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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): OCTOBER 30, 1997
FLEXTRONICS INTERNATIONAL LTD.
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(Exact name of Registrant as specified in its charter)
SINGAPORE
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(State or other jurisdiction of
incorporation)
0-23354 NOT APPLICABLE
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(Commission (IRS Employer
File Number) Identification No.)
514 CHAI CHEE LANE, #04-13, BEDOK INDUSTRIAL ESTATE, SINGAPORE 469029
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(Address of principal executive offices) (Zip Code)
(65) 449-5255
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 30, 1997, Flextronics International Ltd. (the "Company")
acquired 92% of the outstanding capital stock of Neutronics Electronic
Industries Holding A.G. ("Neutronics") in exchange for 2,806,000 shares of the
Company's ordinary shares (the "Exchange"). Neutronics is a contract
manufacturer headquartered in Austria and having production facilities in
Austria and Hungary. The Exchange will be accounted for as a "pooling of
interests."
The Company will register for resale the shares issued to the Neutronics
stockholders. In connection with the Exchange, the Company agreed to loan to
Neutronics and Althofen Electronics GmbH, a wholly-owned subsidiary of
Neutronics, up to US$30 million. The Company will appoint Mr. S.L. Hui, the
majority stockholder of Neutronics, to the Company's Board of Directors.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
(b) PRO FORMA FINANCIAL INFORMATION.
As of the date of this Report, it is impracticable to provide the
required financial statements and pro forma financial information relating to
Neutronics. Such statements and information will be filed as soon as they become
available, and in any event not later than 60 days after the date this Report is
required to be filed with the Securities and Exchange Commission.
(c) EXHIBITS.
(2) Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or
Succession.
Exhibit 2 Exchange Agreement, dated as of October 19, 1997, by and
among Flextronics International Ltd., Neutronics Electronic
Industries Holding A.G. and the named Shareholders of
Neutronics Electronic Industries Holding A.G.
(10) Material Contracts.
Exhibit 10 Loan Agreement, dated as of October 19, 1997, by and
among Flextronics International Ltd., Neutronics Electronic
Industries Holding A.G. and Althofen Electronics GmbH.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLEXTRONICS INTERNATIONAL LTD.
Date: November 6, 1997 By: /s/ Robert R. B. Dykes
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Robert R. B. Dykes
Senior Vice President of Finance and
Administration
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EXHIBIT INDEX
Exhibit 2
Exchange Agreement, dated as of October 19, 1997, by and among Flextronics
International Ltd., Neutronics Electronic Industries Holding A.G. and the named
Shareholders of Neutronics Electronic Industries Holding A.G. The Company agrees
to furnish a copy of any omitted schedule to the Commission upon request.
Exhibit 10
Loan Agreement, dated as of October 19, 1997, by and among Flextronics
International Ltd., Neutronics Electronic Industries Holding A.G. and Althofen
Electronics GmbH.
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EXHIBIT 2
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement") is entered into as of October
19, 1997, by and among Flextronics International Ltd., a company organized under
the laws of Singapore ("Acquiror"), Neutronics Electronic Industries Holding
A.G., a corporation organized under the laws of the Republic of Austria
("Target") and the shareholders of Target listed on Exhibit A hereto (each
individually a "Stockholder" and collectively the "Stockholders").
R E C I T A L S
A. Acquiror and Target are engaged in the business of providing,
among other things, contract electronic manufacturing services.
B. The parties intend that, subject to the terms and conditions
hereinafter set forth, Acquiror will acquire 92% of the outstanding Target
Ordinary Shares from the Stockholders pursuant to the terms and conditions set
forth herein in exchange for Acquiror's Ordinary Shares (as defined below).
C. The foregoing transactions are intended to be accounted for as a
"pooling of interests" for accounting purposes.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS
1.1 "Acquiror Ordinary Shares" means the Ordinary Shares, $0.01 par
value, of Acquiror.
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1.2 "Austrian GAAP" means generally accepted accounting principles
in Austria.
1.3 "Charter Documents" of an entity means the Articles of
Association and By-Laws of such entity or any equivalent corporate documents.
1.4 "Closing" means the closing of the Exchange pursuant to
Section 7.
1.5 "Disclosure Schedules" means the separate disclosure schedules
referring to the Sections contained in this Agreement, which have been exchanged
by the parties hereto prior to the execution of this Agreement.
1.6 The "Exchange" means the exchange of the Target Ordinary Shares
for the Acquiror Ordinary Shares contemplated by Section 2.
1.7 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.8 "Material Adverse Effect" with respect to an entity means any
circumstance, change in, or effect on such entity or any of its Subsidiaries
that, individually or in the aggregate with any other circumstances, changes in,
or effects on such entity or any of its Subsidiaries, (i) is or is reasonably
likely to be materially adverse to the condition (financial or otherwise),
business, properties or results of operations of such entity and its
Subsidiaries, taken as a whole, or (ii) could adversely affect the ability of
such entity to consummate the transactions contemplated hereby.
1.9 "Material Agreement" means any agreement, lease, instrument,
arrangement or commitment to which Target or any of its Subsidiaries is a party
or is bound (i) that is, or is reasonably likely to be, material to the business
of Target or any of its Subsidiaries; (ii) with any Significant Customer or
Significant Supplier; or (iii) constituting a collective bargaining agreement,
or with any works council or any other representative of a significant number of
employees.
1.10 "Offering Memorandum" means the Preliminary Offering Memorandum,
dated October 18, 1997, of Target attached hereto as Exhibit 1.10.
1.11 "Permitted Liens" means the liens (i) in favor of ING Bank N.V.
and described in the loan agreements between Target and ING Bank N.V. and dated
September 30, 1994, December 23, 1994 and October 6, 1994 and (ii) described in
sections 10.2(i) - (xiv) of the Term Loan and Revolving Credit Agreement, dated
as of March 27, 1997, among Acquiror, BankBoston, N.A. as Agent and Lender, and
the other lenders named therein.
1.12 "SEC" means the U.S. Securities and Exchange Commission.
1.13 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.14 "Significant Customer" means a customer who in the nine-month
period ended September 30, 1997, was one of the fifteen largest sources of
revenues for Target and its Subsidiaries taken as a whole.
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1.15 "Significant Supplier" means a supplier who in the nine-month
period ended September 30, 1997, was one of the fifteen largest suppliers of
goods or services to Target and its Subsidiaries, taken as a whole, based upon
amounts paid.
1.16 "Subsidiary" of an entity means a corporation or other business
entity in which such entity owns, directly or indirectly, at least fifty percent
(50%) interest or otherwise, directly or indirectly, controls such corporation
or entity.
1.17 "Target Ordinary Share Certificates" means certificates
reflecting ownership of Target Ordinary Shares.
1.18 "Target Ordinary Shares" means the issued and outstanding
Ordinary Shares of Target.
1.19 "U.S. GAAP" means generally accepted accounting principles of
the United States of America.
2. THE EXCHANGE
2.1 Exchange of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, each Stockholder shall transfer all of such
Stockholder's Target Ordinary Shares to Acquiror, the amounts of which are set
forth beside their respective names on Exhibit A attached hereto, and in
exchange for each such share of Target Ordinary Shares, Acquiror shall issue to
each such Stockholder 1.90625 fully paid and nonassessable Acquiror Ordinary
Shares.
2.2 No Adjustments. There shall be no adjustments made to the number
of Acquiror Ordinary Shares exchanged for Target Ordinary Shares pursuant to
Section 2.1 regardless of any fluctuation of the price per share of Acquiror
Ordinary Shares as quoted on The Nasdaq National Market except in connection
with any stock split, reverse stock split, combination, reorganization or
reclassification of Acquiror Ordinary Shares.
2.3 Fractional Shares. No fractional Acquiror Ordinary Shares will
be issued in connection with the Exchange, but in lieu thereof each Stockholder
who would otherwise be entitled to receive a fraction of an Acquiror Ordinary
Share will receive from Acquiror, promptly after the Closing, an amount of cash
equal to the per share market value of Acquiror Ordinary Shares (based on the
closing sale price of Acquiror Ordinary Shares as quoted on The Nasdaq National
Market on the Closing Date, as reported in the Wall Street Journal) (the
"Closing Price") multiplied by the fraction of an Acquiror Ordinary Share to
which such Stockholder would otherwise be entitled.
2.4 Pooling of Interests. The parties intend that the Exchange be
treated as a "pooling of interests" for accounting purposes.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder (severally with respect to representations and
warranties regarding such Stockholder in Sections 3.1 and 3.3 and otherwise
jointly and severally with the other Stockholders) represents and warrants that:
3.1 Title. Except as disclosed in Schedule 3.1, such Stockholder
owns and holds
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good and valid title to the Target Ordinary Shares being exchanged hereunder by
such Stockholder, free and clear of any liens, security interests, restrictions,
options or encumbrances. Except as disclosed in Schedule 3.1, such Stockholder's
Target Ordinary Shares are not subject to any right of first refusal or other
restriction, no other person has any interest or right in such Target Ordinary
Shares, and such Target Ordinary Shares are being transferred to Acquiror in
compliance with all applicable securities laws. Such Stockholder has no other
interest or right in the equity of Target.
3.2 Organization and Good Standing. Target and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted and as proposed to be conducted, and is
qualified as a foreign corporation in each jurisdiction in which a failure to be
so qualified would have a Material Adverse Effect.
3.3 Power, Authorization and Validity.
3.3.1 Such Stockholder and Target have the right, power, legal
capacity and authority to enter into and perform their obligations under
this Agreement and all agreements to which the Stockholders or Target
are or will be a party that are required to be executed pursuant to this
Agreement (the "Target Ancillary Agreements"). This Agreement and the
Target Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby, as applicable to Target, have been duly
and validly approved and authorized by all necessary corporate and
shareholder action on the part of Target. To the extent that such
Stockholder is not an individual, the execution, delivery and
performance of this Agreement and the Target Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby
have been duly and validly approved and authorized by all necessary
corporate action on the part of such Stockholder.
3.3.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable such Stockholder or Target to enter
into, and to perform its obligations under, this Agreement and the
Target Ancillary Agreements, except for the clearance of the Austrian
Cartel Court, if required.
3.3.3 This Agreement and the Target Ancillary Agreements are, or
when executed by the Stockholders will be, valid and binding obligations
of the Stockholders and Target, as applicable, enforceable in accordance
with their respective terms, except as to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (b) rules of law governing specific performance,
injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection
with the offering, issuance or sale of securities.
3.4 Capitalization. The authorized capital stock of Target consists
of 2,400,000 Ordinary Shares of nominal value ATS 100 each, of which 1,600,000
Ordinary Shares are issued and outstanding. All issued and outstanding Target
Ordinary Shares have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission, and have been
offered, issued, sold and delivered by Target in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable securities laws and conform to the description thereof set forth
in the Offering Memorandum. An accurate and complete list of all holders of
Target Ordinary Shares and options or warrants
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to purchase Target Ordinary Shares, and the number of shares, options and
warrants held by each is set forth in Schedule 3.4. Except as set forth in
Schedule 3.4, there are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
any of Target's authorized but unissued capital stock or any securities
convertible into or exchangeable for Target Ordinary Shares or obligating Target
to grant, extend, or enter into any such option, warrant, call, right,
commitment, conversion privilege or other right or agreement, and there is no
liability for dividends accrued but unpaid. There are no voting agreements,
voting trusts, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable securities laws) applicable to any of
Target's outstanding securities.
3.5 Subsidiaries. Schedule 3.5 sets forth a complete list of all
Subsidiaries of Target and, except as set forth in Schedule 3.5, Target does not
have any other interest, direct or indirect, in any corporation, partnership,
joint venture or other business entity.
3.6 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement nor any Target Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the Charter
Documents of Target or any Subsidiary, as currently in effect, (b) except as
disclosed in Schedule 3.6, in any material respect, any Material Agreement, or
(c) except as would not have a Material Adverse Effect, any judgment, writ,
decree, order, statute, rule or regulation applicable to Target or any
Subsidiary or their respective assets or properties.
3.7 Litigation. There is no action, proceeding, claim or
investigation pending against Target or any of its Subsidiaries before any court
or administrative agency that if determined adversely to Target or any of its
Subsidiaries would have a Material Adverse Effect nor, to Target's knowledge,
has any such action, proceeding, claim or investigation been threatened. There
is, to Target's or Stockholder's knowledge, no reasonable basis for any person
or entity to assert a claim against Target or Acquiror based upon: (a) ownership
or rights to ownership of any Target Ordinary Shares, (b) breach of any rights
as a Target Ordinary Shareholder, including any option or preemptive rights or
rights to notice or to vote, or (c) breach of any rights under any agreement
between Target and any Stockholder.
3.8 Taxes. Except as set forth in Schedule 3.8, Target and each of
its Subsidiaries has filed all national, provincial, local and foreign tax
returns required to be filed, has paid all taxes required to be paid in respect
of all periods for which returns have been filed, has established an adequate
accrual or reserve for the payment of all taxes payable in respect of the
periods subsequent to the periods covered by the most recent applicable tax
returns, has made all necessary estimated tax payments, and has no material
liability for taxes in excess of the amount so paid or accruals or reserves so
established. Neither Target nor any of its Subsidiaries is delinquent in the
payment of any tax or is delinquent in the filing of any tax returns, and no
deficiencies for any tax have been threatened, claimed, proposed or assessed.
Except as set forth in Schedule 3.8, no tax return of Target or any of its
Subsidiaries has ever been audited by any applicable governmental taxing agency
or authority. For the purposes of this Section, the terms "tax" and "taxes"
include all national, provincial, local and foreign income, gains, franchise,
excise, property, sales, use, employment, license, payroll, occupation,
recording, value added or transfer taxes, governmental charges, fees, levies or
assessments (whether payable directly or by withholding), and, with respect to
such taxes, any estimated tax, interest and penalties or additions to tax and
interest on such penalties and additions to tax.
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3.9 Target Financial Statements. The Offering Memorandum includes
(i) Target's audited balance sheet as of December 31, 1996 and audited income
statement and statement of cash flows for the fiscal year then ended as well as
the corresponding audited balance sheets, audited income statements and
statements of cash flow for Target's two (2) prior fiscal periods and (ii)
Target's unaudited balance sheet (the "Target Balance Sheet") as of June 30,
1997 (the "Balance Sheet Date") and unaudited income statement and statement of
cash flows for the six (6) month period ending June 30, 1997 as well as the
unaudited balance sheet as of June 30, 1997 and unaudited income statement and
statement of cash flows for the six-month period ending on June 30, 1997
(collectively, the "Target Financial Statements"). The Target Financial
Statements (a) are in accordance with the books and records of Target, (b)
fairly present, in all material respects, the financial condition of Target at
the date therein indicated and the results of operations for the period therein
specified and (c) have been prepared in accordance with Austrian GAAP applied on
a consistent basis. Except as disclosed in Schedule 3.9, Target and its
Subsidiaries have no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, that is not reflected or reserved against in the Target Financial
Statements, except for those that may have been incurred after the date of the
Target Financial Statements in the ordinary course of their business, consistent
with past practice, and that are not material in amount either individually or
collectively.
3.10 Product and Service Warranties. Except as would not have a
Material Adverse Effect, between January 1, 1997 and the date of this Agreement,
Target has not experienced any product or service warranty claims materially
greater than the same type of claims reflected in the Target Financial
Statements for similar operational periods.
3.11 Title to Properties. Except as disclosed in Schedule 3.11,
either Target or one of its Subsidiaries has good and marketable title to all
real property used in its business and to all of its assets shown on the Target
Balance Sheet, free and clear of all liens, charges, restrictions or
encumbrances other than Permitted Liens. Such assets are sufficient for the
continued operation of the business of Target and its Subsidiaries consistent
with current practice. All machinery and equipment included in such properties
is in good condition and repair, normal wear and tear excepted.
3.12 Absence of Certain Changes. Except as described in Schedule
3.12, since the Balance Sheet Date, there has not been with respect to Target or
any of its Subsidiaries:
(a) any Material Adverse Effect;
(b) any contingent liability incurred thereby as guarantor or
otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the
properties thereof other than Permitted Liens;
(d) any material obligation or liability incurred thereby other than
obligations and liabilities incurred in the ordinary course of business;
(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets thereof other than in the ordinary course of business;
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(f) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
thereof;
(g) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock thereof,
any split, combination or recapitalization of the capital stock thereof or any
direct or indirect redemption, purchase or other acquisition of the capital
stock thereof;
(h) any labor dispute or claim of unfair labor practices, any
material change in the compensation payable or to become payable to any of its
officers, employees or agents, or any bonus payment or arrangement made to or
with any of such officers, employees or agents;
(i) any payment or discharge of a material lien or liability thereof
which lien was not either shown on the Balance Sheet or incurred in the ordinary
course of business thereafter;
(j) any obligation or liability incurred thereby to any of its
officers, directors or stockholders or any loans or advances made thereby to any
of its officers, directors or stockholders except normal compensation and
expense allowances payable to officers; or
(k) any agreement or action (not otherwise referred to in items (a)
through (j)) entered by into by Target or any of its Subsidiaries or taken by
Target or any of its Subsidiaries that is material to Target and its
Subsidiaries taken as a whole.
3.13 Certain Material Agreements. Except as disclosed in Schedule
3.13, neither Target nor any of its Subsidiaries is a party to any Material
Agreement or any other agreement, contract or instrument with any customer,
supplier, landlord or labor union or association that (i) contains any provision
that is or could reasonably be expected to become materially burdensome to
Target or such Subsidiary, other than provisions that are in the ordinary course
of Target's and its Subsidiaries' business and are consistent with industry
practice; (ii) provides for the reduction of prices charged by Target or any of
its Subsidiaries to any Significant Customer for its products or services other
than (A) price reductions that are proportionate to reductions in the related
costs, and (B) price reductions pursuant to provisions that are in the ordinary
course of Target's and its Subsidiaries' business and are consistent with
industry practice (but including, without limitation, any "most favored
customer" provisions); (iii) provides for any increases in the prices to be paid
by Target or any of its Subsidiaries to any Significant Supplier for any
products or services; or (iv) provides for any warranty or similar obligations
with respect to products or services other than an obligation to repair or
replace products in the event of defective workmanship or materials provided by
Target or such Subsidiary. There is no contract with a Significant Customer or a
Significant Supplier that contains any provision, that, by itself could
reasonably be expected to materially adversely affect the ability of Target to
achieve its operating margins. Except as disclosed in Schedule 3.13, Target is
not aware of, nor has Target or any of its Subsidiaries received notice of, any
intention on the part of any Significant Customer or Significant Supplier to
cease doing business with Target or any of its Subsidiaries or to materially
reduce the volume of such business, or to modify or change in any material
manner any existing arrangement with Target or any of its Subsidiaries for the
purchase or supply of any products or services.
All Material Agreements are valid and in full force and effect. Neither
Target nor any of its Subsidiaries is, nor, to the knowledge of Target, is any
other party thereto, in breach or default of any Material Agreement, which
breach or default would have a Material Adverse Effect.
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3.14 Intellectual Property. Target and its Subsidiaries own, or have
the right to use, sell or license all material Intellectual Property Rights (as
defined below) necessary or required for the conduct of their respective
businesses as presently conducted. Except as would not have a Material Adverse
Effect, the conduct of Target's business does not infringe any Intellectual
Property Right of any other party and there is no pending or, to the knowledge
of Target, threatened claim or litigation asserting any such infringement. As
used herein, the term "Intellectual Property Rights" shall mean all worldwide
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, "moral rights," licenses, know-how, trade secrets, customer lists,
proprietary processes, all source and object code, inventions, and all
documentation and media constituting, describing or relating to the above.
3.15 Compliance with Laws. Except as would not have a Material
Adverse Effect Target and each of its Subsidiaries has complied, and is or will
be at the Closing Date in compliance, with all applicable laws, ordinances,
regulations, and rules, and all orders, writs, injunctions, awards, judgments,
and decrees applicable to it or to the assets, properties, and business thereof.
3.16 Certain Transactions and Agreements.
3.16.1 None of the officers or directors of Target or any of its
Subsidiaries, nor any member of their immediate families, has any direct
or indirect ownership interest in any firm or corporation that competes
with Target (except with respect to any interest in less than five
percent of the stock of any corporation whose stock is publicly traded).
Except as disclosed in Schedule 3.16.1, none of said officers or
directors, or any member of their immediate families, is directly or
indirectly interested in any contract or informal arrangement with
Target or any of its Subsidiaries, except for normal compensation for
services as an officer, director or employee thereof. None of said
officers or directors or family members has any interest in any
property, real or personal, tangible or intangible, including
inventions, patents, copyrights, trademarks or trade names or trade
secrets, used in or pertaining to the business of Target or any of its
Subsidiaries, except for their rights as a stockholder.
3.16.2 Except as disclosed in Schedule 3.16.2, no officer,
director or stockholder of Target or any member of the immediate family
of any such person has had, either directly or indirectly, a material
interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to Target or any of its Subsidiaries any goods,
property, technology or intellectual or other property rights or
services; or (ii) any contract or agreement to which Target or any of
its Subsidiaries is a party or by which it may be bound or affected. All
current arrangements between Target and Philips Electronics N.V. and its
affiliates are on an arm's-length basis.
3.17 Employees, Other Compliance.
3.17.1 Schedule 3.17.1 sets forth a list of the employment
contracts of the four executive officers of Target and any material
labor agreements that are not consistent with general industry practice.
3.17.2 Target and each of its Subsidiaries has good labor
relations and is not
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involved in any material labor disputes, and has no knowledge of any
facts indicating that the consummation of the transactions contemplated
hereby will have a material adverse effect on such labor relations, and
has no knowledge that any of its officers, or significant numbers of
other employees, intends to leave its employ.
3.17.3 Except as disclosed in Schedule 3.17.3 and for any
Kollektiv Vertag, neither Target nor any of its Subsidiaries is a party
to any agreement, contract or instrument with any officer, works council
or any organization representing any significant number of its employees
(each a "Labor Agreement") that provides for any increase in the
compensation to be paid by Target or any of its Subsidiaries to any of
their respective employees (other than increases that do not exceed the
overall cost of living in the applicable geographic region).
3.17.4 There has been no change in any Labor Agreement that
would materially increase the costs of Target or any of its Subsidiaries
above the level incurred in the six-month period ended June 30, 1997.
3.17.5 Neither Target nor any Subsidiary is a party to any
agreement or plan with any officer thereof the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Target in the nature of any of the
transactions contemplated by this Agreement.
3.18 No Brokers. Except for the fees and expenses payable by Target
to Barings Brothers Limited in accordance with those certain letter agreements
dated June 25, 1997 and October 7, 1997 (true and correct copies of which have
been provided to Acquiror), Target is not obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with any
transaction contemplated hereby or thereby.
3.19 Offering Memorandum. The Offering Memorandum does not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3.20 Corporate Books and Records. The minute books of Target and its
Subsidiaries contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, Boards of Directors and all committees
of the Boards of Directors of Target and its Subsidiaries. Complete and accurate
copies of all such minute books and of the stock register of Target and its
Subsidiaries have been provided by Target to Acquiror.
3.21 Accounting Controls. Target has devised and maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with Austrian GAAP and U.S.
GAAP, and (ii) to maintain accountability for assets, and (c) the amount
recorded for assets on the books and records of Target is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.22 Insurance. Target and its Subsidiaries maintain and at all times
during the prior three years have maintained fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance which it believes to be reasonably prudent
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for similarly sized and similarly situated businesses. Schedule 3.22 sets forth
all current policies of insurance.
3.23 Environmental Matters. Except as would not have a Material
Adverse Effect, neither the Target nor any of its Subsidiaries (i) is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), (ii) owns or operates any
real property contaminated with any substances that are subject to any
Environmental Laws, (iii) to the knowledge of Target, is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is subject
to any claim relating to any Environmental Laws and Target is not aware of any
pending investigation which might lead to such a claim.
3.24 Customers; Backlog; Returns and Complaints. Except as would not
have a Material Adverse Effect, neither Target nor any Subsidiary has any
outstanding customer disputes concerning its goods and/or services with any
Significant Customer and Target has no knowledge of any dissatisfaction on the
part of any Significant Customer.
3.25 Suppliers. Except as would not have a Material Adverse Effect,
neither Target nor any Subsidiary has any outstanding disputes concerning goods
or services provided by any Significant Supplier. Except as would not have a
Material Adverse Effect, neither Target nor any Subsidiary has received any
written notice of a termination or interruption of any existing contracts or
arrangements with any Significant Suppliers. Target and its Subsidiaries have
access, on commercially reasonable terms, to all goods and services reasonably
necessary to them to carry on their business as currently conducted and Target
has no knowledge of any reason why Target and its Subsidiaries will not continue
to have such access on commercially reasonable terms.
3.26 Inventory. The inventory of Target and the Subsidiaries
reflected in the Target Financial Statements is in all material respects of good
and merchantable quality and is in all material respects usable and salable in
the ordinary course of Target's and the Subsidiaries' businesses (subject to
reserves as reflected in the Target Financial Statements) and is owned by Target
and its Subsidiaries free and clear of all liens and encumbrances, except for
Permitted Liens.
3.27 Accounts Receivable. Schedule 3.27 contains a true aged list of
unpaid accounts and notes receivable owing to Target or any of its Subsidiaries
as of October 10, 1997.
3.28 Accounting Matters. Target is autonomous and has never been a
subsidiary or division of another corporation or other entity (other than a
personal holding company, the capital stock of which was indirectly owned solely
by one individual, and which had no operating assets, operations or employees
other than its investment in Target). Except as disclosed in Schedule 3.28,
Target has not (i) issued any shares of its capital stock since December 31,
1996; (ii) paid any dividends or effected any other distributions to its
shareholders since December 31, 1996; (iii) reacquired or purchased any shares
of its capital stock from September 19, 1995; (iv) entered into any financial
arrangements for the benefit of its shareholders from September 19, 1995; or (v)
changed any of its equity interests from September 19, 1995.
3.29 No United States Revenue. During the year ended December 31,
1996 and the
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twelve months ended June 30, 1997, Target and its Subsidiaries, in the
aggregate, derived less than $25 million in revenues from sales of goods or
services in the United States of America.
3.30 Investment. Each Stockholder (i) understands that the Acquiror
Ordinary Shares to be issued hereunder have not been registered under the
Securities Act, or under any state securities laws, and are being offered and
sold in reliance upon exemptions from such registration for transactions not
involving any public offering; (ii) is acquiring such Acquiror Ordinary Shares
solely for its own account for investment purposes and not with a view to the
distribution thereof (other than pursuant to an effective registration statement
under the Securities Act); (iii) has received the Acquiror Disclosure Package
and has had the opportunity to receive such additional information concerning
Acquiror as it may desire in order to evaluate the merits and risks of an
investment in such Acquiror Ordinary Shares; and (iv) is able to bear the
economic risk inherent in acquiring and holding such Acquiror Ordinary Shares.
4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants that:
4.1 Organization and Good Standing. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and authority to
own, operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted, and is qualified as a foreign
corporation in each jurisdiction in which a failure to be so qualified would
have a Material Adverse Effect.
4.2 Power, Authorization and Validity.
4.2.1 Acquiror has the right, power, legal capacity and
authority to enter into and perform its obligations under this
Agreement, and all agreements to which Acquiror is or will be a party
that are required to be executed pursuant to this Agreement (the
"Acquiror Ancillary Agreements"). The execution, delivery and
performance of this Agreement and the Acquiror Ancillary Agreements by
Acquiror have been duly and validly approved and authorized by all
necessary corporate and shareholder action on the part of Acquiror.
4.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable Acquiror to enter into, and to perform
its obligations under, this Agreement and the Acquiror Ancillary
Agreements, except for the clearance of the Austrian Cartel Court, if
required.
4.2.3 This Agreement and the Acquiror Ancillary Agreements are,
or when executed by Acquiror will be, valid and binding obligations of
Acquiror enforceable in accordance with their respective terms, except
as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable
remedies and (c) the enforceability of provisions requiring
indemnification in connection with the offering, issuance or sale of
securities.
4.3 Capitalization. The authorized capital stock of Acquiror
consists of 100,000,000 Ordinary Shares par value S$0.01 each, of which
15,994,325 Ordinary Shares
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were issued and outstanding as of October 14, 1997. The Acquiror Ordinary Shares
to be issued to the Stockholders will be duly authorized and validly issued, and
when paid for in accordance with this Agreement will be fully paid and
nonassessable, will not be subject to any right of rescission, and will be
offered, issued, sold and delivered by Acquiror in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable securities laws and conform to the description contained in
Acquiror's registration statement filed with the SEC with respect to 1,900,000
Acquiror Ordinary Shares. Except for the issuance of Acquiror Ordinary Shares
subject to preemptive rights in exchange for Target Ordinary Shares subject to
similar preemptive rights, the Acquiror Ordinary Shares to be issued to the
Stockholders will be free and clear of any liens, security interests,
restrictions, options or encumbrances except as provided in Sections 11.5 or
11.6 hereof. There are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
any of Acquiror's authorized but unissued capital stock or any securities
convertible into or exchangeable for Acquiror's Ordinary Shares or obligating
Acquiror to grant, extend, or enter into any such option, warrant, call, right,
commitment, conversion privilege or other right or agreement, and there is no
liability for dividends accrued but unpaid except as disclosed in the Acquiror
Disclosure Package or as granted pursuant to Stock Option and Purchase Plans
described in the Acquiror Disclosure Package. There are no voting agreements,
voting trusts, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable securities laws) applicable to any of
Acquiror's outstanding securities. The representations and warranties contained
in this Section 4.3 shall survive the Closing indefinitely and Acquiror hereby
agrees to fully indemnify the Stockholders for Damages (as defined below)
resulting from any breach of such representations and warranties.
4.4 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement nor any Acquiror Ancillary Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of (a) any provision of the Charter Documents of
Acquiror, as currently in effect, (b) in any material respect, any material
agreement, instrument or contract to which Acquiror is a party or by which
Acquiror is bound, or (c) except as would not have a Material Adverse Effect,
any national, provincial, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to Acquiror or its assets or properties.
4.5 Litigation. There is no action, proceeding, claim or
investigation pending against Acquiror or any of its Subsidiaries before any
court or administrative agency that if determined adversely to Acquiror or any
of its Subsidiaries would have a Material Adverse Effect nor, to Acquiror's
knowledge, has any such action, proceeding, claim or investigation been
threatened.
4.6 Taxes. Acquiror and each of its Subsidiaries have filed all
national, provincial, local and foreign tax returns required to be filed, have
paid all taxes required to be paid in respect of all periods for which returns
have been filed, have established an adequate accrual or reserve for the payment
of all taxes payable in respect of the periods subsequent to the periods covered
by the most recent applicable tax returns, have made all necessary estimated tax
payments, and have no material liability for taxes in excess of the amount so
paid or accruals or reserves so established. Neither Acquiror nor any of its
Subsidiaries is delinquent in the payment of any tax or is delinquent in the
filing of any tax returns, and no deficiencies for any tax have been threatened,
claimed, proposed or assessed. No tax return of Acquiror or any of its
Subsidiaries has ever been audited by applicable governmental taxing agency or
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authorities. For the purposes of this Section, the terms "tax" and "taxes"
include all national, provincial, local and foreign income, gains, franchise,
excise, property, sales, use, employment, license, payroll, occupation,
recording, value added or transfer taxes, governmental charges, fees, levies or
assessments (whether payable directly or by withholding), and, with respect to
such taxes, any estimated tax, interest and penalties or additions to tax and
interest on such penalties and additions to tax.
4.7 Acquiror Financial Statements. The Acquiror Disclosure Package
(as defined in Section 4.8) includes (i) Acquiror's audited balance sheet as of
March 31, 1997, and audited income statement and statement of cash flows for the
fiscal years then ended as well as the corresponding audited balance sheets,
audited income statements and statements of cash flow for Acquiror's two (2)
prior fiscal years and (ii) Acquiror's unaudited balance sheet as of June 30,
1997 and unaudited income statement and statement of cash flows for the three
(3) month period ending June 30, 1997, as well the unaudited balance sheet as of
June 30, 1997 and unaudited income statement and statement of cash flows for the
three-month period ending on June 30, 1997 (collectively the "Acquiror Financial
Statements"). The Acquiror Financial Statements (a) are in accordance with the
books and records of Acquiror, (b) fairly present, in all material respects, the
financial condition of Acquiror at the date therein indicated and the results of
operations for the period therein specified and (c) have been prepared in
accordance with U.S. GAAP applied on a consistent basis. Except as disclosed in
Schedule 4.7, Acquiror has no material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Acquiror
Financial Statements, except for those that may have been incurred after the
date of the Acquiror Financial Statements in the ordinary course of its
business, consistent with past practice, and that are not material in amount
either individually or collectively.
4.8 Disclosure. Acquiror has made available to Target an investor
disclosure package consisting of Acquiror's annual report on Form 10-K, as
amended, for its fiscal year ending March 31, 1997, all Forms 10-Q and 8-K, as
amended, filed by Acquiror with the SEC since the Fiscal Year End and up to the
date of this Agreement and all proxy materials distributed to Acquiror's
stockholders since the Fiscal Year End and up to the date of this Agreement (the
"Acquiror Disclosure Package"). The documents in the Acquiror Disclosure Package
(i) conform, as of the dates of their respective filing with the SEC, in all
material respects, to the requirements of the Securities Act and the Exchange
Act and (ii) when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
they were made, not misleading, except as disclosed in Schedule 4.7.
4.9 Absence of Certain Changes. Since June 30, 1997, there has not
been any Material Adverse Effect on Acquiror except as disclosed in the Acquiror
Disclosure Package or in Schedule 4.7.
4.10 Compliance with Laws. Except as would not have a Material
Adverse Effect, Acquiror and each of its Subsidiaries has complied, and is or
will be at the Closing Date in compliance, with all applicable laws, ordinances,
regulations, and rules, and all orders, writs, injunctions, awards, judgments,
and decrees applicable to it or to the assets, properties, and business thereof.
4.11 No Brokers. Acquiror is not obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution
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of this Agreement or in connection with any transaction contemplated hereby or
thereby.
4.12 Accounting Matters. Acquiror has not taken any action, that
would prevent it from accounting for the Exchange as a "Pooling of Interest"
under U.S. GAAP.
4.13 No Austrian Revenue. During the year ending December 31, 1996,
and the twelve months ended June 30, 1997, Acquiror derived less than ATS
150,000,000 in revenues from sales of goods or services in Austria.
5. TARGET PRECLOSING COVENANTS
During the period from the date of this Agreement until and including the
Closing Date, Target (which term, for purposes of this Section 5 shall include
each of its Subsidiaries) and the Stockholders each individually covenant and
agree as follows:
5.1 Advice of Changes. The Stockholders and Target will promptly
advise Acquiror in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of the
Stockholders contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue or inaccurate in any material respect and (b)
of any Material Adverse Effect on Target.
5.2 Maintenance of Business. The Stockholders will cause Target to
and Target will use all reasonable efforts to carry on and preserve Target's
business and its relationships with customers, suppliers, employees and others
in substantially the same manner as Target has prior to the date hereof. If
Target or a Stockholder becomes aware of a material deterioration in the
relationship with any customer, supplier or with its employees, Target or such
Stockholder will promptly bring such information to the attention of Acquiror in
writing and, if requested by Acquiror, will exert all reasonable efforts to
restore or cause Target to restore the relationship.
5.3 Conduct of Business. Except as disclosed in Schedule 5.3, the
Stockholders will cause Target to and Target will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and will not, without the prior written consent of Acquiror:
(a) except for the loan agreement dated the date hereof between
Acquiror and Target and borrowings under existing credit lines that permit
repayment at Closing, borrow any money;
(b) enter into any transaction except in the ordinary course of
business consistent with past practice;
(c) encumber or permit to be encumbered any of its assets except in
the ordinary course of its business consistent with past practice and to an
extent which is not material;
(d) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(e) enter into any Material Agreement except in the ordinary course
of business consistent with past practice;
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(f) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to the date of
this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, increased salary or special remuneration to any
officer or employee (except for normal salary increases consistent with past
practices not to exceed 10% per year and except pursuant to existing
arrangements previously disclosed to Acquiror) or enter into any new employment
agreement with any such person;
(h) change accounting methods, other than changes required by
Austrian GAAP or U.S. GAAP;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock;
(j) amend or terminate any Material Agreement, except those amended
or terminated in the ordinary course of business, consistent with past practice;
(k) lend any amount to any person or entity, other than advances to
Subsidiaries or advances for travel and expenses which are incurred in the
ordinary course of business consistent with past practice, not material in
amount and documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any obligation, except for
those of Subsidiaries and for the endorsement of checks and other negotiable
instruments in the ordinary course of business, consistent with past practice,
which are not material in amount;
(m) waive or release any material right or claim, except in the
ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital stock of any class
(except upon the exercise of an option or warrant currently outstanding), or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock, or accelerate the vesting of any outstanding option or
other security;
(o) split or combine the outstanding shares of its capital stock of
any class or enter into any recapitalization affecting the number of outstanding
shares of its capital stock of any class or affecting any other of its
securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its Charter Documents;
(r) license any of its technology or intellectual property except in
the ordinary course of business consistent with past practice;
(s) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return unless copies of such returns
have been delivered to Acquiror for its review prior to filing;
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(t) change in any material respect insurance coverage or issue any
certificates of insurance;
(u) terminate the employment of any officer or any significant
number of other employees or terminate any contract, arrangement or relationship
with any Significant Customer or Significant Supplier; or
(v) agree to do, or permit any Subsidiary to do or agree to do, any
of the things described in the preceding clauses 5.3(a) through 5.3(u).
5.4 Regulatory Approvals. The Stockholders and Target will execute
and file, or join in the execution and filing of, any application or other
document that may be necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or foreign which may be
reasonably required, or which Acquiror may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement. Target
will use all reasonable efforts to obtain all such authorizations, approvals and
consents.
5.5 Necessary Consents. The Stockholders and Target will use all
reasonable efforts to obtain such written consents and to take such other
actions as may be necessary or appropriate to allow the consummation of the
transactions contemplated hereby and to allow Acquiror to carry on Target's
business after the Closing Date.
5.6 Litigation. The Stockholders and Target will notify Acquiror in
writing promptly after learning of any material actions, suits, proceedings or
investigations by or before any court, board or governmental agency, initiated
by or against it or any of its Subsidiaries, or known by Stockholders or Target
to be threatened against Target.
5.7 No Other Negotiations. From the date hereof until the earlier of
termination of this Agreement (provided such termination is not in breach of
this Agreement) or consummation of the Exchange, Target will not and the
Stockholders agree that they will not, and will not authorize or permit any
officer, director, employee or affiliate of Target, or any other person, on its
or their behalf to, directly or indirectly, solicit or encourage any offer from
any party or consider any inquiries or proposals received from any other party,
participate in any negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person (other than Acquiror), concerning
the possible disposition of all or any substantial portion of Target's business,
assets or capital stock by merger, sale or any other means. The Stockholders and
Target will promptly notify Acquiror orally and in writing of any such inquiries
or proposals.
5.8 Access to Information. Until the Closing, the Stockholders will
cause Target to and Target will allow Acquiror and its agents reasonable access
to the files, books, records and offices of Target, including, without
limitation, any and all information relating to Target's taxes, commitments,
contracts, leases, licenses, and real, personal and intangible property and
financial condition; provided that such access shall not substantially interrupt
the ordinary operations of Target.
5.9 Satisfaction of Conditions Precedent. The Stockholders and
Target will use all reasonable efforts to satisfy or cause to be satisfied all
the conditions precedent which are set forth in Section 9, and they will use all
reasonable efforts to cause the transactions
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contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of third
parties and to make all filings with, and give all notices to, third parties
that may be necessary or reasonably required on its part in order to effect the
transactions contemplated hereby and Stockholders shall vote all of their Target
Ordinary Shares as reasonably necessary to effectuate the foregoing.
5.10 Employment Agreements. The Stockholders will cause Target to and
Target shall use all reasonable efforts to obtain from each of Humphrey Porter,
Walter Mayrhofer, Hubert Hofferer and Richard Pfaffstaller an employment
agreement containing the terms set forth in Exhibit 5.10 (each, an "Employment
Agreement" and, collectively, the "Employment Agreements").
5.11 Pooling Accounting. The Stockholders and Target shall use all
reasonable efforts to cause the business combination to be effected by the
Exchange to be accounted for as a "pooling of interests." In this regard, Mr.
Walter Mayrhofer agrees, at or prior to Closing, to enter into an agreement with
Acquiror that grants to Acquiror rights identical in substance to those granted
to the Stockholders in the Agreement Granting Preemptive Rights among Austrian
Philips LLC, Sandaplast Limited, Walter Mayrhofer, Humphrey Porter, Hubert
Hofferer and Richard Pfaffstaller, dated August 1, 1997. The Stockholders and
Target shall use all reasonable efforts to cause Target's affiliates not to take
any action that would adversely affect the ability of Acquiror to account for
the business combination to be effected by the Exchange as a "pooling of
interests." Target has no affiliates that own any of its capital stock, or
rights to acquire its capital stock, other than the Stockholders.
5.12 Securities Laws. The Stockholders and Target shall use all
reasonable efforts to assist Acquiror to the extent necessary to comply with the
securities laws of all jurisdictions which are applicable in connection with the
Exchange.
6. ACQUIROR PRECLOSING COVENANTS
During the period from the date of this Agreement until the Closing
Date, Acquiror covenants and agrees as follows:
6.1 Advice of Changes. Acquiror will promptly advise the
Stockholders and Target in writing (a) of any event occurring subsequent to the
date of this Agreement that would render any representation or warranty of
Acquiror contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue or inaccurate in any material respect and (b) of any
Material Adverse Effect on Acquiror.
6.2 Conduct of Business. Acquiror will not take any action, or agree
to take any action, which would have a Material Adverse Effect on Acquiror.
6.3 Regulatory Approvals. Acquiror will execute and file, or join in
the execution and filing of, any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Target may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Acquiror will
use all reasonable efforts to obtain all such authorizations, approvals and
consents.
6.4 Necessary Consents. Acquiror will use all reasonable efforts to
assist Target in obtaining such written consents and to take such other actions
as may be necessary or
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appropriate to allow the consummation of the transactions contemplated hereby.
6.5 Litigation. Acquiror will notify the Stockholders and Target in
writing promptly after learning of any material actions, suits, proceedings or
investigations by or before any court, board or governmental agency, initiated
by or against it or any of its Subsidiaries, or known by Acquiror to be
threatened against Acquiror.
6.6 Satisfaction of Conditions Precedent. Acquiror will use all
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and Acquiror will use all reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions contemplated hereby.
6.7 Pooling Accounting. Acquiror shall use all reasonable efforts to
cause the business combination to be effected by the Exchange to be accounted
for as a "pooling of interests. "Acquiror shall use all reasonable efforts to
cause its affiliates not to take any action that would adversely affect the
ability of Acquiror to account for the business combination to be effected by
the Exchange as a "pooling of interests."
6.8 Acquiror Affiliates Agreements. To ensure that the Exchange will
be accounted for as a "pooling of interests," Acquiror will cause each of its
affiliates to sign and deliver to Acquiror, on or prior to the Closing Date, a
written agreement (the "Acquiror Affiliates Agreement"), in the form of Exhibit
6.8.
7. CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as
provided in Section 10 below, the Closing will take place at the offices of
Shearman & Sterling, 199 Bishopsgate, London, England EC2M 3TY at 1:00 p.m.,
GMT, on October 30, 1997, or, if all conditions to closing have not been
satisfied or waived by such date, such other place, time and date as Target,
Acquiror and the Stockholders may mutually select (the "Closing Date").
7.2 Exchanges at the Closing.
7.2.1 At the Closing, each Stockholder will deliver to Acquiror
(a) the Target Ordinary Shares Certificate(s) representing all Target
Ordinary Shares held of record or beneficially owned by such Stockholder
on the Closing Date as set forth on Exhibit A, duly endorsed by such
Stockholder for transfer to Acquiror, (b) a written stock transfer form
separate from the Target Ordinary Shares Certificate in the form
attached hereto as Exhibit 7.2.1, duly endorsed by such Stockholder
assigning and transferring all such Target Ordinary Shares to Acquiror
and (c) any other documentation required to effectuate transfer under
applicable law.
7.2.2 Upon receipt of the documents described in Section 7.2.1,
Acquiror will direct its transfer agent to issue (and deliver to each
Stockholder) a share certificate or certificates registered in the name
of such Stockholder for the number of Acquiror Ordinary Shares set forth
beside such Stockholder's name on Exhibit A.
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7.2.3 Promptly after the Closing, Acquiror will deliver to the
Stockholders any cash due in lieu of fractional shares as provided for
in Section 2.
7.3 All Acquiror Ordinary Shares and cash in lieu of fractional
shares delivered upon the surrender of Target Ordinary Shares in accordance with
the terms hereof will be deemed to have been delivered in full satisfaction of
all rights pertaining to such Target Ordinary Shares.
8. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS
The Stockholders' obligations hereunder are subject to the fulfillment
or satisfaction, on and as of the Closing, each of the following conditions (any
one or more of which may be waived by the Stockholders, but only in a writing
signed by the Stockholders):
8.1 Accuracy of Representations and Warranties. The representations
and warranties of Acquiror set forth in Section 4 shall be true and accurate in
every material respect on and as of the Closing with the same force and effect
as if they had been made at the Closing, other than representations and
warranties made of a specific date, which shall have been true and accurate in
every material respect when made.
8.2 Covenants. Acquiror shall have performed and complied in all
material respects with all of its covenants contained in Section 6 on or before
the Closing.
8.3 Closing Certificate. The Stockholders shall receive a
certificate to the effect that the requirements of Sections 8.1 and 8.2 have
been satisfied signed by a duly authorized officer of Acquiror.
8.4 Compliance with Law. There shall be no order, decree, or ruling
by any court or governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
8.5 Government Consents. There shall have been obtained at or prior
to the Closing Date such permits or authorizations, and there shall have been
taken such other action, as may be required to consummate the Exchange by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
securities laws.
8.6 Opinion of Acquiror's Counsel. The Stockholders shall have
received from Allen & Gledhill, Singapore counsel to Acquiror, an opinion
substantially in the form of Exhibit 8.6.
8.7 No Litigation. No litigation or proceeding shall be pending for
the purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this Agreement or which
would have a Material Adverse Effect on Acquiror.
8.8 Documents. The Stockholders shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by their legal counsel to consummate the transactions
contemplated hereby.
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<PAGE> 20
9. CONDITIONS TO OBLIGATIONS OF ACQUIROR
The obligations of Acquiror hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Acquiror, but only in a writing signed by
Acquiror):
9.1 Accuracy of Representations and Warranties. The representations
and warranties of the Stockholders set forth in Section 3 shall be true and
accurate in every material respect on and as of the Closing with the same force
and effect as if they had been made at the Closing, other than representations
and warranties made of a specific date, which shall have been true and correct
in every material respect when made.
9.2 Covenants. The Stockholders and Target shall have performed and
complied in all material respects with all of their covenants contained in
Section 5 on or before the Closing.
9.3 Closing Certificate. Acquiror shall receive a certificate to the
effect that the requirements of Sections 9.1 and 9.2 have been satisfied signed
by the Stockholders as to Sections 9.1 and 9.2 and by Target as to Section 9.2.
9.4 Compliance with Law. There shall be no order, decree, or ruling
by any court or governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
9.5 Government Consents. There shall have been obtained at or prior
to the Closing Date such permits or authorizations, and there shall have been
taken such other action, as may be required to consummate the Exchange by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
federal and state securities laws.
9.6 Opinion of Stockholders' and Target's Counsel. Acquiror shall
have received from Krilyszym & Associates, Austrian counsel to Target, and
Kersten Schwennesen, Senior Legal Counsel of Philips Consumer Electronics B.V.,
opinions substantially in the form of Exhibit 9.6.
9.7 Consents. Acquiror shall have received duly executed copies of
all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or
reasonably deemed necessary by Acquiror's legal counsel to provide for the
continuation in full force and effect of any and all material contracts and
leases of Target and for Acquiror to consummate the transactions contemplated
hereby in form and substance reasonably satisfactory to Acquiror.
9.8 No Litigation. No litigation or proceeding shall be pending for
the purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this Agreement, or which
would have a Material Adverse Effect on Target.
9.9 Employment Agreements. Acquiror shall have received executed copies
of Employment Agreements executed by Target and Humphrey Porter, Walter
Mayrhofer, Hubert Hofferer and Richard Pfaffstaller.
9.10 Satisfactory Form of Legal and Accounting Matters. The form of
all legal and Closing documents delivered hereunder shall be reasonably
acceptable to Acquiror's counsel.
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<PAGE> 21
10. TERMINATION OF AGREEMENT
10.1 Termination.
10.1.1 This Agreement may be terminated at any time prior to the
Closing by the mutual written consent of each of the parties hereto.
10.1.2 This Agreement may be terminated by any party hereto if
all conditions to such party's obligations to consummate the
transactions contemplated hereby have not been satisfied or waived on or
before November 30, 1997; provided that this provision shall not be
available to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur on or prior to such date.
10.1.3 This Agreement may be terminated by either Acquiror or
Stockholders in the event that any governmental or regulatory authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable.
Any termination of this Agreement under this Section 10.1 will be effective by
the delivery of notice of the terminating party to the other party hereto.
10.2 No Liability. Any termination of this Agreement pursuant to this
Section 10 will be without further obligation or liability upon any party in
favor of the other party hereto other than (i) the obligations provided in
Section 12.16, (ii) the Confidentiality Agreement between Target and Acquiror,
dated October 2, 1997, and (iii) any liability of any party hereto for breach of
this Agreement, each of which will survive termination of this Agreement;
provided, however, that nothing herein will limit the obligation of the
Stockholders, Target and Acquiror to use all reasonable efforts to cause the
Exchange to be consummated, as set forth above.
11. CONTINUING COVENANTS
11.1 Survival of Representations. Unless otherwise specified herein,
all representations and warranties of the Stockholders set forth in this
Agreement will survive the Closing Date and will expire on the first anniversary
of the Closing Date. Except as provided in Section 4.3, Acquiror's
representations and warranties set forth in this Agreement shall terminate as of
the Closing.
11.2 Indemnification. (a) Subject to the limitations set forth in
this Section 11.2, the Stockholders indemnify and hold harmless Acquiror and its
respective officers, directors, agents and employees, and each person, if any,
who controls or may control Acquiror within the meaning of the Securities Act
("Indemnified Persons") from and against any and all claims, demands, actions,
causes of action, judgments, fines, penalties, obligations, losses, costs,
damages, liabilities and expenses including, without limitation, the reasonable
fees and disbursements of legal counsel, investigators, consultants, accountants
and other professionals (collectively, "Damages") incurred or suffered by any
Indemnified Persons, resulting from, by
21
<PAGE> 22
reason of or in connection with (i) any breach of the representations or
warranties made by the Stockholders in this Agreement or any certificate,
document or instrument delivered by or on behalf of Target or a Stockholder
pursuant hereto or in connection herewith, (ii) a material breach of any
covenant or agreement made by Target or the Stockholders, or (iii) resulting
from any failure of any Stockholder to have good, valid and marketable title to
the issued and outstanding Target Ordinary Shares held by such Stockholder, free
and clear of all liens, claims, pledges, options, adverse claims, assessments,
charges of any nature whatsoever, or to have full right, capacity and authority
to transfer such Target Ordinary Shares to Acquiror pursuant to the terms of
this Agreement.
(b) The Indemnified Persons shall not have any right to be
indemnified under this Section 11.2 unless the aggregate amount of all Damages
exceeds $2 million, in which case the Indemnified Persons will be entitled to
indemnification for all of their Damages and not merely the amount of damages in
excess of $2 million; provided, however, that the maximum aggregate
indemnification obligation of the Stockholders shall be $20 million. The
Stockholders' liability under this Section 11.2 shall be joint and several;
provided that each Stockholder shall not be liable for any Claim (as defined
below) under this Section 11.2 beyond an amount equal to such Stockholder's Pro
Rata Share of Damages incurred with respect to such Claim. Each Stockholder's
"Pro Rata Share" is that percentage expressed by a fraction, the numerator of
which is the number of Target Ordinary Shares owned by such Stockholder and the
denominator of which is the number of Target Ordinary Shares owned by all
Stockholders, in each case as of the date hereof.
(c) Promptly after the receipt by an Indemnified Person of notice or
discovery of any claim, damage or legal action or proceeding giving rise to
indemnification rights under this Agreement, such Indemnified Person will give
all of the Stockholders (the "Indemnitors") written notice of such claim,
damage, legal action or proceeding (a "Claim"). Within ten days of delivery of
such written notice, the Indemnitors may, at their expense, elect to take all
necessary steps properly to contest any Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to the
Indemnitors. If the Indemnitors make the foregoing election, an Indemnified
Person will have the right to participate at its own expense in all proceedings.
If the Indemnitors do not make such election, an Indemnified Person shall be
free to handle the prosecution or defense of any such Claim, will take all
necessary steps to contest the Claim involving third parties or to prosecute
such Claim to conclusion or settlement satisfactory to such Indemnified Person,
and will notify all Indemnitors of the progress of any such Claim, will permit
all Indemnitors, at their sole cost, to participate in such prosecution or
defense and will provide the Indemnitors with reasonable access to all relevant
information and documentation relating to the Claim and the prosecution or
defense thereof. In any case, the party not in control of the Claim will
cooperate with the other party in the conduct of the prosecution or defense of
such Claim. Neither party will compromise or settle any such Claim without the
written consent of either Acquiror (if the Indemnitors defend the Claim) or all
of the Indemnitors (if Acquiror defends the Claim), such consent not to be
unreasonably withheld; provided that an Indemnified Person shall have the right
to settle any such Claim if the terms of such settlement are not prejudicial to
the Indemnitors, and that in such event the Indemnified Person shall be deemed
to have waived any right of indemnity for such claim hereunder against
22
<PAGE> 23
any Indemnitor that shall not have consented to such settlement.
11.3 Registration of Acquiror Ordinary Shares. Following the Closing,
Acquiror shall register for resale the Acquiror Ordinary Shares received by the
Stockholders pursuant to the Exchange. Such registration shall be made in
accordance with the terms and conditions set forth in Exhibit 11.3.
11.4 Appointment of Stockholder to Acquiror Board. At the Closing or
as soon as practicable thereafter, Acquiror shall take all necessary corporate
actions, including but not limited to obtaining shareholder consent to such
actions if necessary, to appoint Mr. S. L. Hui (or Mr. Hui's designee, who shall
be a member of Mr. Hui's family or other person acceptable to Acquiror) to the
Board of Directors of Acquiror. In addition, Acquiror hereby agrees to nominate
Mr. Hui (or his designee) to fill a directorship, whose term shall be a minimum
of three years, at the next shareholder meeting convened for the purpose of
electing directors.
11.5 Securities Act Matters. Each Stockholder agrees not to sell,
transfer or otherwise dispose of any Acquiror Ordinary Shares unless such sale,
transfer or disposition is made pursuant to an effective registration statement
under the Securities Act or in a transaction that, in the opinion of Shearman &
Sterling or other counsel reasonably acceptable to Acquiror, is exempt from
registration thereunder, and each Stockholder understands that the Acquiror
Ordinary Shares issued in the Exchange will bear appropriate legends setting
forth the restrictions on transfer contained in this Section 11.5 and in Section
11.6.
11.6 Stockholder Representations and Covenants Relating to "Pooling
of Interests" Accounting. (a) Each Stockholder has not in contemplation of the
Exchange, engaged, and will not, after the Closing, until such time as results
covering at least 30 days of combined operations of the Acquiror and Target have
been published by Acquiror, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on Form
10-K, 10-Q, or 8-K, or any other public filing or announcement which includes
the combined results of operations, engage, in any sale, exchange, transfer,
pledge, disposition of or grant of any option, establish any "short" or
put-equivalent position with respect to or the entry into any similar
transaction intended to reduce the risk of the undersigned's ownership of or
investment in, any of the following:
(i) any shares of Acquiror Ordinary Shares which the undersigned may
acquire in connection with the Exchange, or any securities which may be paid as
a dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and other
securities being referred to herein, collectively, as "Restricted Securities"),
or any option, right or other interest with respect to any Restricted
Securities;
(ii) any capital stock of Target; or
(iii) any Target Ordinary Shares or other Target equity securities
which the undersigned purchases or otherwise acquires after the execution of
this Agreement.
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<PAGE> 24
(b) As promptly as practicable following the Closing, Acquiror shall
publish results covering at least 30 days of combined operations of the Acquiror
and Target in the form of a quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results of
operations; provided, however, that Acquiror shall be under no obligation to
publish any such financial information other than with respect to a fiscal
quarter of Acquiror.
12. GENERAL PROVISIONS
12.1 Governing Law. The internal laws of the laws of the State of New
York (irrespective of its choice of law principles) will govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
12.2 Assignment; Binding upon Successors and Assigns. Neither party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto. Any purported assignment in
violation of this Section shall be void. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
12.6 Amendment and Waivers. The observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. Any term or provision of this
Agreement may be amended, either retroactively or prospectively, only by a
writing signed by Acquiror, Target and
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<PAGE> 25
the Stockholders.
12.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
12.8 Expenses. Each party will bear its respective expenses and legal
fees incurred with respect to this Agreement, and the transactions contemplated
hereby; provided, however, that if the Exchange is consummated Acquiror will pay
promptly upon demand the reasonable investment banking, legal and accounting
fees and expenses incurred by Target and the Stockholders in this transaction;
provided, however, that Target shall not be responsible for fees and expenses in
connection with the Exchange and Target's proposed initial public offering in
excess of U.S. $3,373,000 and the Stockholders shall be solely responsible for
all fees and expenses in excess of such amount.
12.9 Attorneys' Fees. Should any arbitration or other suit be brought
to enforce or interpret any part of this Agreement, the prevailing party will be
entitled to recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court or other trier of fact
(including, without limitation, costs, expenses and fees on any appeal). The
prevailing party will be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
12.10 Notices. Any notice or other communication required or permitted
to be given under this Agreement will be in writing, will be delivered
personally or by registered or certified mail, postage prepaid, and will be
deemed given upon delivery, if delivered personally, or three days after deposit
in the mails, if mailed, to the following addresses:
(i) If to Acquiror:
Flextronics International Ltd.
2241 Lundy Avenue
San Jose, CA 95151
Telecopy: (408) 428-0420
Attention: President
with a copy to:
Fenwick & West, LP
Two Palo Alto Square
Suite 800
Palo Alto, CA 94306
Telecopy: (415) 494-1717
Attention: Gordon Davidson
(ii) If to Target:
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<PAGE> 26
Neutronics Electronic Industries Holding A.G.
Gutheil - Schodergasse 10
A-1102 Vienna, Austria
Telecopy: (43 1 60101 4860)
Attention: President
with a copy to:
Shearman & Sterling
199 Bishopsgate
London EC2M 3TY, England
Telecopy: 011-44-171-920-9020
Attention: James Bartos
(iii) If to a Stockholder:
At the address for such Stockholder set forth in
Exhibit A.
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.10.
12.11 Construction of Agreement. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
12.12 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
12.13 Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
12.14 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or any party hereto
26
<PAGE> 27
or any other person or entity unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof will be personal solely
between the parties to this Agreement.
12.15 Public Announcement. Upon execution of this Agreement, Acquiror
and Target will issue a press release approved by both parties announcing the
Exchange. Thereafter, Acquiror may issue such press releases, and make such
other disclosures regarding the Exchange, as it reasonably and in good faith
determines are required under applicable securities laws or regulatory rules.
12.16 Confidentiality. The Stockholders, Target and Acquiror each
recognize that they have received and will receive confidential information
concerning the other during the course of the Exchange negotiations and
preparations. Accordingly, Acquiror, the Stockholders and Target each agrees (a)
to use its respective best efforts to prevent the unauthorized disclosure of any
confidential information concerning the other that was or is disclosed during
the course of such negotiations and preparations, and is clearly designated in
writing as confidential at the time of disclosure, and (b) to not make use of or
permit to be used any such confidential information other than for the purpose
of effectuating the Exchange and related transactions. The obligations of this
Section will not apply to information that (i) is or becomes part of the public
domain, (ii) is disclosed by the disclosing party to third parties without
restrictions on disclosure, (iii) is received by the receiving party from a
third party without breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law. If this Agreement is terminated, all
copies of documents containing confidential information shall be returned by the
receiving party to the disclosing party.
12.17 Effect of Disclosure Schedules. Notwithstanding anything to the
contrary contained in this Agreement or in any section of the Disclosure
Schedules, any information disclosed in one of such Disclosure Schedules shall
be deemed to be disclosed in all of such Disclosure Schedules, to the extent it
is apparent from the information disclosed.
12.18 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Confidentiality Agreement between Target and Acquiror, dated October 2, 1997.
The express terms hereof control and supersede any course of performance or
usage of the trade inconsistent with any of the terms hereof.
[Rest of this page intentionally left blank.]
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<PAGE> 28
12.19 ARBITRATION. ALL DISPUTES, DIFFERENCES, CONTROVERSIES OR CLAIMS
ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE AGREEMENT TO ARBITRATE SET FORTH
IN THIS SECTION 12.19, SHALL BE SUBMITTED TO AND RESOLVED BY ARBITRATION IN
LONDON, ENGLAND CONDUCTED IN ACCORDANCE WITH UNCITRAL ARBITRATION RULES AS THEN
IN FORCE. THE LONDON COURT OF INTERNATIONAL ARBITRATION SHALL BE THE APPOINTING
AUTHORITY. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO SUCH JURISDICTION, FORUM
AND RULES, AND IRREVOCABLY WAIVES ANY AND ALL OBJECTIONS TO SUCH JURISDICTION,
FORUM AND RULES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written in Zalaegerszeg.
FLEXTRONICS INTERNATIONAL LTD. NEUTRONICS ELECTRONIC
INDUSTRIES HOLDING A.G.
By: /s/ Michael E. Marks By: /s/ Humphrey Porter
---------------------------- --------------------------------
Its: Chief Executive Officer Its: Chief Executive Officer
---------------------------- --------------------------------
By: /s/ Hubert Hofferer
--------------------------------
Its: Chief Operating Officer
--------------------------------
OSTERREICHISCHE PHILIPS PHILIPS BETEILIGUNGS GmBH
INDUSTRIE GmBH
By: /s/ Karsten Schwennesen By: /s/ Karsten Schwennesen
---------------------------- ---------------------------------
Its: Senior Counsel Its: Senior Counsel
--------------------------- --------------------------------
S.L. HUI WALTER MAYRHOFER
/s/ S.L. Hui /s/ Walter Mayrhofer
- -------------------------------- -------------------------------------
<PAGE> 29
The undersigned persons acknowledge the obligations outlined in Sections
11.5 and 11.6 and hereby agree to be bound by the terms contained in such
Sections 11.5 and 11.6, in Zalaegerszeg.
HUMPHREY PORTER HUBERT HOFFERER
/s/ Humphrey Porter /s/ Hubert Hofferer
- -------------------------------- -------------------------------------
RICHARD PFAFFSTALLER
/s/ Richard Pfaffstaller
- --------------------------------
<PAGE> 30
LIST OF EXHIBITS
Exhibit A List of Stockholders
Exhibit 1.10 Preliminary Offering Memorandum
Exhibit 5.11 Term Sheets for Employment Agreement
Exhibit 6.8 Acquiror Affiliates Agreement
Exhibit 8.6 Opinion of Allen & Gledhill
Exhibit 9.6 Opinions of Stockholders' and Target's Counsel
Exhibit 11.3 Registration of Acquiror Ordinary Shares
<PAGE> 31
EXHIBIT A
LIST OF STOCKHOLDERS
<TABLE>
<CAPTION>
Total Number of Acquiror
Ordinary Shares to Be Issued
Number of Target Ordinary in Exchange for Stockholder's
Name and Address of Stockholder Shares Owned Target Ordinary Shares
- ------------------------------- ------------------------- -----------------------------
<S> <C> <C>
Osterreichische Philips 436,000 831,125
Industrie GmbH
Triester Strasse 64
P.O. Box 217
1101 Vienna Austria
Philips Beteiligungs GmbH 140,000 266,875
Triestar Strasse 64
P.O. Box 217
1101 Vienna Austria
S.L. Hui 864,000 1,647,000
No. 8 Jalan 15
11700 Glugor, Penang, Malaysia
Walter Mayrhofer 32,000 61,000
c/o Electronic Industries
Holding A.G.
Gutheil-Schoder-Gasse 10
A-1102 Vienna Austria
</TABLE>
<PAGE> 1
EXHIBIT 10
LOAN AGREEMENT
LOAN AGREEMENT, dated as of October 19, 1997, between Flextronics International
Ltd. (hereinafter referred to as the "Lender") and Althofen Electronics
Gesellschaft mbH having its registered office at Friesacher Strasse 3, 9330
Althofen, Austria (hereinafter referred to as "Althofen") and Neutronics
Electronic Industries Holding A.G., having its registered office at
Gutheil-Schoder-Gasse 10, A-1102 Vienna, Austria (hereinafter referred to as
"Neutronics") (both Althofen and Neutronics jointly and severally as a
"Borrower" and collectively the "Borrowers") (each of the above a "Party", or,
collectively, the "Parties").
WHEREAS
the Borrowers have requested, and the Lender has agreed to provide to the
Borrowers a bridge finance facility in a maximum amount of US$30,000,000 (in
words: thirty million United States dollars).
the Parties hereto agree as follows:
CLAUSE 1: LOAN AMOUNT
Subject to the terms and conditions as stated below, the Lender shall establish
a non-revolving term loan facility (the "Facility") of up to maximum
US$30,000,000 (in words: thirty million United States dollars)(the "Loan
Amount").
CLAUSE 2: USE OF FUNDS
The Loan Amount shall be used in order to finance (i) the Borrowers' working
capital in the ordinary course of the Borrowers' business consistent with its
prior practice and (ii) capital expenditures of the Borrowers in the ordinary
course of the Borrowers' business. No portion of the Loan Amount shall be used
to finance any extraordinary expenditure (other than such maximum aggregate
amount of capital expenditures) without the express prior written consent of the
Lender.
CLAUSE 3: DRAWDOWN
The Loan Amount shall be made available and drawn down at the request of the
Borrowers exclusively in United States dollars in one or several disbursements
(the "Drawdowns"). The Loan Amount shall be drawn in multiples of US$100,000. Up
to US$8,400,000 may be drawn on or prior to December 31, 1997, up to
US$16,600,000 may be drawn on or prior to January 31, 1998, up to US$26,000,000
may be drawn on or prior to February 28, 1998 and the full amount of the Loan
Amount may be drawn from and after March 1, 1998 through the expiry of the
Availability Period (as defined in Clause 4). No amount may be drawn after the
expiry of the Availability Period and the then undrawn portion of the Facility
shall be cancelled.
CLAUSE 4: AVAILABILITY PERIOD
The Loan Amount shall be available for Drawdown (subject to the limitations of
Clause 3) until April 20, 1998 (the "Availability Period").
<PAGE> 2
CLAUSE 5: DRAWDOWN NOTICE
For each Drawdown, the Borrower shall send a written Drawdown Notice to the
Lender specifying the amount to be drawn, which in any case shall reach the
Lender not later than two Business Days before the value date of the Drawdown.
Such Drawdown Notice shall include the payment instructions, the Borrowers'
certification that all of their representations and warranties contained herein
are true on such date and that they are in compliance with all of the terms and
provisions hereof on such date and be signed by persons who are authorized to
legally bind the Borrowers for the respective amounts.
CLAUSE 6: REPAYMENT
Subject to Clause 6A, outstanding principal amounts may be repaid only on
Interest Payment Dates. Subject to Clause 6A, all outstanding amounts including
principal, unpaid accrued interest and any other charges which might have
occurred under this Facility shall be repaid in any case not later than on the
first anniversary of the date of this Loan Agreement (the "Maturity Date"). No
amount repaid may be redrawn.
CLAUSE 6A: MANDATORY PREPAYMENT
All outstanding amounts including principal, unpaid accrued interest and any
other charges which might have occurred under this Facility shall be repaid
within 2 Business Days upon the sale by either Borrower of any of its capital
stock to any person or entity other than the Lender, any merger or consolidation
of either Borrower with any person or entity other than the Lender or any sale
by either Borrower of all or a substantial portion of its assets to any person
or entity other than the Lender.
CLAUSE 7: INTEREST PERIOD
The first Interest Period shall end on the last Business Day of January, 1998.
Successive Interest Periods shall end on the last Business Day of April 1998 and
July 1998 and the last Interest Period shall end on the Maturity Date.
CLAUSE 8: INTEREST PAYMENT DATES
Interest shall be due and payable on all Drawdowns on the last Business Day of
January 1998, April 1998 and July 1998 and on the Maturity Date (each, an
"Interest Payment Date").
CLAUSE 9: INTEREST
Interest shall accrue from day to day and shall be computed at a Base Rate plus
a margin of 3% p.a. (in words: three percent), based on the actual number of
days elapsed and a year of 360 days and shall be calculated on all outstanding
amounts under the Facility ("Interest").
CLAUSE 10: BASE RATE
The Base Rate shall be LIBOR, determined on the basis of the average offered
rate per annum for deposits in United States dollars for a corresponding amount
and a corresponding period, interpolated as necessary, which appears on the
Reuters Screen LIBO page as of 11:00 a.m. London time on the rate fixing day.
LIBOR shall be fixed by the Lender two Business Days prior to the beginning of
the respective Interest Period (in the case of Drawdowns two Business Days prior
to such Drawdown).
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CLAUSE 11: REPRESENTATIONS AND WARRANTIES
The Borrowers jointly and severally represent, warrant and agree with Lender:
a) that they are validly existing under the laws of Austria;
b) that all necessary permits and authorizations to enter into this Loan
Agreement and the Note (as defined herein) and to make payments
thereunder, have been obtained;
c) to have taken all required actions to execute, deliver and perform their
obligations under this Loan Agreement and the Note, and such execution,
delivery and performance shall not violate their articles of
association, by-laws or other governing documents;
d) the there has occurred and is continuing no Event of Default;
e) that each Borrower has all requisite power and authority to execute and
deliver this Loan Agreement and the Note and to carry out its
obligations thereunder and this Loan Agreement and the Note constitute
legal, valid and binding obligations of each Borrower enforceable
against it in accordance with their terms and conditions;
f) the execution and delivery of this Loan Agreement and the Note and the
performance of the transactions contemplated therein by each Borrower
and the Lender will not violate any applicable law, rule or regulation
in Austria.
CLAUSE 12: UNDERTAKINGS
The Borrowers undertake to keep the Lender informed on all matters which may
reasonably be regarded by the Lender as having a material importance with
respect to the overall standing of the Borrowers and their ability to perform
their obligations under this Loan Agreement and the Note.
The Borrowers shall inform the Lender upon the occurrence of any Event of
Default or any potential Event of Default without undue delay, specifying the
nature of such event and any steps the Borrowers are taking to remedy the same.
The Borrowers shall deliver to the Lender their audited Annual Report and
semi-annual financial statements reasonably satisfactory to the Lender as soon
as they are available, but in any case the audited Annual Report not later than
6 months and the semi-annual financial statement not later than 2 months after
the end of the respective business period.
The obligations of the Borrowers hereunder shall be subordinated as follows to
the obligations of the Borrowers under (i) the Loan Agreement dated September
30, 1994 between Neutronics and ING Bank N.V., (ii) the Loan Agreement dated
October 6, 1994 between the Borrowers and ING Bank N.V., (iii) the Loan
Agreement dated December 23, 1994 between Neutronics and ING Bank N.V. and (iv)
any other borrowings from banks or other financial institutions (collectively,
the "Senior Loan Agreements"). In the event of any payment default by the
Borrowers under any Senior Loan Agreement or any payment or distribution by the
Borrowers to any of their creditors in a total or partial liquidation,
reorganization or dissolution of the Borrowers, or in a bankruptcy, receivership
or similar proceeding relating to the Borrowers or their property, all amounts
payable under the Senior Loan Agreements shall be paid in full before any
payment or distribution shall be made to the Lender for amounts payable under
this Loan Agreement. The obligations of the Borrowers hereunder will rank at
least pari passu and equally with all other
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unsecured and unsubordinated senior debts. Unless the Lender shall otherwise
agree, the Borrowers shall not create or permit to exist any lien on any of
their property, revenue or other assets, present or future, except:
-- any tax or other statutory lien, provided that such lien shall be
discharged within thirty (30) days after the date it is created
or arises (unless contested in good faith by the Borrower, in
which case it shall be discharged within thirty (30) days after
final adjudication); or
-- any lien securing debt under the Senior Loan Agreements.
CLAUSE 13: LATE PAYMENT
Any amounts due and payable under this Loan Agreement, which the Borrowers fail
to pay to the Lender at a due date, constitute a Late Payment.
CLAUSE 14: INTEREST ON LATE PAYMENT
Without prejudice to any other right of the Lender under this Loan Agreement the
Borrowers shall pay to the Lender Interest on Late Payments at the rate of two
per cent per annum above the rate according to Clause 9 of this Loan Agreement
on each amount payable hereunder, which has not been paid on the due date
thereof. This interest shall be compounded monthly on Interest Payment Dates and
is payable as from the due date until actual payment has been received by the
Lender.
CLAUSES 15: EVENT OF DEFAULT
Without prejudice to Clause 14 of this Loan Agreement, any outstanding amount
under this Loan Agreement will immediately become due and payable upon the
occurrence of any of the following events (each, an "Event of Default"):
a) Any of the Borrowers shall not have duly paid any amount due to the
Lender under this Loan Agreement or under any agreement between any
bank, financial institution or other lender and the Borrowers or any of
their subsidiaries (whether or not such payment shall have been
permitted under any relevant subordination provision);
b) Any of the Borrowers or any of their subsidiaries shall dispose of all
its assets or a substantial part thereof;
c) An order is made or a resolution passed or other procedures or actions
are taken for the winding-up or dissolution of the Borrowers or any of
their subsidiaries, the Borrowers or any of their subsidiaries stops
payments, ceases or threatens to cease to carry on the whole or part of
its business or is deemed to be unable to pay and of its debts or
otherwise becomes or declares itself to be unable to pay any of its
debts or otherwise becomes or declares itself to be unable to pay or is
declared by any competent authority to be insolvent;
d) Any of the Borrowers default in the due performance or observance of any
undertaking or obligation on its part in connection with this Loan
Agreement or any Senior Loan Agreement;
e) Any representation or warranty of the Borrowers contained in this Loan
Agreement or any statement or certificate delivered hereunder at any
time should be or become incorrect;
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f) Any other payment obligation of any of the Borrowers becomes prematurely
repayable following a default by a Borrower or any security given by the
Borrowers becomes enforceable or any obligation of a company related to
the Borrowers becomes prematurely repayable following a default by such
related company; or
g) Any event occurs which in the reasonable and good faith opinion of the
Lender has or is reasonably likely to have a material adverse effect on
the consolidated financial condition of the Borrowers and/or their
ability to perform their payment obligations under this Loan Agreement.
Without prejudice to Clause 14 hereof, the Borrowers shall jointly and severally
indemnify the Lender against any loss or expenses which the Lender may sustain
or incur as a consequence of any Event of Default by the Borrowers in payment of
the principal of the loan or interest accrued thereon and against any costs
incidental to the loan and those resulting from its collection, provided that
such loss or expenses shall include - but be not limited to - any interest or
fee paid or payable on account of any funds borrowed in order to carry the
amount of the loan.
CLAUSE 16: PAYMENTS BY THE BORROWER
All payments shall be made by the Borrowers free and clear of and without any
withholding or deduction for, or on account of any tax or withholding or
deduction for or on account of any set-off or counterclaim except to the extent,
if any, required by law.
In the event that the Borrowers are compelled by law to withhold amounts of tax
on any payment to the Lender, the Borrowers shall pay to the Lender such
additional amounts as may be necessary to ensure, that the Lender receives a net
amount in the currency of the Loan equal to the full amount which the Lender
would have received if payment had not been made subject to such tax. The term
"tax" includes all present and future taxes, levies, imposts, duties,
withholdings and any restrictions or conditions imposed, assessed or collected
by any jurisdiction.
Whenever any payment hereunder shall be due on a day which is not a Business Day
such payment shall be made on the next succeeding Business Day. If such a
Business Day falls in the next calendar month, such payment shall be effective
on the Business Day preceding the original day of payment.
Payments received from the Borrowers shall be applied to discharge the
indebtedness of the Borrowers to the Lender under this Loan Agreement in the
following order:
1. unpaid costs and expenses of the Lender
2. interest for late payments
3. interest amounts
4. any other amounts due pursuant to this Loan Agreement with the exception
of principal
5. principal to be repaid
CLAUSE 17: [Intentionally Omitted]
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CLAUSE 18: COSTS AND EXPENSES
All costs incurred in the preparation, execution and enforcement of this Loan
Agreement, including taxes, provisions, stamp duties and reasonable legal fees
and expenses, shall be for the account of the Borrowers.
The Borrowers hereby declare to indemnify and hold the Lender harmless for all
liabilities in connection with this Loan Agreement and the documents related
thereto and/or its or their enforcement which may arise to the Lender from
present or future environmental legislation.
CLAUSE 19: GENERAL TERMS AND CONDITIONS
Unless otherwise stipulated in this Loan Agreement the General Business
Conditions of the Austrian Credit Institutions as attached hereto as Schedule 1
(in the version as of 1st October 1979) shall apply. In case of conflict the
wording of this Loan Agreement shall prevail.
CLAUSE 20: WAIVERS, REMEDIES CUMULATIVE
No failure to exercise and no delay in exercising on the part of the Lender any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof, or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any right or remedies provided by law.
CLAUSE 21: PARTIAL INVALIDITY
The illegality, invalidity or unenforceability of any provision of this Loan
Agreement under the law of any jurisdiction shall not affect its legality,
validity or enforceability under the law of any other jurisdiction nor the
legality, validity or enforceability of any other provision.
CLAUSE 22: NOTICES
Unless otherwise specified herein, all notices, requests, demands or other
communications to or upon the Parties hereto shall be given by facsimile
transmission or overnight courier addressed to the Party in question as follows:
In the case of the Borrowers to:
Neutronics Electronic Industries Holding A.G.
Gutheil-Schoder-Gasse 10
A-1102 Vienna
Austria
Attention: President
Fax. No.011-43-1-60101-4860
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and in the case of the Lender to:
Flextronics International Ltd.
2241 Lundy Avenue
San Jose, California 95151
Attention: Chief Financial Officer
Fax. No. 1-408-428-0420
or at such other address any Party hereto may designate by notice to the other
Party hereto provided that any notice given by cable or telex shall be confirmed
as soon as practicable thereafter by registered letter. Any such communication
shall be deemed to have been given:
in the case of facsimile, at the time of transmission;
in the case of overnight courier, upon receipt.
CLAUSE 23: BUSINESS DAYS
For the sake of this Loan Agreement Business Day means any day on which banks
are open for business in Vienna and Frankfurt.
CLAUSE 24: AMENDMENTS
Amendments to this Loan Agreement shall be made in writing only.
CLAUSE 25: JURISDICTION
This Loan Agreement shall be governed by and construed in accordance with the
laws of Austria. Place of Jurisdiction shall be the competent courts of Vienna.
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CLAUSE 26: NOTE
Loans by the Lender to the Borrowers hereunder ("Loans") shall be evidenced by a
single note, in the form attached hereto as Exhibit A (the "Note") payable to
the order of the Lender in an amount equal to the unpaid principal amount of
loans hereunder.
FLEXTRONICS INTERNATIONAL LTD. NEUTRONICS ELECTRONIC INDUSTRIES HOLDING
A.G.
By: /s/ Michael E. Marks By: /s/ Humphrey Porter
- ------------------------------ ----------------------------------------
Name: Michael E. Marks Name: Humphrey Porter
Title: Chairman and CEO Title: Chief Executive Officer
ALTHOFEN ELECTRONICS GmBH
By: /s/ Hubert Hofferer
----------------------------------------
Name: Hubert Hofferer
Title: Managing Director
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EXHIBIT A
NOTE
October 19, 1997
For value received, Neutronics Electronic Industries Holding, A.G. and
Althofen Electronics GmbH, each a company organized under the laws of Austria
(together, "Borrowers"), jointly and severally promise to pay to the order of
FLEXTRONICS INTERNATIONAL LTD.
("Lender"), the unpaid principal amount of each Loan made by Lender to Borrowers
pursuant to the Loan Agreement referred to below on the Maturity Date. Borrowers
promise to pay interest on the unpaid principal amount of each such Loan on the
dates and at the rate or rates provided for in the Loan Agreement. All such
payments of principal and interest shall be made in lawful money of United
States dollars at the office of Lender, 2241 Lundy Avenue, San Jose, California
94306, United States of America.
All Loans made by Lender and all repayments of the principal thereof
shall be recorded by Lender and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding shall be endorsed by Lender on the schedule attached hereto, or
on a continuation of such schedule attached to and made a part hereof; provided
that the failure of Lender to make any such recordation or endorsement shall not
affect the obligations of Borrowers hereunder or under the Loan Agreement.
This note is the Note referred to in the Loan Agreement dated as October
19, 1997 between Borrowers and Lender. Terms defined in the Loan Agreement are
used herein with the same meanings. Reference is made to the Loan Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
NEUTRONICS ELECTRONIC INDUSTRIES HOLDING, A.G.
By:________________________________________
Name:
Title:
ALTHOFEN ELECTRONICS GMBH
By:________________________________________
Name:
Title:
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NOTE (CONTINUED)
LOANS AND PAYMENTS OF PRINCIPAL
DATE AMOUNT OF LOAN AMOUNT OF PRINCIPAL REPAID NOTATION BY
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