period of 30 days from the last day
of the immediately preceding Settlement Period.
"SOLECTRON" has the meaning set forth in the preamble to the Agreement.
"SOLECTRON CREDIT AGREEMENT" shall mean the Credit Agreement dated as
of May 1, 1997, among Solectron, the banks party thereto, Bank of
America, as agent and issuing bank, and BancAmerica Securities, Inc., as
arranger, as amended, supplemented or otherwise modified from time to
time.
"SOLECTRON PARTY" means Solectron (whether acting as an Originator, as
Guarantor or Servicer), Solectron California Corporation, the Seller or
any of their respective Affiliates.
"SOLVENT" means, as to any Person at any time, that (a) the fair value
of the property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(32) of the Bankruptcy Code and, in the
alternative, for purposes of applicable state fraudulent conveyance law;
(b) the present fair saleable value of the property of such Person is
not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its property and pay
its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of
business; (d) 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 (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute
unreasonably small capital.
"STANDARD & POOR'S" or "S&P" means Standard & Poor's Rating Services, a
division of The McGraw Hill Companies, Inc., or any successor thereto.
"SUBSCRIPTION AGREEMENT" is defined in PARAGRAPH 1(c) of Exhibit I to
the Purchase and Sale Agreement.
"TANGIBLE NET WORTH" means total stockholders' equity minus goodwill,
patents, trade names, trade marks, copyrights, franchises,
organizational expense, deferred assets other than prepaid insurance and
prepaid taxes and such other assets as are properly classified as
"intangible assets", for any corporation as determined in accordance
with generally accepted accounting principles.
"TERMINATION DATE" means the earlier of (i) the Business Day which the
Seller so designates by notice to the Administrator at least five days
in advance and (ii) the Facility Termination Date.
"TERMINATION DAY" means (i) each day on which the conditions set forth
in SECTION 2 of EXHIBIT II are not satisfied and (ii) each day which
occurs on or after the Termination Date.
"TERMINATION DISCOUNT" means, for the Purchased Interest on any date, an
amount equal to the Rate Variance Factor on such date multiplied by the
product of (i) the Capital of the Purchased Interest on such date and
(ii) the product of (a) the Base Rate for the Purchased Interest for a
30-day Fixed Period deemed to commence on such date and (b) a fraction
having as its numerator the product of (i) the Average Maturity (as in
effect on such date) times (ii) 2.0 and 360 as its denominator.
"TERMINATION EVENT" has the meaning specified in EXHIBIT V.
"TERMINATION FEE" means, for any Fixed Period during which a Termination
Day occurs, the amount, if any, by which (i) the additional Discount
(calculated without taking into account any Termination Fee or any
shortened duration of such Fixed Period pursuant to CLAUSE (c)(iv) of
the definition thereof) which would have accrued during such Fixed
Period on the reductions of Capital of the Purchased Interest relating
to such Fixed Period had such reductions remained as Capital, exceeds
(ii) the income, if any, received by the Issuer from the Issuer
investing the proceeds of such reductions of Capital, as reasonably
determined by the Administrator, which determination shall be binding
and conclusive for all purposes, absent manifest error.
"TRANSACTION DOCUMENTS" means the Agreement, the Purchase and Sale
Agreement, the Lock-Box Agreements, the Liquidity Asset Purchase
Agreement, the Initial Purchaser Note, the Subscription Agreement and
all other certificates, instruments, UCC financing statements, reports
required under the Transaction Documents, notices and agreements
executed or delivered under or in connection with the Agreement, in each
case as the same may be amended, amended and restated or otherwise
modified from time to time in accordance with their respective terms
and, if applicable, in accordance with the terms of the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"UNMATURED TERMINATION EVENT" means, with respect to the Purchase and
Sale Agreement or the Agreement, an event which, with the giving of
notice or lapse of time, or both, would constitute a Purchase and Sale
Termination Event or a Termination Event, as the case may be.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
OTHER TERMS. All accounting terms not specifically defined in the
Agreement or in any other Transaction Document shall be construed in
accordance with generally accepted accounting principles. All terms
used in Article 9 of the UCC in effect in the State of California, and
not specifically defined in the Agreement or in any other Transaction
Document, are used herein as defined in such Article 9. Unless the
context otherwise requires, when used in the Agreement or in any other
Transaction Document, "or" means "and/or", and "including" (and with
correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.
<PAGE>
EXHIBIT II
CONDITIONS OF PURCHASES
1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial purchase
under the Agreement is subject to the conditions precedent that the
Administrator shall have received on or before the date of such purchase
the following, each in form and substance (including the date thereof)
satisfactory to the Administrator:
(a) A duly executed counterpart of this Agreement.
(b) A duly executed counterpart of the Purchase and Sale Agreement.
(c) Certified copies of (i) the resolutions of the Board of
Directors of each of Solectron California Corporation, the Seller and
Solectron Corporation (as an Originator, as Servicer and as Guarantor)
authorizing the execution, delivery, and performance by Solectron
California Corporation, the Seller and Solectron Corporation (as an
Originator, as Servicer and as Guarantor), respectively, of the
Agreement and the other Transaction Documents, (ii) all documents
evidencing other necessary corporate action and governmental approvals,
if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of each
of Solectron California Corporation, the Seller and the Solectron
Corporation.
(d) A certificate of the Secretary or Assistant Secretary of
Solectron California Corporation, the Seller and Solectron Corporation
certifying the names and true signatures of the officers of Solectron
California Corporation, the Seller and Solectron Corporation,
respectively, authorized to sign the Transaction Documents to which it
is party. Until the Administrator receives a subsequent incumbency
certificate from Solectron California Corporation, the Seller or
Solectron Corporation in form and substance satisfactory to the
Administrator, the Administrator shall be entitled to rely on the last
such certificate delivered to it by Solectron California Corporation,
the Seller or Solectron Corporation, as the case may be.
(e) Acknowledgment copies, or time stamped receipt copies, of proper
UCC financing statements, duly filed on or before the date of such
initial purchase under the UCC of all jurisdictions that the
Administrator may deem necessary or desirable in order to perfect the
interests of the Seller, the Administrator and the Issuer contemplated
by the Agreement and the Purchase and Sale Agreement.
(f) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, if any, necessary to release all security
interests and other rights of any Person in the Receivables, Contracts
or Related Security previously granted by the Seller and each
Originator.
(g) Completed UCC requests for information, dated on or before the
date of such initial purchase, listing the financing statements referred
to in SUBSECTION (e) above and all other effective financing statements
filed in the jurisdictions referred to in SUBSECTION (e) above that name
the Seller or an Originator as debtor, together with copies of such
other financing statements (none of which shall cover any Receivables,
Contracts or Related Security), and similar search reports with respect
to federal tax liens and liens of the PBGC and judgment liens in such
jurisdictions as the Administrator may request, showing no such liens on
any of the Receivables, Contracts or Related Security.
(h) Copies of executed Lock-Box Agreements with the Lock-Box Banks.
(i) A favorable opinion of Wilson Sonsini Goodrich & Rosati, counsel
for Solectron California Corporation, the Seller and Solectron
Corporation (as an Originator, as Servicer and Guarantor), as to
corporate matters, security interests (including perfection and
priority), and as to such other matters as the Administrator may
reasonably request.
(j) A favorable opinion of Murphy, Wier & Butler, as to true sale
and substantive consolidation.
(k) Satisfactory results of a review and audit of each Originator's
and the Servicer's collection, operating and reporting systems, Credit
and Collection Policy, historical receivables data and accounts,
including satisfactory results of a review of each Originator's and the
Servicer's operating location(s) and satisfactory review and approval of
the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(l) A completed Seller Report representing the performance of the
Receivables for the month prior to closing.
(m) Evidence of payment by each Originator, Solectron and the Seller
of all accrued and unpaid fees (including those contemplated by the
letter agreement referred to in SECTION 1.5), costs and expenses to the
extent then due and payable on the date thereof, together with Attorney
Costs of the Administrator to the extent invoiced prior to or on such
date, plus such additional amounts of Attorney Costs as shall constitute
the Administrator's reasonable estimate of Attorney Costs incurred or to
be incurred by it through the closing proceedings (provided that such
estimate shall not thereafter preclude final settling of accounts
between such Persons and the Administrator) and, without limiting the
foregoing, including any such costs, fees and expenses arising under or
referenced in SECTION 5.4.
(n) A letter agreement between the Seller and the Administrator
contemplated by SECTION 1.5.
(o) Good standing certificates with respect to each of Solectron
California Corporation, the Seller and the Servicer issued by the
Secretaries of the States of California and (with respect to the Seller
and Solectron) Delaware.
(p) A certificate from an officer of Solectron California
Corporation to the effect that the Seller has a Tangible Net Worth of at
least $20,000,000.
(q) Such other approvals, opinions or documents as the Administrator
or Purchasers may reasonably request.
2. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS. Each
purchase (including the initial purchase) and each reinvestment shall be
subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered
to the Administrator on or prior to such purchase, in form and substance
satisfactory to the Administrator, a completed Seller Report with
respect to the immediately preceding calendar month, dated within 10
days prior to the date of such purchase together with a listing by
Obligor of all Receivables and such additional information as may
reasonably be requested by the Administrator;
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such
purchase or reinvestment shall be deemed a representation and warranty
by the Seller that such statements are then true):
(i) the representations and warranties contained in PARAGRAPHS
(e), (f), (h), (i), (j), (k), (o), (q), (r) and (t) of EXHIBIT III are
true and correct on and as of the date of such purchase or reinvestment
as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes a Termination Event or
that would constitute a Termination Event but for the requirement that
notice be given or time elapse or both; and
(c) the Administrator shall have received such other approvals,
opinions or documents as it may reasonably request.
<PAGE>
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer, represents and warrants as follows
with respect to itself and its respective properties, as applicable:
(a) It is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware in the case of the
Servicer, and is duly qualified to do business and is in good standing
in every other jurisdiction where the failure to so qualify could
reasonably be expected to result in a material adverse effect on its
business, assets, operations, prospects or condition, financial or
otherwise, and those of any of its subsidiaries taken as a whole, its
ability to perform its obligations under the Agreement, or the rights of
or benefits available under any Transaction Document to the Issuer or
the Administrator.
(b) The execution, delivery and performance by it of the Agreement
and the other Transaction Documents to which it is a party, including,
in the case of the Seller, the Seller's use of the proceeds of purchases
and reinvestments, (i) are within its corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not
contravene or result in a default under or conflict with (1) its charter
or by-laws, (2) any material law, rule or regulation applicable to it,
(3) any contractual restriction binding on or affecting it or its
property (including, without limitation the Solectron Credit Agreement)
or (4) any order, writ, judgment, award, injunction or decree binding on
or affecting the Seller or its property, and (iv) do not result in or
require the creation of any Adverse Claim upon or with respect to any of
its properties. The Agreement and the other Transaction Documents to
which it is a party have been duly executed and delivered by it.
(c) No authorization or approval or consent or other action by, and
no notice to or filing with, any Governmental Authority or other Person
is required for the due execution, delivery and performance by it of the
Agreement or any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction Documents to
which it is a party constitutes the legal, valid and binding obligation
of it enforceable against it in accordance with its terms.
(e) The balance sheets of Solectron and its subsidiaries, in each
case as at September 31, 1996, and the related statements of income and
retained earnings of the Servicer and its subsidiaries, in each case for
the fiscal year then ended, copies of which have been furnished to the
Administrator, fairly present the financial condition of the Servicer
and its subsidiaries, as at such date and the results of the operations
of the Servicer and its subsidiaries, for the period ended on such date,
all in accordance with generally accepted accounting principles
consistently applied, and since September 31, 1996 there has been no
material adverse change in the business, operations, property or
financial or other condition or operations of the Servicer or any of its
subsidiaries, the ability of the Servicer to perform its obligations
under the Agreement or the other Transaction Documents or, in the case
of the Seller, the collectibility of the Receivables, or which affects
the legality, validity or enforceability of the Agreement or the other
Transaction Documents.
(f) There is no pending or threatened action or proceeding affecting
the Seller or the Servicer or any of its subsidiaries before any
Governmental Authority or arbitrator (x) which could materially
adversely affect (i) the business, operations, prospects, property,
financial or other condition or operations of the Seller or the Servicer
or any of its subsidiaries, (ii) the ability of the Seller or the
Servicer to perform its obligations under the Agreement or the other
Transaction Documents, (iii) the ability of Solectron to pay its
obligations under the Solectron Credit Agreement or (iv) the
collectibility of the Receivables, or (y) which affects or purports to
affect the legality, validity or enforceability of the Agreement or the
other Transaction Documents.
(g) No proceeds of any purchase or reinvestment in respect of the
Purchased Interest will be used to acquire any equity security of a
class which is registered or required to be registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
(h) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security free and clear of any Adverse Claim;
upon each purchase or reinvestment, the Issuer shall acquire a valid and
enforceable perfected undivided percentage ownership interest, to the
extent of the Purchased Interest, in each Pool Receivable then existing
or thereafter arising and in the Related Assets with respect thereto,
free and clear of any Adverse Claim; the Agreement creates a security
interest in favor of the Administrator, on its behalf and on behalf of
the Issuer, in Seller's right, title and interest in, to and under the
items described in SECTION 1.2(d), and the Administrator, on its behalf
and on behalf of the Issuer, has a first priority perfected security
interest in such items, free and clear of any Adverse Claims. Each
Receivable constitutes an "account" as such term is defined in the UCC.
No effective financing statement or other instrument similar in effect
covering any Contract or any Pool Receivable or Related Asset or any
Lock-Box Account (or other item covered by SECTION 1.2(d) of the
Agreement) is on file in any recording office, except those filed in
favor of the Administrator relating to the Agreement.
(i) Each Seller Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is
supplied by the Seller or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished
at any time by or on behalf of the Seller to the Administrator in
connection with the Agreement is or will be accurate in all material
respects as of its date or (except as otherwise disclosed to the
Administrator at such time) as of the date so furnished, and no such
item contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make
the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(j) The principal place of business and chief executive office (as
such terms are used in the UCC) of the Seller and the office where the
Seller keeps its records concerning the Receivables are located at the
address referred to in PARAGRAPH (b) of EXHIBIT IV.
(k) The names and addresses of all the Lock-Box Banks, together with
the account numbers of the Lock-Box Accounts, are specified in SCHEDULE
II to the Agreement (or at such other Lock-Box Banks and/or with such
other Lock-Box Accounts as have been notified to the Administrator in
accordance with the Agreement). The Lock-Box Banks have complied with
all of the terms of the Lock-Box Agreements.
(l) It is not in violation of any order of any court, arbitrator or
Governmental Authority.
(m) Neither it nor any of its Affiliates of has any direct or
indirect ownership or other financial interest in the Issuer.
(n) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including,
without limitation, Regulations G or U of the Federal Reserve Board.
(o) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance, exists and is an
Eligible Receivable as of the date of such calculation.
(p) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of the Purchased
Interest or from the application of the proceeds therefrom, which
constitutes a Termination Event.
(q) The Seller has accounted for each sale of undivided percentage
ownership interests in Receivables in its books and financial statements
as sales, consistent with Generally Accepted Accounting Principles.
(r) It has complied in all material respects with the Credit and
Collection Policy with regard to each Pool Receivable.
(s) It has complied with all of the terms, covenants and agreements
contained in the Agreement and the other Transaction Documents and
applicable to it.
(t) It is Solvent; and at the time of (and immediately after) each
purchase and reinvestment by the Purchaser, it shall have been Solvent.
(u) The Seller's complete corporate name is set forth in the
preamble to the Agreement, and the Seller does not use and has not
during the last six years used any other corporate name, trade name,
doing business name or fictitious name, except as set forth on SCHEDULE
III and except for names first used after the date of the Agreement and
set forth in a notice delivered to the Administrator pursuant to
PARAGRAPH (b)(ii) of EXHIBIT IV.
(v) The Seller is not, and is not controlled by, an "investment
company" registered or required to be registered under the Investment
Company Act of 1940, as amended.
<PAGE>
EXHIBIT IV
COVENANTS
COVENANTS OF THE SELLER AND THE SERVICER. Until the latest of the
Facility Termination Date, the date on which no Capital of or Discount
in respect of the Purchased Interest shall be outstanding and the date
all other amounts (other than in respect of unasserted indemnity claims)
owed by the Seller under the Agreement to the Issuer, the Administrator
and any other Indemnified Party or Affected Person shall be paid in full
(such latest date being referred to as the "Final Payout Date"), each of
the Seller and the Servicer covenants and agrees, with respect to
itself, as follows:
(a) COMPLIANCE WITH LAWS, ETC. It shall comply in all material
respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so
to comply with such laws, rules and regulations or the failure so to
preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect the
collectibility of the Receivables or the enforceability of any related
Contract or its ability to perform its obligations under any related
Contract or under the Agreement.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT; CHANGE OF NAME, IDENTITY,
CORPORATE STRUCTURE; ETC. In the case of the Seller, it
(i) shall keep its principal place of business and chief
executive office (as such terms are used in the UCC) and the office
where it keeps its records concerning the Receivables at the address set
forth under its name on the signature page to the Agreement or, upon at
least 30 days' prior written notice of a proposed change to the
Administrator, at any other locations in jurisdictions where all actions
reasonably requested by the Administrator to protect and perfect the
interests of the Administrator and the Issuer in the Receivables and
related items (including without limitation the items described in
SECTION 1.2(d)) have been taken and completed; and
(ii) shall provide the Administrator with at least 30 days'
written notice prior to making any change in its name or making any
other change in its identity or corporate structure (including a merger)
which could render any UCC financing statement filed in connection with
this Agreement "seriously misleading" as such term is used in the UCC;
each notice to the Administrator pursuant to this sentence shall set
forth the applicable change and the effective date thereof.
Each of the Seller and Servicer also will maintain and implement
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Receivables and related
Contracts in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records, computer tapes and
disks and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records
adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND
COLLECTION POLICY. It shall, at its expense, cause each Originator to
timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by such Originator
under the Contracts related to the Pool Receivables, and timely and
fully comply in all material respects with the Credit and Collection
Policy with regard to each Receivable and the related Contract.
(d) OWNERSHIP INTEREST, ETC. It shall, at its expense, take all
action necessary or desirable to establish and maintain a valid and
enforceable and perfected undivided ownership interest, to the extent of
the Purchased Interest, in the Pool Receivables and the Related Assets
with respect thereto, and a first priority perfected security interest
in the items described in SECTION 1.2(d), in each case free and clear of
any Adverse Claim, in favor of the Administrator and the Issuer,
including, without limitation, filing UCC financing statements and
taking such other action to perfect, protect or more fully evidence the
interest of the Administrator and the Issuer under the Agreement as the
Administrator or the Issuer, through the Administrator, may reasonably
request.
(e) SALES, LIENS, ETC. The Seller shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Adverse Claim upon or with respect to, any or all of
its right, title or interest in, to or under, any item described in
SECTION 1.2(d) including without limitation the Seller's undivided
interest in any Receivable, Related Security, or Collections, or upon or
with respect to any account to which any Collections of any Pool
Receivables are sent, or assign any right to receive income in respect
of any items contemplated by this PARAGRAPH (e).
(f) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as provided in
SECTION 4.2(a) of the Agreement, it shall not extend the maturity or
adjust the Outstanding Balance or otherwise modify the terms of any Pool
Receivable or amend, modify or waive any term or condition of any
related Contract.
(g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. It shall
not make any material change in the character of its business or in the
Credit and Collection Policy, that would adversely affect the
collectibility of the Receivables Pool or the enforceability of any
related Contract or the ability of each Originator to perform its
obligations under any related Contract or the ability of each Seller or
the Servicer to perform its obligations under the Agreement without the
prior written consent of the Administrator.
(h) AUDITS. It shall, from time to time during regular business
hours with prior written notice to it as reasonably requested by the
Administrator, permit the Administrator, or its agents or
representatives, (i) to examine and make copies of and make abstracts
from all books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under its control
relating to Receivables and the Related Assets (including, without
limitation, the related Contracts and any such books, records and
documents relating to the identification of Obligors and agings, charge-
offs, offsets and delinquencies of Receivables), and (ii) to visit its
offices and properties for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to
Receivables and the Related Assets or its performance hereunder or under
the Contracts with any of its officers, employees, agents or contractors
having knowledge of such matters.
(i) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT
INSTRUCTIONS TO OBLIGORS. It shall not add or terminate any bank as a
Lock-Box Bank or any account as a Lock-Box Account from those listed in
Schedule II to the Agreement, or make any change in its instructions to
Obligors regarding payments to be made to any Lock-Box Account (or
related post office box), unless the Administrator shall have consented
thereto in writing and the Administrator shall have received copies of
all agreements and documents (including without limitation Lock-Box
Agreements) that it may request in connection therewith.
(j) DEPOSITS TO LOCK-BOX ACCOUNTS. It shall (i) instruct all
Obligors to make payments of all Receivables only to one or more Lock-
Box Accounts or to post office boxes which are covered by a Lock-Box
Agreement and to which only Lock-Box Banks have access, provided that,
consistent with its efforts to maximize Collections and its month-end
collection practices in effect as of the date of the Agreement, it may
permit Obligors to make payments on Receivables directly to the
applicable Originator so long as the Rated Long Term Debt of Solectron
is Investment Grade or otherwise with the prior written consent of the
Administrator, (ii) instruct and cause the Lock-Box Banks to cause all
items and amounts relating to such Receivables received in such post
office boxes to be removed and deposited into a Lock-Box Account on a
daily basis, and (iii) deposit, or cause to be deposited, any
Collections of Pool Receivables received by it into Lock-Box Accounts
not later than three Business Days after receipt thereof. It will not
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Pool Receivables or interest accruing on amounts held in
such accounts.
(k) MARKING OF RECORDS. It shall, at its expense, mark its master
data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided
percentage ownership interests with regard to the Purchased Interest
related to such Receivables and related Contracts have been sold in
accordance with the Agreement.
(l) REPORTING REQUIREMENTS. It shall provide to the Administrator
(in multiple copies, if requested by the Administrator) the following:
(i) as soon as available and in any event within 45 days after
the end of the first three quarters of each fiscal year of the Seller
and the Servicer, balance sheets of Solectron, Solectron California
Corporation and the Seller and of Solectron and its subsidiaries on a
consolidated basis as of the end of such quarter, and statements of
income and retained earnings of each of Solectron and Solectron
California Corporation individually and of Solectron and its
subsidiaries on a consolidated basis, for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer of each of Solectron California
Corporation, the Seller and Solectron;
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of Solectron, a copy of the annual report
for such year for Solectron and its subsidiaries, containing financial
statements for such year audited by KPMG Peat Marwick or other
independent certified public accountants of national reputation;
(iii) as soon as available and in any event not later than the
tenth calendar day of each month or, if such day is not a Business Day,
the first Business Day thereafter, a Seller Report as of the previous
Month-End Date;
(iv) on the first Business Day of each calendar week, a report
with respect to Solectron's accounts payable as of the last Business Day
of the preceding week, in form and substance satisfactory to the
Administrator, if the rating on the Rated Long Term Debt of Solectron is
no longer Investment Grade;
(v) as soon as possible and in any event within five days after
the occurrence of each Termination Event or event which, with the giving
of notice or lapse of time, or both, would constitute a Termination
Event, a statement of the chief financial officer of the Servicer, the
Seller or Solectron California Corporation setting forth details of such
Termination Event or event and the action that the Seller or Solectron
California Corporation, as the case may be, has taken and proposes to
take with respect thereto;
(vi) promptly after the sending or filing thereof, copies of all
reports that the Servicer, the Seller, Solectron California Corporation
or any of its Subsidiaries sends to any of its security holders, and
copies of all reports and registration statements that the Seller,
Solectron California Corporation, Solectron or any of its subsidiaries
files with the Securities and Exchange Commission or any national
securities exchange;
(vii) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller, Solectron California Corporation,
Solectron or any Affiliate files under ERISA with the Internal Revenue
Service or the PBGC or the U.S. Department of Labor or that the Seller,
Solectron California Corporation, Solectron or any Affiliate receives
from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller, Solectron
California Corporation, Solectron or any Affiliate is or was, within the
preceding five years, a contributing employer, in each case in respect
of the assessment of withdrawal liability or an event or condition which
could, in the aggregate, result in the imposition of liability on the
Seller, Solectron California Corporation, Solectron and/or any such
Affiliate in excess of $5,000,000;
(viii) at least thirty days prior to any change in the Seller's or
an Originator's name, or any other change requiring the amendment of UCC
financing statements or the filing of new UCC financing statements in
order to maintain the perfection and priority of the security interest
granted pursuant to SECTION 1.2 of the Agreement, a notice setting forth
such changes and the effective date thereof;
(ix) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller,
Solectron California Corporation, Solectron or any of their respective
Affiliates as the Administrator may from time to time reasonably
request;
(x) promptly after the Seller or the Servicer obtains knowledge
thereof, notice of any (a) litigation, investigation or proceeding which
may exist at any time involving any Solectron Party and any Governmental
Authority which, if not cured or if adversely determined, as the case
may be, would have a material adverse effect (i) on the business,
operations, property or financial or other condition of Solectron or any
of its subsidiaries or (ii) upon the ability of Solectron or any of its
subsidiaries to pay any Indebtedness or (iii) upon the Receivables Pool
or (iv) upon the Seller's receipt of or right to receive Collections; or
(b) litigation or proceeding adversely affecting any Solectron Party or
in which the amount involved is $5,000,000 or more and not covered by
insurance or in which injunctive or similar relief is sought or (c)
litigation or proceeding relating to any Transaction Document; and
(xi) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or
other condition of the Seller or any other Solectron Party.
(m) GENERAL RESTRICTIONS. On and after the Initial Purchase Date,
(i) RESTRICTED PAYMENTS. the Seller shall not (A) pay or declare
any Dividend, (B) lend or advance any funds, or (C) repay any loans or
advances to, for or from any Solectron Party, or (D) make any payments
in respect of the purchase price of Receivables and Related Assets under
the Purchase and Sale Agreement, except in accordance with CLAUSE (o) of
this EXHIBIT IV and this CLAUSE (m). Actions of the type described in
the preceding sentence are herein collectively called "RESTRICTED
PAYMENTS";
(ii) TYPES OF PERMITTED PAYMENTS. subject to the limitations set
forth in CLAUSE (o) below, the Seller may declare and pay Dividends to
any shareholder (provided, that payment of such Dividends must comply
with applicable law; and PROVIDED, FURTHER, that Dividends may not be
paid more frequently than permitted by applicable law;
(iii) ADDITIONAL SPECIFIC RESTRICTIONS. the Seller may make
Restricted Payments only out of Collections paid or released to the
Seller pursuant to SECTIONS 1.4(b)(ii) or 1.4(b)(iv) of the Agreement,
from the proceeds of any Purchased Interest, from the original paid in
capital of the Seller, or from other net income of the Seller; provided,
however, that the Seller shall not pay, make or declare;
(A) any Dividend if, after giving effect thereto, the Seller's
Tangible Net Worth would be less than $20,000,000;
(B) any Restricted Payment if, after giving effect thereto, a
Termination Event or Unmatured Termination Event shall have occurred and
be continuing; or
(C) any Restricted Payment if, after giving effect thereto, the
Seller would not be Solvent.
(n) ERISA MATTERS. It shall notify the Administrator as soon as is
practicable and in any event not later than two Business Days after
(i) the institution of any steps by it or any other Person to terminate
any Pension Plan which is not fully funded, unless adequate reserves
have been set aside for the funding thereof, (ii) the failure to make a
required contribution to any Pension Plan if such failure is sufficient
to give rise to a lien under section 302(f) of ERISA, (iii) the taking
of any action with respect to a Pension Plan which could result in the
requirement that any Solectron Party furnish a bond or other security to
the PBGC or such Pension Plan or (iv) the occurrence of any other event
concerning any Pension Plan which is reasonably likely to result in a
material adverse effect on the business, operations, property or
financial or other condition of any Solectron Party.
(o) MERGERS, ACQUISITIONS, SALES, INVESTMENTS, ETC. It shall cause
the Seller not to:
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person,
(ii) sell, transfer, convey or lease any of its assets other than
pursuant to or as expressly permitted by this Agreement, or
(iii) make, incur or suffer to exist any investment in, equity
contribution to, loan or advance to, or payment obligation in respect of
the deferred purchase price of property from, any other Person, except
as expressly contemplated by this Agreement and the Purchase and Sale
Agreement.
<PAGE>
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a) The Servicer shall fail to deliver the Seller Report pursuant to
the Agreement and such failure shall remain unremedied for five days, or
(ii) the Seller shall fail to make any payment required under the
Agreement and such failure shall remain unremedied for two Business
Days; or
(b) The Servicer shall fail (i) to transfer to any successor
Servicer when required any rights, pursuant to the Agreement, which the
Servicer then has, or (ii) to make any payment required under the
Agreement; or
(c) Any representation or warranty made or deemed made by the
Seller or the Servicer (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document or any
information or report delivered by the Seller or the Servicer pursuant
to the Agreement shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered; or
(d) The Seller or the Servicer shall fail to perform or observe (i)
any term, covenant or agreement contained in PARAGRAPHS (d), (e), (f),
(g), (i), (j), (m), (n) or (o) of EXHIBIT IV to the Agreement and, in
the case of any such failure with respect to PARAGRAPHS (i) or (j) that
is solely the result of the termination of the applicable Lockbox
Agreement by Bank of America National Trust and Savings Assocation, such
failure shall remain unremedied for fourteen (14) days, (ii) any term,
covenant or agreement contained in PARAGRAPH (l) of EXHIBIT IV to the
Agreement and such failure shall remain unremedied for five days, or
(iii) any other term, covenant or agreement contained in the Agreement
or any other Transaction Document on its part to be performed or
observed and any such failure shall remain unremedied for thirty (30)
days; or
(e) Any Solectron Party shall be in default with respect to any
payment (whether or principal or interest and regardless of amount) in
respect of any Material Indebtedness and such failure shall continue
beyond the applicable grace period specified in the agreement or
instrument relating to such Material Indebtedness or any Solectron Party
shall default in any obligation under any Material Indebtedness and such
failure shall result in such Material Indebtedness being declared to be
due and payable prior to the stated maturity thereof; or
(f) The Agreement or any purchase or any reinvestment pursuant to
the Agreement shall for any reason (other than pursuant to the terms
hereof) (i) cease to create, or the Purchased Interest shall for any
reason cease to be, a valid and enforceable first priority perfected
undivided percentage ownership interest to the extent of the Purchased
Interest in each Pool Receivable and the Related Security and
Collections and other proceeds with respect thereto, free and clear of
any Adverse Claim or (ii) cease to create with respect to the items
described in SECTION 1.2(d), or the interest of the Administrator, on
its behalf and on behalf of the Issuer, with respect to such items shall
cease to be, a valid and enforceable first priority perfected security
interest, free and clear of any Adverse Claim; or
(g) Solectron or the Seller shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against
Solectron or Seller seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period
of 30 days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or
Solectron or the Seller shall take any corporate action to authorize any
of the actions set forth above in this PARAGRAPH (g); or
(h) As of any Month-End Date on and after the Initial Purchase Date,
(i) the average Sales-Based Dilution Ratio for the three months ended on
such Month-End Date shall exceed 9%, (ii) the average Sales-Based
Default Ratio for the three months ended on such Month-End Date shall
exceed 4% or (iii) the average Delinquency Ratio for the three months
ended on such Month-End Date shall exceed 6%; or
(i) The Purchased Interest shall exceed 100% and such condition
shall have continued for a period of five (5) Business Days following
the earlier of (x) the Servicer's knowledge of such condition and (y)
notice to the Servicer by the Administrator of the occurrence of such
condition; or
(j) An "Event of Default", as defined in the Solectron Credit
Agreement, shall occur and be continuing, or, if the Solectron Credit
Agreement (or the commitments of the lenders thereunder) has expired,
been terminated or is otherwise not in full force and effect, an "Event
of Default" as defined in the Solectron Credit Agreement, as in effect
at the time immediately preceding such expiration, termination or
failure to be in full force and effect, would have occurred and been
continuing if the Solectron Credit Agreement had not so expired,
terminated or failed to be in full force and effect; or
(k) On and after the Initial Purchase Date, the Tangible Net Worth
of Seller shall at anytime be less than $20,000,000; or
(l) Any Change of Control shall occur or Solectron and Solectron
California Corporation shall not own, directly or indirectly, 100% of
all issued and outstanding capital stock of the Seller; or
(m) If Solectron has any Rated Long Term Debt outstanding, the
rating assigned by S&P shall at any time be withdrawn or be less than
"BB"; or
(n) A Purchase and Sale Termination Event shall have occurred.
<PAGE>
SCHEDULE I
CREDIT AND COLLECTION POLICY
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
LOCK-BOX BANK LOCK-BOX ACCOUNT
Bank of America National Trust
and Savings Association
<PAGE>
SCHEDULE III
TRADE NAMES
<PAGE>
ANNEX A
FORM OF LOCK-BOX AGREEMENT
AGREEMENT RELATING TO LOCKBOX SERVICES
This Agreement is entered into as of September __, 1997 among Solectron
California Corporation ("SCC"), Solectron Corporation ("SOLECTRON" and
together with SCC, the "ORIGINATORS)', Solectron Funding Corporation
("SELLER"), Receivables Capital Corporation ("PURCHASER"), Bank of
America National Trust and Savings Association, as administrator for
Purchaser ("ADMINISTRATOR"), and Bank of America National Trust and
Savings Association ("BANK") with respect to the following:
A. Solectron and Bank have agreed to the Standard Terms and
Conditions, a copy of which is attached as EXHIBIT A and incorporated
herein by reference (the "STANDARD TERMS AND CONDITIONS"), relating to
remittance processing services to be performed by Bank ("REMITTANCE
PROCESSING SERVICE") in relation to the checks and other payment
instruments mailed to the United States Post Office address or addresses
("LOCKBOX ADDRESS OR ADDRESSES") assigned to Solectron (collectively,
the "PAYMENTS") from time to time received or deposited in [Solectron's]
Account No. ___________ with Bank (the "ACCOUNT").
B. Each of the Originators has assigned and/or may hereafter assign
to Seller, and Seller has assigned and/or may hereafter assign to
Purchaser and Administrator an undivided percentage interest in, and has
granted to Administrator for its benefit and the benefit of Purchaser a
security interest in, certain accounts, chattel paper instruments or
general intangibles ("RECEIVABLES") and all proceeds thereof, including
the Payments.
C. Each Originator, Seller, Purchaser, Administrator and Bank are
entering into this Agreement to provide for the assignment of the
Account to Administrator, for its benefit and the benefit of Purchaser,
and the disposition of net proceeds of Payments deposited in the
Account.
ACCORDINGLY, EACH ORIGINATOR, PURCHASER, ADMINISTRATOR AND BANK AGREE AS
FOLLOWS:
1. Assignment of Account:
(a) Each Originator hereby assigns and transfers to Seller, and
Seller hereby assigns and transfers to Administrator, for its benefit
and the benefit of Purchaser, and grants to Administrator, for its
benefit and the benefit of Purchaser, a security interest in, the
Account, all Payments and all other moneys deposited in the Account from
time to time. Subject to the terms hereof, Administrator, for its
benefit and the benefit of Purchaser, shall have exclusive dominion and
control over the Account.
(b) Bank hereby acknowledges receipt of notice of the ownership
and security interest of Administrator, for its benefit and the benefit
of Purchaser, in the Payments, the Account and the amounts from time to
time on deposit therein and agrees that the Account shall be maintained
for the benefit of Administrator, on its behalf and on behalf of
Purchaser, on the terms provided herein).
(c) The Account shall be entitled "Solectron for the benefit of
Bank of America, as Administrator."
(d) Administrator, on behalf of itself and Purchaser, hereby
authorizes Bank to transfer balances in the Account to each Originator
in accordance with instructions to Bank from Solectron, and hereby
authorizes Solectron (in its capacity as servicer of the Receivables) to
accept such transfers and to give such instructions prior to the
Activation Period. The "ACTIVATION PERIOD" means the period of time
commencing on the date [two] Business Days after Bank's receipt of a
written notice from Administrator in the form of Attachment I (the
"NOTICE"). Administrator will simultaneously provide a copy of the
Notice to Solectron.
(e) Bank has sole and exclusive access to items mailed to the
Lockbox Address(es).
2. Bank is hereby authorized (and, in the case of clauses (a), (b) and
(e) below, hereby agrees):
(a) to perform the Remittance Processing Service and to follow its
usual operating procedures for the handling of any Payments, in
accordance with the Standard Terms and Conditions, as modified by this
Agreement;
(b) to charge the Account for all returned Payments, service
charges, and other fees and charges associated with the Remittance
Processing Service and this Agreement;
(c) to follow its usual procedures in the event the Account or any
Payment should be or become the subject of any writ, levy, order or
other similar judicial or regulatory order or process ("ORDER") to
comply with such Order; and
(d) at all times prior to the Activation Period, to transfer all
collected and available balances in the Account to [Solectron] Account
No. __________ at ______________ (or such other account as [Solectron]
may designate by written notice to the Bank and Administrator), and,
notwithstanding anything to the contrary herein or in the Standard Terms
and Conditions, during the Activation Period (i) to refrain from
transferring any balances at the discretion of the Company and (ii) to
transfer all collected and available balances in the Account to such
account as Administrator may designate by written notice to Bank)
pursuant to Administrator's instructions. Funds are not available if,
in the reasonable determination of Bank, they are subject to a hold,
dispute or legal process preventing their withdrawal. Company or
Administrator, as applicable, will give Bank reasonable advance written
notice of any change in the instructions.
3. If the balances in the Account are not sufficient to pay Bank for
any returned check, each Originator agrees to pay Bank on demand the
amount due Bank.
(a) If the balances in the Account are not sufficient to
compensate Bank for any fees or charges due Bank in connection with the
Remittance Processing Service or this Agreement, each Originator agrees
to pay Bank on demand the amount due Bank.
4. Each Originator hereby authorizes Bank, without prior notice, from
time to time to debit any other account either Originator may have with
Bank for the amount or amounts due Bank under subsection 3(a) or 3(b).
Neither Purchaser nor Administrator shall be responsible for payment of
any such amount.
(a) bank agrees it shall not offset against the Account, except as
permitted under this Agreement, until this Agreement has been terminated
pursuant to subsection 5(d) hereof or by agreement of the parties.
5. Termination of this Agreement shall be as follows:
(a) Bank may terminate this Agreement upon 30 days' prior written
notice to each Originator, Seller and Administrator. Purchaser or
Administrator may terminate this Agreement upon 30 days' prior written
notice by Administrator to each Originator, Seller and Bank. Neither of
the Originators nor Seller may terminate this Agreement or the
Remittance Processing Service except with the written consent of
Administrator and upon 30 days' prior written notice to Bank and
Administrator.
(b) Notwithstanding subsection 4(a), Bank may terminate this
Agreement at any time by at least one Business Day's prior written
notice to each Originator, Seller and Administrator if (i) either
Originator or Seller breaches any of the terms of this Agreement, any
other agreement with Bank or any agreement involving the borrowing of
money or the extension of credit; (ii) either Originator or Seller
liquidates, dissolves, merges with or into or consolidates with another
entity or sells, leases or disposes of a substantial portion of its
business or assets; (iii) either Originator, or Seller terminates its
business, fails generally or admits in writing its inability to pay its
debts as they become due; any bankruptcy, reorganization, arrangement,
insolvency, dissolution or similar proceeding is instituted with respect
to either Originator or Seller; either Originator, or Seller makes any
assignment for the benefit of creditors or enters into any composition
with creditors or takes any action in furtherance of any of the
foregoing; or (iv) any material adverse change occurs in each
Originator's or Seller's financial condition, results of operations or
ability to perform its obligations under this Agreement. Each
Originator and Seller shall promptly give written notice to Bank and
Administrator of the occurrence of any of the foregoing events with
respect to itself.
(c) Upon any termination of this Agreement pursuant to subsection
4(a) or 4(b) hereof, and subject to Section 13 hereof, (i) each
Originator shall promptly arrange for Payments received at the Lockbox
Address(es) or otherwise in or for deposit to the Account to be
forwarded to another bank acceptable to Administrator and processed
pursuant to an agreement acceptable to Administrator, and (ii) Bank
shall no longer be required to process Payments, but subject to payment
in advance of Bank's standard charges for such service, shall forward
all Payments then held by Bank and all mail thereafter received at the
Lockbox Address to such address or account as Administrator may direct.
Otherwise the provisions of this Agreement shall remain in effect until
terminated pursuant to subsection 5(d) or by agreement among the
parties.
6. Bank will not be liable to either Originator, Seller, Purchaser or
Administrator for any expense, claim, loss, damage or cost ("DAMAGES")
arising out of or relating to its performance under this Agreement other
than those Damages which result directly from its acts or omissions
constituting negligence or willful misconduct, subject to the limits in
subsection 5(b).
(a) Bank's liability is limited to direct money Damages actually
incurred. In no event will Bank be liable for any special, indirect,
consequential or exemplary damages or for lost profits.
(b) Bank will be excused from failing to act or delay in acting,
and no such failure or delay shall constitute a breach of this Agreement
or otherwise give rise to any liability of Bank, if (i) such failure or
delay is caused by circumstances beyond Bank's reasonable control,
including but not limited to legal constraint, emergency conditions,
action or inaction of governmental, civil or military authority, fire,
strike, lockout or other labor dispute, war, riot, theft, flood,
earthquake or other natural disaster, breakdown of public or private or
common carrier communications or transmission facilities, equipment
failure, or act, negligence or default of either Originator, Seller,
Purchaser or Administrator or (ii) such failure or delay resulted from
Bank's reasonable belief that the action would have violated any
guideline, rule or regulation of any governmental authority. Bank
agrees to give each Originator, Seller and Administrator prompt notice
of any actual or anticipated failure or delay resulting from any of the
foregoing but any failure of Bank to give such notice shall not affect
Bank's rights (or the limitation of its liability) under this subsection
5(b) or 5(c).
(c) Administrator shall notify Bank promptly in writing when
Purchaser has no further ownership interest (or commitment to acquire
any interest) in the Receivables and all of each Originator's and
Seller's, obligations have been paid in full, and this Agreement shall
automatically terminate upon Bank's receipt of such notice.
7. Each Originator shall indemnify Bank against, and hold it harmless
from, any and all liabilities, claims, costs, expenses and damages of
any nature (including but not limited to allocated costs of staff
counsel, other reasonable attorney's fees and any fees and expenses
incurred in enforcing this Agreement) in any way arising out of or
relating to disputes or legal actions concerning Bank's provision of the
Remittance Processing Service, this Agreement, the Lockbox Addresses or
any Payment. This Section does not apply to any cost or damage
attributable to the gross negligence or intentional misconduct of Bank.
Each Originator's obligations under this Section shall survive
termination of this Agreement.
8. The Originators and Seller each represents and warrants to Bank,
Purchaser and Administrator, that (i) each Acceptable Payee has
authorized Payments payable to it to be credited to the Account; (ii)
this Agreement constitutes its duly authorized, legal, valid, binding
and enforceable obligation; (iii) the performance of its obligations
under this Agreement and the consummation of the transactions
contemplated hereunder will not (A) constitute or result in a breach of
its certificate or articles of incorporation, by-laws or partnership
agreement, as applicable, or the provisions of any material contract to
which it is a party or by which it is bound or (B) result in the
violation of any law, regulation, judgment, decree or governmental order
applicable to it; and (iv) all approvals and authorizations required to
permit the execution, delivery, performance and consummation of this
Agreement and the transactions contemplated hereunder have been
obtained.
(a) The Originators and Seller each agrees that it shall be deemed
to make and renew each representation and warranty in subsection 7(a) on
and as of each day on which it uses the Remittance Processing Service.
9. The Originators and Seller each represents and warrants that it has
not assigned or granted a security interest in the Account or any funds
now or hereafter deposited in the Account, except to Seller (in the case
of each Originator and to Purchaser and Administrator.
10. The Originators and Seller each agrees that:
(a) Except as permitted under Section 2(d), it cannot, and will
not, withdraw any monies from the Account until such time as
Administrator advises Bank in writing that Purchaser and Administrator
no longer claim any interest in the Account and the monies deposited and
to be deposited in the Account; and
(b) It will not permit the Account to become subject to any other
pledge, assignment, lien, charge or encumbrance of any kind, nature or
description, other than ownership and security interests of Purchaser,
and Administrator on its behalf, hereunder and as referred to herein.
11. Purchaser and Administrator each acknowledges and agrees that Bank
has the right to charge the Account from time to time, as set forth in
this Agreement, and the account agreement, as amended from time to time,
and that Purchaser and Administrator have no right to the sums so
withdrawn by Bank.
12. Each Business Day (as defined below), Bank will prepare a package
of materials for each Lockbox Address which will include, but is not
limited to, any Payments not processed in accordance with the set-up
documents, invoices, any other material received at the Lockbox
Address(es) and information regarding the deposit for such Business Day.
For purposes hereof, "Business Day" shall mean each Monday through
Friday, excluding bank holidays.
(a) Bank will send the materials to the address specified below
for Solectron, with a copy of the deposit advice to the address
specified below for Administrator. In addition to the original statement
which will be provided to Solectron, if requested by Administrator, Bank
will provide Administrator with a duplicate statement.
13. Each Originator agrees to pay to Bank, upon receipt of Bank's
invoice, all costs, expenses and attorneys' fees (including allocated
costs for in-house legal services) incurred by Bank in connection with
the preparation and administration (including any amendments) and
enforcement of this Agreement and any instrument or agreement required
hereunder, including but not limited to any such costs, expenses and
fees arising out of the resolution of any conflict, dispute, motion
regarding entitlement to rights or rights of action, or other action to
enforce Bank's rights in a case arising under Title 11, United States
Code.
14. Notwithstanding any of the other provisions in this Agreement, in
the event of the commencement of a case pursuant to Title 11, United
States Code, filed by or against either Originator or Seller, or in the
event of the commencement of any similar case under then applicable
federal or state law providing for the relief of debtors or the
protection of creditors by or against either Originator or Seller, Bank
may take or omit to take any action as Bank reasonably deems necessary
in order to comply with all applicable provisions of governing statutes,
and shall not be liable to the other parties, and each of the other
parties hereby agrees not to assert any claim against Bank, for any
Damages arising from such action or omission.
15. This Agreement may be amended only be a writing signed by each
Originator, Seller, Purchaser, Administrator and Bank; except that
Bank's charges are subject to change by Bank upon 30 days' prior written
notice to each Originator and Seller.
16. This Agreement may be executed in counterparts; all such
counterparts shall constitute but one and the same agreement.
17. Any written notice or other written communication to be given under
this Agreement shall be addressed to each party at its address set forth
on the signature page of this Agreement or to such other address as a
party may specify in writing. Except as otherwise expressly provided
herein, any such notice shall be effective upon receipt.
18. This Agreement controls in the event of any conflict between this
Agreement and or any other document or written or oral statement. This
Agreement supersedes all prior understandings, writings, proposals,
representations and communications, oral or written, of any party
relating to the subject matter hereof.
19. Neither of the Originators nor Seller may assign any of its rights
or obligations under this Agreement without the prior written consent of
Bank. Upon [30 days] prior written notice to Bank, Purchaser may assign
its rights and interests under this Agreement to any assignee of
Purchaser's interest in the Receivables. Administrator may assign its
rights, interests and obligations under this Agreement to any successor
administrator for Purchaser. Administrator agrees to give prompt
written notice to Bank of any such assignment by Purchaser or
Administrator, but no failure to give or delay in giving such notice
shall impair the assignee's interest in the Account or, on and after the
giving of such notice, the rights of the assignee hereunder.
20. Bank hereby agrees that it will not institute, or join any other
person or entity in instituting, any case pursuant to Title 11, United
States Code, or any similar case under then applicable state or federal
law providing for the relief of debtors or the protection of creditors,
(a) against Purchaser prior to the date which is one year and one day
after payment of all commercial paper or other rated securities now or
hereafter issued by Purchaser or (b) against Seller prior to the date
which is one year and one day after the date on which Purchaser has no
further ownership interest (or commitment to acquire any interest) in
the Receivables and all of Seller's obligations which are secured by the
Receivables, the Payments and the Account are paid in full. This
Section 19 shall survive any termination of this Agreement.
21. This Agreement shall be interpreted in accordance with Illinois law
without reference to Illinois principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this agreement by
their duly authorized officers as of the day and year first above
written.
Solectron Corporation Address for notices:
("Solectron" and "Originator")
847 Gilbrator Drive
By: __________________ Building 5
Name: ________________ Milpitas, California 95035
Title: _______________ Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
Solectron California Corporation Addresses for notices
("Originator")
847 Gilbrator Drive
By: __________________ Building 5
Name: ________________ Milpitas, California 95035
Title: _______________ Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
Solectron Funding Corporation Address for notices:
("Seller") 847 Gilbrator Drive
By: __________________ Building 5
Name: ________________ Milpitas, California 95035
Title: _______________ Attention: Treasurer
Telephone: (408) 956-6577
Facsimile: (408) 956-6062
Receivables Capital Corporation Address for notices:
("Purchaser")
c/o Administrator at its
address shown below
By: __________________ c/o Merrill Lynch Money
Markets, Inc.
Name: ________________ World Financial Center,
North Tower
Title: _______________ 250 Vesey Street - 11th Floor
New York, New York 10281-1311
Attention: George Roller
Telephone: (212) 449-1606
Facsimile: (212) 449-2234
Bank of America National Trust Address for notices:
and Savings Association
("Administrator") Asset Securitization Group
231 South LaSalle Street
By: __________________ Chicago, Illinois 60697
Name: ________________ Attention: Asset Securitization
Group
Title: _______________ Telephone: (312) 828-7421
Facsimile: (312) 828-7855
Bank of America National Trust
and Savings Association
("Bank")
By: __________________
Name: ________________
Title: _______________
By: __________________
Name: ________________
Title: _______________
<PAGE>
EXHIBIT A
TO THREE PARTY AGREEMENT RELATING
TO LOCKBOX SERVICES
STANDARD TERMS AND CONDITIONS
The Lockbox Service involves processing checks that are received at a
Lockbox Address. With this Service, Company instructs its customers to
mail checks it wants to have processed under the Service to the Lockbox
Address. Banks picks up mail at the Lockbox Address according to its
mail pick-up schedule. Banks will have unrestricted and exclusive
access to the mail directed to the Lockbox Address. Bank will provide
Company with the Lockbox Service for a Lockbox Address when Company has
completed and Bank has received Bank's then current set-up documents for
the Lockbox Address.
If Bank receives any mail containing Company's Lockbox number at Bank's
lockbox operations location (instead of the Lockbox Address), Bank may
handle the mail as if it had been received at the Lockbox Address.
PROCESSING
Bank will handle checks received at the Lockbox Address according to the
applicable deposit account agreement, if the checks were delivered by
Company to Bank for deposit to the Account, except as modified by this
Agreement.
Bank will open the envelopes picked up from the Lockbox Address and
remove the contents. For the Lockbox Address, checks and other
documents contained in the envelopes will be inspected and handled in
the manner specified in the Company's set-up documents. Bank captures
and reports information related to the lockbox processing, where
available, if Company has specified this option in the set-up documents.
Banks will endorse all checks Bank processes on Company's behalf.
If Bank processes an unsigned check as instructed in the set-up
documents, and the check is paid, but the account owner does not
authorize payment, Company agrees to indemnify Bank, the drawee bank,
(which may include Bank) and any intervening collection bank for any
liability or expense incurred by such indemnitee due to the payment and
collection of the check.
If Company instructs Bank not to process a check bearing a handwritten
or typed notation "Payment in Full" or words of similar import on the
face of the check, Company understands that Bank has adopted procedures
designed to detect checks bearing such notations; however, Bank will not
be liable to Company or any other party for losses suffered if Bank
fails to detect checks bearing such notations.
RETURN CHECK
Unless Company and Bank agree to another processing procedure, Bank will
reclear a check once which has been returned and marked to "Refer to
Maker," "Not Sufficient Funds:" or "Uncollected Funds." If the Check is
returned for any other reason or if the check is returned a second time,
Bank will debit the applicable Account and return the check to Company.
Company agrees that Bank will not send a returned item notice to
Company for a returned check unless Company and Bank have agreed
otherwise.
ACCEPTABLE PAYEES
For the Lockbox Address, Company will provide to Bank the names of
Acceptable Payees ("Acceptable Payee" means Company's name and any other
payee name provided to Bank by Company as an acceptable payee for checks
to be processed under the Lockbox Service). Bank will process a check
only if it is made payable to an Acceptable Payee and if the check is
otherwise processable. Company warrants that each Acceptable Payee has
authorized checks payable to it be credited to the Account Company
designates for the Lockbox Service. Bank may treat as an acceptable
Payee any variation of any Acceptable Payee's name that Bank deems to be
reasonable.
CHANGES TO PROCESSING INSTRUCTIONS
Company may request Bank orally or in writing to make changes to the
processing instructions (including changes to Acceptable Payees) for any
Lockbox Address by contacting its Bank representative . Bank will not
be obligated to implement any requested changes until Bank has actually
received the requests and had a reasonable opportunity to act upon them.
In making changes, Bank is entitled to rely on instructions purporting
to be from Company.
<PAGE>
ATTACHMENT I
MULTI PARTY LOCKBOX
Bank of America National Trust and Savings Association
as Administrator
To: Bank of America
231 South LaSalle Street
Chicago, Illinois 60697
Re: Solectron Corporation
Account No. ____________
Ladies and Gentlemen:
Reference is made to the Lockbox Agreement dated September __, 1997 (the
"Agreement") among Solectron Corporation, Solectron California
Corporation, Solectron Funding Corporation, Receivables Capital
Corporation, Bank of America National Trust and Savings Association, as
administrator, and you regarding the above-described account (the
"Account"). In accordance with Section 1(d) and 2(d) of the Agreement,
we hereby give you notice of our exercise of control of the Account and
we hereby instruct you to transfer funds to Administrator's account or
otherwise in accordance with Administrator's instructions as follows:
[insert instructions].
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
as Administrator
By: __________________
Name: ________________
Title: _______________
<PAGE>
LOCK-BOX AGREEMENT
___________, 1997
[Name and Address of
Lock-Box Bank]
Gentlemen:
Reference is made to lock-box account no. _____ (the "Lock-Box Account")
and deposit account no. _____ (together with the Lock-Box Account, the
"Accounts") maintained by Solectron [California] Corporation ("SOLECTRON
[CALIFORNIA]") with you. Reference is further made to (i) the Purchase
and Sale Agreement dated as of September __, 1997 (as the same may be
amended, amended and restated or otherwise modified from time to time,
the "PURCHASE AND SALE AGREEMENT") among Solectron [California
Corporation ("SOLECTRON CALIFORNIA")], as an Originator, Solectron
Corporation, individually and as Servicer and an Originator, and
Solectron Funding Corporation, as Initial Purchaser ("SOLECTRON
FUNDING"), and (ii) the Receivables Purchase Agreement dated as of
September __, 1997 (as the same may be amended, amended and restated or
otherwise modified from time to time, the "RECEIVABLES PURCHASE
AGREEMENT") among Solectron Funding, as Seller, Solectron, as Servicer,
Receivables Capital Corporation ("RCC"), as Issuer, and Bank of America
National Trust and Savings Association, as administrator (the
"ADMINISTRATOR").
Please be advised that pursuant to the Purchase and Sale Agreement
Solectron [California] has sold to Solectron Funding all of Solectron's
right, title and interest in (but not its obligations under) the
Accounts, all amounts on deposit therein, all certificates and
instruments, if any, evidencing such Accounts and amounts on deposit
therein and all related agreements between you and Solectron
[California]. In addition:
(i) (a) pursuant to the Purchase and Sale Agreement, Solectron
[California] has sold to Solectron Funding and may hereafter sell to
Solectron Funding all of Solectron's [California's] right, title and
interest in accounts, chattel paper, instruments or general intangibles
(collectively, "RECEIVABLES") with respect to which payments are or may
hereafter be made to the Accounts and (b) pursuant to the Receivables
Purchase Agreement, Solectron Funding has assigned and/or may hereafter
assign to RCC one or more undivided percentage interests in Receivables
with respect to which payments are or may hereafter be made to the
Accounts; and
(ii) (a) pursuant to the Purchase and Sale Agreement, Solectron
[California] has granted a security interest in such Receivables, the
Accounts and related property to Solectron Funding and (b) pursuant to
the Receivables Purchase Agreement Solectron Funding has granted a
security interest in such Receivables, the Accounts and related property
to the Administrator (for its benefit and the benefit of RCC).
Your execution of this letter agreement is a condition precedent to
continued maintenance of the Accounts with you.
Solectron [California] and Solectron Funding hereby transfer
exclusive ownership and control of the Accounts to the Administrator on
behalf of RCC, subject only to the condition subsequent that the
Administrator shall have given you notice of its election to assume such
ownership and control, which notice may be in the form attached hereto
as Exhibit A or in any other form that gives you reasonable notice of
such election.
We hereby irrevocably instruct you, at all times from and after the
date of your receipt of notice from the Administrator as described
above, to make all payments to be made by you out of or in connection
with the Accounts directly to the Administrator, at its address set
forth below its signature hereto or as the Administrator otherwise
notifies you for the account of RCC (account # ___________, ABA
#___________), or otherwise in accordance with the instructions of the
Administrator.
We also hereby notify you that, at all times from and after the
date of your receipt of notice from the Administrator as described
above, the Administrator shall be irrevocably entitled to exercise in
our place and stead any and all rights in respect of or in connection
with the Accounts, including, without limitation, (a) the right to
specify when payments are to be made out of or in connection with the
Accounts and (b) the right to require preparation of duplicate monthly
bank statements on the Accounts for the Administrator's audit purposes
and mailing of such statements directly to an address specified by the
Administrator.
Notice from the Administrator may be personally served or sent by
facsimile or U.S. mail, certified return receipt requested, to the
address or facsimile number set forth under your signature to this
letter agreement (or to such other address or facsimile number as to
which you shall notify the Administrator in writing). If notice is
given by facsimile, it will be deemed to have been received when the
notice is sent and receipt is confirmed by telephone or other electronic
means. All other notices will be deemed to have been received when
actually received or, in the case of personal delivery, delivered.
By executing this letter agreement, you acknowledge and consent to
the existence of the Administrator's right to ownership and control of
the Accounts and the Administrator's security interest in the Accounts
and amounts from time to time on deposit therein and agree that from the
date hereof the Accounts shall be maintained by you for the benefit of,
and amounts from time to time therein held by you as agent for, the
Administrator on the terms provided herein. The Accounts are to be
titled "Solectron Funding Corporation and Bank of America National Trust
and Savings Association as the Administrator for Receivables Capital
Corporation". Except as otherwise provided in this letter agreement,
payments to the Accounts are to be processed in accordance with the
standard procedures currently in effect. All service charges and fees
with respect to the Accounts shall continue to be payable by us as under
the arrangements currently in effect.
By executing this letter agreement, you irrevocably waive and agree
not to assert, claim or endeavor to exercise, irrevocably bar and estop
yourself from asserting, claiming or exercising, and acknowledge that
you have not heretofore received a notice, writ, order or any form of
legal process from any other person or entity asserting, claiming or
exercising, any right of set-off, banker's lien or other purported form
of claim with respect to the Accounts or any funds from time to time
therein. Except for your right to payment of your service charges and
fees and to make deductions for returned items, you shall have no rights
in the Accounts or funds therein. To the extent you may ever have such
rights, you hereby expressly subordinate all such rights to all rights
of the Administrator.
You may terminate this letter agreement by canceling the Accounts,
which cancellation and termination shall become effective only upon
thirty days' prior written notice thereof from you to the Administrator.
Incoming mail addressed to or wire transfers to the Accounts received
after such cancellation shall be forwarded in accordance with the
Administrator's instructions. This letter agreement may also be
terminated upon written notice to you by the Administrator stating that
the Receivables Purchase Agreement pursuant to which this letter
agreement was obtained is no longer in effect. Except as otherwise
provided in this paragraph, this letter agreement may not be terminated
or amended without the prior written consent of the Administrator. This
letter agreement may be executed in any number of counterparts, and by
the parties hereto on separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
EACH SOLECTRON PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION
OF THE COURT OF THE STATE OF CALIFORNIA SITTING IN SAN FRANCISCO AND OF
THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT, OR FOR RECOGNITION
OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT
ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
LETTER AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATOR OR THE
ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS LETTER AGREEMENT AGAINST ANY OTHER PARTY HERETO OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION. EACH SOLECTRON PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY
LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT IN ANY COURT
REFERRED TO IN THIS CLAUSE (b). EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT. EACH PARTY TO THIS LETTER AGREEMENT IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 5.2 OF THE RECEIVABLES PURCHASE AGREEMENT. NOTHING IN THIS
LETTER AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Please acknowledge your agreement to the terms set forth in this
letter agreement by signing the two copies of this letter agreement
enclosed herewith in the space provided below, sending one such signed
copy to the Administrator at its address provided above and returning
the other signed copy to us.
Very truly yours,
SOLECTRON CORPORATION
By:
Name:
Title:
SOLECTRON CALIFORNIA CORPORATION
By:
Name:
Title:
SOLECTRON FUNDING CORPORATION
By:
Name:
Title:
Acknowledged and agreed to as of
the date first written above:
RECEIVABLES CAPITAL CORPORATION
By:
Name:
Title:
c/o Merrill Lynch Money Markets Inc.
World Financial Center, North Tower
250 Vesey Street - 11th Floor
New York, New York 10281-1311
Attention: George Roller
Telephone No. (212) 449-1606
Facsimile No. (212) 449-2234
with a copy to:
Bank of America National Trust
and Savings Association
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization
Group
Telephone No. (312) 828-7421
Facsimile No. (312) 828-7855
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrator
By:
Name:
Title:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization
Group
Telephone No. (312) 828-7421
Facsimile No. (312) 828-7855
<PAGE>
EXHIBIT A to
Lock-Box Agreement
[Letterhead of Bank of America National
Trust and Savings Association]
Name and address
of Lock-Box Bank
Re: Solectron
Lock-Box Account No. _____
Deposit Account No. _____
Dear __________:
Reference is made to the letter agreement dated September __, 1997 (the
"Letter Agreement") among Solectron Corporation, Solectron California
Corporation, Solectron Funding Corporation, Receivables Capital
Corporation ("RCC"), the undersigned, as Administrator and you
concerning the above described accounts (the "Accounts"). We hereby
give you notice of our assumption of ownership and control of the
Accounts as provided in the Letter Agreement.
We hereby instruct you to make all payments to be made by you out of or
in connection with the Accounts directly to the undersigned, at our
address set forth above, for the account of RCC (account no.
___________).
[other instructions]
Very truly yours,
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrator
By:
Name:
Title:
Exhibit 11.1
<TABLE>
SOLECTRON CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING NET INCOME PER SHARE
(in thousands, except per share data)
<CAPTION>
Years ended August 31,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of shares
of common stock and common stock
equivalents:
Primary:
Common stock 111,502 101,676 85,721
Common stock equivalents -
stock options 3,819 2,578 1,825
-------- -------- --------
115,321 104,254 87,546
Fully Diluted:
Common shares issuable upon
assumed conversion of
convertible subordinated
notes 6,804 6,087 16,573
Incremental increase in common
stock equivalent options using
end of period market price 1,456 12 1,046
-------- -------- --------
123,581 110,353 105,165
======== ======== ========
Net income - primary $158,059 $114,232 $ 79,526
Interest accretion on convertible
subordinated notes, net of taxes 9,564 5,499 5,439
-------- -------- --------
Net income - fully diluted $167,623 $119,731 $ 84,965
======== ======== ========
Net income per share - primary $ 1.37 $ 1.10 $ 0.91
======== ======== ========
Net income per share - fully diluted $ 1.36 $ 1.08 $ 0.81
======== ======== ========
</TABLE>
Exhibit 21.1
SOLECTRON CORPORATION SUBSIDIARIES
State or Other Jurisdiction of
Subsidiary Incorporation or Organization
- ------------ ------------------------------
The Americas
- ------------
Solectron California Corporation California
Solectron Massachusetts Corporation California
Solectron Technology, Inc. California
Solectron Texas, Inc. Delaware
Solectron Washington, Inc. California
Fine Pitch Technology, Inc. California
Force Computers, Inc. Delaware
Solectron Brasil, Ltda. Brazil
Solectron de Mexico, S.A. de C.V. Mexico
Europe
- ------------
Solectron France, S.A. France
Solectron GmbH Germany
Solectron Scotland Limited Scotland
Nybyggaren 45:830 AB (Sweden) Sweden
Asia
- ------------
Solectron Japan, Inc. Japan
Solectron (Suzhou) Technology Co., Ltd Suzhou, Peoples Republic of
China
Solectron Technology SDN. BHD. Malaysia
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
SOLECTRON CORPORATION:
We consent to the incorporation by reference in the registration
statements (Nos. 333-24293, 333-02523, 33-58580 and 33-46686) on Forms
S-3 and S-8 of Solectron Corporation of our report dated September 11,
1997, relating to the consolidated balance sheets of Solectron
Corporation and subsidiaries as of August 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended August 31,
1997, and the related schedule, which report appears in the August 31,
1997, annual report on Form 10-K of Solectron Corporation.
KPMG Peat Marwick LLP
Palo Alto, California
November 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835541
<NAME> SOLECTRON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-END> AUG-30-1997
<CASH> 225,073
<SECURITIES> 257,829
<RECEIVABLES> 422,731
<ALLOWANCES> 4,049
<INVENTORY> 494,622
<CURRENT-ASSETS> 1,475,632
<PP&E> 648,777
<DEPRECIATION> 322,416
<TOTAL-ASSETS> 1,852,419
<CURRENT-LIABILITIES> 543,942
<BONDS> 385,850
0
0
<COMMON> 115
<OTHER-SE> 918,954
<TOTAL-LIABILITY-AND-EQUITY> 1,852,419
<SALES> 3,694,385
<TOTAL-REVENUES> 3,694,385
<CGS> 3,266,106
<TOTAL-COSTS> 3,266,106
<OTHER-EXPENSES> 189,538
<LOSS-PROVISION> 2,319
<INTEREST-EXPENSE> 26,551
<INCOME-PRETAX> 238,407
<INCOME-TAX> 80,348
<INCOME-CONTINUING> 158,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,059
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.36
</TABLE>
