<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-23354
FLEXTRONICS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Singapore Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Blk 514, Chai Chee Lane
#04-13
Singapore 469029
(Address of principal executive offices) (Zip Code)
(65) 449-5255
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Ordinary Shares December 31, 1996
----------------- -------------------
<S> <C>
S$0.01 par value 13,581,791
</TABLE>
<PAGE> 2
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Condensed Consolidated Balance Sheets - December 31,
1996 and March 31, 1996........................... 3
Condensed Consolidated Statements of Income-Three
months ended December 31, 1996 and 1995........... 4
Condensed Consolidated Statements of Income-Nine
months ended December 31, 1996 and 1995........... 5
Condensed Consolidated Statements of Cash Flow-Nine
months ended December 31, 1996 and 1995........... 6
Notes to Condensed Consolidated Financial Statements. 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 9-13
PART II. OTHER INFORMATION
Items 1 through 6................................................. 14
Signatures........................................................ 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996*
------------------------------
(UNAUDITED)
ASSETS (IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Current assets
Cash $ 13,578 $ 6,546
Accounts receivable, net 67,194 78,114
Inventories - Note B 45,262 52,637
Other current assets 4,343 4,087
------------ ------------
Total current assets 130,377 141,384
------------ ------------
Property and equipment
At cost 110,716 98,998
Accumulated depreciation (39,715) (37,896)
------------ ------------
Net property and equipment 71,001 61,102
------------ ------------
Other non-current assets 16,556 12,102
------------ ------------
TOTAL ASSETS $ 217,934 $ 214,588
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings $ 5,710 $ 14,379
Current portion of capital lease and
long-term debt 21,908 20,934
Accounts payable 59,500 64,625
Other current liabilities 17,054 13,770
------------ ------------
Total current liabilities 104,172 113,708
------------ ------------
Long term debt, less current portion 18,985 17,554
Obligations under capital leases and deferred 10,290 11,376
income taxes
Notes payable to shareholders 400 686
Minority Interest 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized - 100,000,000 shares at
March 31, 1996 and December 31, 1996
Issued and outstanding - 13,213,289 shares
at March 31, 1996 and 13,581,791 shares
at December 31, 1996 87 85
Additional paid-in capital 94,652 93,634
Accumulated deficit (11,137) (22,940)
------------ ------------
Total shareholders' equity 83,602 70,779
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 217,934 $ 214,588
============ ============
</TABLE>
* The balance sheet at March 31, 1996 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements
3
<PAGE> 4
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales $ 121,525 $ 131,816
Costs and expenses:
Cost of sales 111,477 119,996
Selling, general and administrative
expenses 6,922 4,989
Goodwill and intangibles amortisation 288 264
Provision for plant closings 2,321 0
Interest expense and other, net 78 354
------------ ------------
121,086 125,603
Income before income taxes 439 6,213
Provision for income taxes 371 1,211
------------ ------------
Net income after income taxes 68 5,002
============ ============
Earnings per share:
Net income per share $ 0.01 $ 0.37
============ ============
Weighted average ordinary
shares and equivalents 14,470 13,702
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales $ 362,264 $ 322,645
Costs and expenses:
Cost of sales 325,827 293,461
Selling, general and administrative 19,101 13,255
expenses
Goodwill & intangibles amortisation 863 783
Provision for plant closings 2,321 0
Interest expense and other, net 1,450 1,121
------------ ------------
349,562 308,620
Income before income taxes 12,702 14,025
Provision for income taxes 2,166 2,399
------------ ------------
Net income after income taxes 10,536 11,626
============ ============
Earnings per share:
Net income per share $ 0.73 $ 0.89
============ ============
Weighted average ordinary
shares and equivalents 14,377 13,130
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used for) operating $ 40,097 $ (10,894)
activities
Investing activities:
Purchases of property and equipment (17,857) (18,542)
Proceeds from sale of property and 732 103
equipment
Payment for business acquired, net of 0 (3,116)
cash acquired
Investment (3,000) 0
------------ ------------
Net cash used for investing activities (20,125) (21,555)
============ ============
Financing activities:
Borrowing from (repayment) to banks (8,645) 8,225
Source (repayment) of capital lease (4,851) 3,023
obligations
Source (repayment) of long-term debt 574 1,947
Repayment of loan from related party 1,381 0
Loan made to related party (1,938)
Net proceeds from issuance of share 825 22,929
capital
Repayment of notes payable (286) (23)
------------ ------------
Net cash provided by (used for) financing
activities (12,940) 36,101
============ ============
Net increase in cash 7,032 3,652
Cash, beginning of period 6,546 4,751
------------ ------------
Cash, end of period $ 13,578 $ 8,403
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
DECEMBER 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended December 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended March 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in Flextronics International
Ltd.'s annual report on Form 10-K for the year ended March 31, 1996.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1996 1996
------------ ------------
(In thousands)
<S> <C> <C>
Raw materials $ 40,610 $ 42,202
Work-in-process 9,573 14,049
Finished goods 1,028 962
------------ ------------
$ 51,211 $ 57,213
Less: Allowance for obsolescence (5,949) (4,576)
------------ ------------
$ 45,262 $ 52,637
============ ============
</TABLE>
NOTE C: ACQUISITION
On November 25, 1996, the Company acquired Fine Line Printed Circuit
Design, Inc. ("Fine Line"), a circuit board layout and prototype operation
located in San Jose, California. The acquisition was accounted for as a pooling
of interests and the Company has issued 223,321 Ordinary Shares of S$0.01 par
value per share in exchange for all of the outstanding capital stock of Fine
Line. Prior period financial statements were not restated because the financial
results of Fine Line did not have a material impact on the consolidated result.
On December 20, 1996, the Company acquired 40% of FICO Investment Holding
Limited ("FICO") for $5.2 million of which $3 million was paid in December 1996
and the balance payment is due on April 1997. The Company has an option to
purchase the remainder 60% of FICO in 1998 and the consideration for the
remaining 60% is dependent on the financial performance of FICO for period
ending December 31, 1997. FICO produces injection molded plastics for
electronics companies with manufacturing facilities in Shenzhen, China.
In February 1997, the Company expects to enter into a definitive agreement to
acquire from Ericsson Business Networks AB ("Ericsson") 330,000 square feet of
manufacturing facilities in Karlskrona, Sweden and related inventory, equipment
and assets (the "Karlskrona Facilities") for cash. In connection with this
transaction,
7
<PAGE> 8
the Company anticipates that it will record a charge to earnings of
approximately $3.0 million in the fourth fiscal quarter of fiscal 1997, relating
to the anticipated costs of separating the Karlskrona Facilities from Ericsson's
management information systems and implementing a new management information
system, as well as transaction costs for the acquisition.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains projections and other forward-looking
statements regarding future events and the future financial performance of the
Company that involve a number of risks and uncertainties. While this outlook
represents the Company's current judgment on the future direction of the
business, such risks and uncertainties could cause actual events or results to
differ materially from any future performance suggested herein. Certain of the
factors that could cause actual events or results to differ are highlighted
herein. We also refer you to the documents the Company files from time to time
with the Securities and Exchange Commission, specifically the Company's Annual
Report on Form 10-K filed in June 1996 and fiscal year 1997 Form 10-Qs. This
document, as well as the Company's Form 10-K, Form 10-Qs and Form 8-Ks, contain
and identify important factors that could cause the Company's actual results to
differ materially from those contained in this report on Form 10-Q. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Net Sales
Net sales for the three months ended December 31, 1996 decreased 7.8% to
$121.5 million from $131.8 million for the three months ended December 31, 1995
primarily due to reduced sales to certain customers, including Visioneer and
Apple Computer. Net sales for the nine months ended December 31, 1996 increased
12.3% to $362.3 million from $322.6 million for the nine months ended December
31, 1995. The increase was primarily due to new customers in the computer and
communications industries, such as Microsoft, U.S. Robotics and Advanced Fibre
Communications and the inclusion of sales of Astron after it was acquired in
February 1996. This increase was partially offset by reduced sales to certain
existing customers, including Apple Computer, Visioneer, and Houston Tracker
Systems. The Company believes that the reduction in sales to these customers in
the three and nine-month period was primarily due to reductions in these
customers' sales to end-users.
Gross Profit
Gross profit varies from period and is affected by, among other things,
product mix, component costs, product life cycles, unit volumes, startup,
expansion and consolidated of manufacturing facilities, pricing, competition and
new product introductions. Gross profit margin decreased to 8.3% for the three
months ended December 31, 1996 as compared to 9.0% for the three months ended
December 31, 1995. The decrease in the gross profit margin for the three months
ended December 31, 1996 was primarily due to a $0.9 million inventory write down
relating to the closure of the Texas and nChip facilities. See "--Provision for
Plant Closings." Gross profit margin increased to 10.0% for the nine months
ended December 31, 1996 as compared to 9.0% for the nine months ended December
31, 1995. The increase was mainly due to higher sales in the first two quarters
of the year resulting in better labor and overhead absorption, and the inclusion
of Astron's printed circuit board business which has historically had a
relatively higher gross profit margin than the Company. This benefit was
partially offset by underutilization of the nCHIP semiconductor fabrication
facility, and of the Company's Texas facility, which is being closed. See "--
Provision for Plant Closings." Gross margins may be adversely effected in the
short term as the Company commences production in new facilities, including the
Karlskrona Facilities, and may also be adversely affected by the relatively high
cost of manufacturing in Sweden.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
December 31, 1996 increased to $6.9 million from $5.0 million for the three
months ended December 31, 1995 and increased as a percentage of net sales to
5.7% for the three months ended December 31, 1996 from 3.8% for the three months
ended December 31, 1995. Selling, general and administrative expenses for the
nine months ended December 31, 1996 increased to $19.1 million from $13.3
million in the nine months ended December 31, 1995 and increased as a percentage
of net sales from 4.1% to 5.3%. The increases, both in dollars and as a
percentage of sales, were principally due to the inclusion of Astron's selling,
general and administrative expenses after its acquisition in February 1996;
increases in staffing
9
<PAGE> 10
levels, corporate salaries and bonuses; increased sales and marketing expenses;
and travel and legal expenses related to recent acquisitions.
Goodwill and Intangible Assets Amortization
Goodwill and intangible assets are amortized on a straight line basis.
Goodwill and intangible amortization for the nine months ended December 31, 1996
increased to $863,000 from $783,000 for the nine months ended December 31, 1995,
primarily due to the Company's acquisitions of A&A and Astron.
Provision for Plant Closings
As the Company has implemented its facilities consolidation strategy, it
has incurred expenses for plant closings in fiscal 1996 and the nine months
ended December 31, 1996. In the three months ended December 31, 1996, the
Company incurred plant closing expense of $2.3 million in connection with the
closing of its Texas facility and the write-off of obsolete equipment at the
nCHIP semiconductor fabrication facility. The Texas facility had been primarily
dedicated to production for Global Village Communications and Apple Computer, to
whom the Company does not anticipate making substantial sales in future periods.
In addition, during this period, the Company began negotiations to sell the
nCHIP semiconductor fabrication facility to a third party. In the fourth quarter
of fiscal 1997, the Company expects to incur expenses of approximately $2.0
million in connection with its planned shift of manufacturing operations from
Singapore to lower cost manufacturing locations.
In the fourth quarter of fiscal 1996, the Company recorded charges
totaling $2.5 million for costs associated with the closing of one of the
Company's Malaysian plants and its Shekou, China operations. Production from the
Shekou facility was moved to the Company's plant in Xixiang, China.
Interest Expense and Other, Net
Interest expense and other, net decreased to $78,000 for the three
months ended December 31, 1996 from $354,000 for the three months ended
December 31, 1995, due to successful insurance claim, offset in part by an
increase in indebtedness to finance the Astron acquisition. Interest expense
and other, net increased to $1.5 million for the nine months ended December 31,
1996 from $1.1 million for the nine months ended December 31, 1995, mainly due
to indebtedness incurred in order to finance the Astron acquisition, offset in
part by a successful insurance claim. The Company expects its interest expense
to increase substantially as a result of the indebtedness which it expects to
incur to finance a portion of the purchase price of the Karlskrona Facilities.
Provision for Income Taxes
The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Singapore, Malaysia, Hong
Kong. Mauritius, China, the United Kingdom, the United States and the
Netherlands. Each of these subsidiaries is subject to taxation in the country in
which it has been formed. The Company's Asian manufacturing subsidiaries have at
various times been granted certain tax relief in each of these countries,
resulting in lower taxes than would otherwise be the case under ordinary tax
rates.
The Company's consolidated effective tax rate for any given period is
calculated by dividing the aggregate taxes incurred by each of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculation of
their respective local taxes. For example, the charge for the closing of one
plant in Malaysia in fiscal 1996 was incurred by a Malaysian subsidiary that did
not have income against which this
10
<PAGE> 11
charge could be offset. The ordinary corporate tax rates for calendar 1996 were
26%, 16.5% and 15% in Singapore, Hong Kong and China, respectively, and 30% on
manufacturing operations in Malaysia. In addition, the tax rate is de minimis in
Labuan, Malaysia and Mauritius where the Company's offshore marketing and
distribution subsidiaries are located.
The Company's consolidated effective tax rate was 84.5 % for the three
months ended December 31, 1996, and 17.1% for the nine months ended December 31,
1996. The increase in the effective tax rate for the three month period was due
to the plant closing charges of $2.3 million, which was incurred by a subsidiary
that did not have income against which this charge could be offset. If the
provision for plant closings is excluded, the Company's consolidated effective
tax rate for the three month period would have been 13.4%.
The Company has structured its operations in Asia in a manner designed to
maximize income in countries where tax incentives have been extended to
encourage foreign investment or where income tax rates are low. The Company's
Singapore subsidiary was granted an investment allowance incentive in respect of
approved fixed capital expenditures subject to certain conditions. These
allowances have been utilized to reduce its taxable income since fiscal 1991,
and were fully utilized at the end of fiscal 1996. If the Singapore subsidiary
sells, leases or disposes of assets in respect of which investment allowances
have been granted before July 31, 1997, the amount of income previously exempted
from Singapore tax will then become taxable at the standard corporate tax rate
of 26.0%. The Company's investments in its plants in Xixiang and Doumen, China
fall under the "Foreign Investment Scheme" that entitles the Company to apply
for a five year tax incentive. The Company obtained the incentive for the Doumen
plant in December 1995 and the Xixiang plant in October 1996. With the approval,
the Company's tax rates on income from these facilities during the incentive
period will be 0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in
the first profitable year. In fiscal 1993, the Company transferred its offshore
marketing and distribution functions to a newly formed marketing subsidiary
located in Labuan, Malaysia, where the tax rate is de minimus. In February 1996,
the Company transferred Astron's sales and marketing business to a newly formed
subsidiary in Mauritius, where the tax rate is 0%. The Company's Malaysian
manufacturing subsidiary has obtained a five-year pioneer certificate from the
relevant authority that provides a tax exemption on manufacturing income from
certain products in Johore, Malaysia. To date, this incentive has had a limited
impact on the Company due to the relatively short history of its Malaysian
operations and its tax allowances and losses carry forward. The Company's
facility in Shekou, China, which was closed in fiscal 1996, was located in a
"Special Economic Zone" and was an approved "Product Export Enterprise" that
qualified for a special corporate income tax rate of 10.0%.
If tax incentives are not renewed upon expiration, if the tax rates
applicable to the Company are rescinded or changed, or if tax authorities
challenge successfully the manner in which profits are recognized among the
Company's subsidiaries, the Company's worldwide effective tax rate would
increase and its results of operations and cash flow would be adversely
affected. Substantially all of the products manufactured by the Company's Asian
subsidiaries are sold to U.S.-based customers. While the Company believes that
profits from its Asian operations are not sufficiently connected to the U.S. to
give rise to U.S. federal or state income taxation, there can be no assurance
that U.S. tax authorities will not challenge the Company's position or, if such
challenge is made, that the Company will prevail in any such dispute. If the
Company's Asian profits became subject to U.S. income taxes, the Company's
worldwide effective tax rate would increase and its results of operations and
cash flow would be adversely affected. In addition, the expansion by the Company
of its operations in North America and Northern Europe may increase its
worldwide effective tax rate.
Variability of Results
The Company has experienced, and expects to continue to experience,
significant periodic and quarterly fluctuations in results of operations due to
a variety of factors. These factors include, among other things, timing of
orders, volume of orders relative to the Company's capacity, customers'
announcements and introduction, and market acceptance, of new products or new
generations of products, evolution in the life cycles of customer's products,
timing of expenditures in anticipation of future orders, effectiveness in
managing manufacturing processes, changes in cost and availability of labor and
components, mix of orders filled, and changes or anticipated changes in
11
<PAGE> 12
economic conditions. In addition, the Company's operating results are adversely
affected by seasonality (principally in Malaysia and China during each fourth
fiscal quarter due to local holiday seasons). The market segments served by the
Company are also subject to economic cycles and have in the past experienced,
and are likely in the future to experience, recessionary periods. A recessionary
period affecting the industry segments served by the Company could have a
material adverse effect on the Company's results of operations. Results of
operations in any period should not be considered indicative of the results to
be expected for any future period, and fluctuations in operating results may
also result in fluctuations in the price of the Company's Ordinary Shares. In
future periods, the Company's revenue or results of operations may be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Ordinary Shares would likely be materially adversely affected.
Liquidity and Capital Resources
The Company has funded its operations from cash generated from operations,
bank debt, lease financing of capital equipment and the proceeds of public
offerings of equity securities. At December 31, 1996, the Company had cash
balances totaling $13.6 million, outstanding bank borrowings of $5.7 million,
and an aggregate of $42.3 million available for borrowing under its credit
facilities.
Net cash provided by operating activities was $40.1 million for the nine
months ended December 31, 1996, comprised primarily of net income, depreciation,
provision for plant closings and decreases in accounts receivable. Net cash used
for operating activities was $10.9 million for the nine months ended December
31, 1995, primarily due to increases in inventory and decreases in accounts
payable.
Accounts receivable, net of allowance for doubtful accounts, decreased to
$67.2 million at December 31, 1996 from $78.1 million at March 31, 1996. The
decrease in accounts receivable was mainly due to improved collection of
accounts receivable during the nine months ended December 31, 1996. Inventories
decreased to $45.3 million at December 31, 1996 from $52.6 million at March 31,
1996. The Company's allowance for doubtful accounts increased to $4.3 million at
December 31, 1996 from $3.6 million at March 31, 1996. The Company's allowance
for inventory obsolescence increased to $5.9 million at December 31, 1996 from
$4.6 million at March 31, 1996. The increases in the allowances for both
doubtful accounts and inventory obsolescence were due to the increase in sales
in the nine month period.
Net cash used for investing activities during the nine months ended
December 31, 1996 was $20.1 million which consisted primarily of expenditures
for the construction in progress at the new campus in Doumen, China; purchases
of machinery and equipment in the San Jose, California and Xixiang, China
facilities; the purchases of land in Guadalajara, Mexico and San Jose,
California; and the investment in FICO. Net cash used for investing activities
during the nine months ended December 31, 1995 was $21.6 million which consisted
primarily of purchases of machinery and equipment in the Company's manufacturing
facilities located in Texas, California and Xixiang, China.
Net cash used for financing activities was $12.9 million for the nine
months ended December 31, 1996 and consisted primarily of repayment of bank
loans and capital lease obligations. Net cash provided by financing activities
was $36.1 million for the nine months ended December 31, 1995 and consisted
primarily of borrowings from banks and net proceeds from the issuance of share
capital. Bank borrowings decreased from $14.4 million at March 31, 1996 to $5.7
million at December 31, 1996 as the Company repaid bank loans using cash
provided by the operating activities.
The Company presently anticipates that its capital expenditures in the
fourth quarter of fiscal 1997 will be approximately $5.0 million to $7.0 million
(excluding the purchase price for the Karlskrona Facilities) and anticipate that
its capital expenditures in fiscal 1998 will be approximately $20 million to $35
million, primarily relating to the development of new and expanded facilities in
San Jose, California, Guadalajara, Mexico, and Doumen, China. In addition, the
Company will be required to expend cash in the fourth quarter of fiscal 1997 and
in fiscal 1998 pursuant to the terms of the Astron acquisition. The Company will
be required to make principal payments of $10 million and $5 million in February
1997 and February 1998, respectively, pursuant to the terms of promissory notes
issued by it in connection with the Astron acquisition, and will be required to
pay an earnout of up to an additional $12.5 million in cash and Ordinary Shares
on or about March 31, 1997, based on the pre-tax profit of Astron for the year
ended December 31, 1996. The Company is also required to make a $15.0 million
payment to Stephen J.L.
12
<PAGE> 13
Rees on June 30, 1998, conditioned upon his remaining employed as Chairman via
cash and Ordinary Shares, of Astron through that time. The Company believes that
existing cash balances, together with anticipated cash flow from operations and
amounts available under its existing and anticipated credit facilities, will be
sufficient to fund its operations (other than the planned acquisition of the
Karlskrona Facilities) through fiscal 1998.
To finance the planned acquisition of the Karlskrona Facilities, the
Company intends to use a combination of equity financing and anticipated
long-term and short-term financing arrangements, and is engaged in discussions
with financial institutions regarding such financing arrangement. No assurance
can be given as to the availability or terms of any such financing arrangements.
13
<PAGE> 14
PART II - OTHER INFORMATION
Items 1 through 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
<TABLE>
<S> <C> <C>
(a) Exhibits: (10.1) Lease dated November 19, 1996 between
John and Susan Sobrato 1979 Revocable Trust and
Flextronics International USA, Inc.
(10.2) Sale and Purchase Agreement dated November 29,
1996 between FICO Forest Industrial Co. Limited
and the Company. Certain Schedules to the Sale
and Purchase Agreement have been omitted. The
Company agrees to furnish supplementally a copy
of any omitted Schedule to the Commission upon
request.
(10.3) Promissory Note & Security Agreement dated
December 19, 1996 in the amount of $650,000
payable by Mr. Richard Davis to the Company.
(10.4) Promissory note dated October 22, 1996 in the
amount of $135,900 payable by Mr. Michael McNamara
to the Company.
(11.1) Statement re: computation of earnings per share.
(11.2) Statement re: computation of earnings per share.
(27.1) Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K: Current Report on Form 8-K filed on November 19, 1996
in connection with the Company's press announcing the letter of intent to
acquire the Karlskrona Facility and the acquisition of Fine Line.
14
<PAGE> 15
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
FLEXTRONICS INTERNATIONAL LTD.
(Registrant)
Date February 12, 1997
----------------------------- --------------------------------------
Michael E. Marks, Chief Executive
Officer
Date February 12, 1997
----------------------------- --------------------------------------
Goh Chan Peng, Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
- ---------- ---------------------
<S> <C>
10.1 Lease dated November 19, 1996 between John and Susan
Sobrato 1979 Revocable Trust and Flextronics International USA,
Inc.
10.2 Sale and Purchase Agreement dated November 29, 1996 between FICO
Forest Industrial Co. Limited and the Company. Certain Schedules to
the Sale and Purchase Agreement have been omitted. The Company
agrees to furnish supplementally a copy of any omitted Schedule to
the Commission upon request.
10.3 Promissory Note & Security Agreement dated December 19, 1996 in the
amount of $650,000 payable by Mr. Richard Davis to the Company.
10.4 Promissory note dated October 22, 1996 in the amount of $135,900
payable by Mr. Michael McNamara to the Company.
11.1 Statement re: computation of earnings per share.
11.2 Statement re: computation of earnings per share.
27.1 Financial Data Schedule.
</TABLE>
16
<PAGE> 1
EXHIBIT 10.1
LEASE BETWEEN
JOHN & SUSAN SOBRATO 1979 REVOCABLE TRUST & FLEXTRONICS INTERNATIONAL USA, INC..
Section Page #
- ------- ------
Parties.................................................... 1
Premises................................................... 1
Use........................................................ 1
Term and Rental............................................ 1
Rental Adjustment................................. 2
Security Deposit........................................... 2
Late Charges............................................... 3
Construction and Possession................................ 3
Building Shell Construction....................... 3
Tenant Improvement Plans.......................... 3
Preliminary Cost Estimates........................ 4
Final Pricing..................................... 4
Change Orders..................................... 4
Building Shell Costs.............................. 5
Tenant Improvement Costs.......................... 5
Construction...................................... 5
General Contractor Overhead & Profit.............. 6
Insurance/Indemnity............................... 6
Punch List & Warranty............................. 6
Other Work by Tenant.............................. 6
Acceptance of Possession and Covenants to Surrender........ 7
Uses Prohibited............................................ 7
Alterations and Additions.................................. 8
Maintenance of Premises.................................... 8
Hazard Insurance........................................... 9
Tenant's Use...................................... 9
Landlord's Insurance.............................. 9
Tenant's Insurance................................ 9
Waiver............................................ 10
Taxes...................................................... 10
Utilities.................................................. 11
Abandonment................................................ 11
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Free From Liens.................................................... 11
Compliance With Governmental Regulations........................... 11
Toxic Waste and Environmental Damage............................... 12
Tenant's Responsibility................................... 12
Tenant's Indemnity Regarding Hazardous Materials.......... 12
Actual Release by Tenant.................................. 13
Environmental Monitoring.................................. 13
Indemnity.......................................................... 14
Advertisements and Signs........................................... 14
Attorney's Fees.................................................... 14
Tenant's Default................................................... 14
Remedies.................................................. 15
Right to Re-enter......................................... 16
Abandonment............................................... 16
No Termination............................................ 16
Surrender of Lease................................................. 16
Habitual Default................................................... 16
Landlord's Default................................................. 17
Notices............................................................ 17
Entry by Landlord.................................................. 17
Destruction of Premises............................................ 18
Destruction by an Insured Casualty........................ 18
Destruction by an Uninsured Casualty...................... 18
Assignment or Sublease............................................. 18
Consent by Landlord....................................... 18
Assignment or Subletting Consideration.................... 19
No Release................................................ 20
Effect of Default......................................... 20
Condemnation....................................................... 20
Effects of Conveyance.............................................. 21
Subordination...................................................... 21
Waiver............................................................. 22
Holding Over....................................................... 22
Successors and Assigns............................................. 22
Estoppel Certificates.............................................. 22
Option to Extend the Lease Term.................................... 23
Grant and Exercise of Option.............................. 23
Determination of Fair Market Rental....................... 23
Resolution of a Disagreement over the Fair Market Rental.. 24
Options............................................................ 24
Quiet Enjoyment.................................................... 25
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Brokers............................................................ 25
Landlord's Liability.............................................. 25
Authority of Parties............................................... 25
Transportation Demand Management programs.......................... 25
Dispute Resolution................................................. 25
Lease Guaranty..................................................... 26
Miscellaneous Provisions........................................... 26
Rent...................................................... 26
Management Fee............................................ 26
Performance by Landlord................................... 26
Interest.................................................. 26
Rights and Remedies....................................... 26
Survival of Indemnities................................... 26
Severability.............................................. 26
Choice of Law............................................. 27
Time...................................................... 27
Entire Agreement.......................................... 27
Representations........................................... 27
No Presumption Against Drafter............................ 27
Headings.................................................. 27
Exhibits.................................................. 27
EXHIBIT A - Premises, Building & Project........................... 28
EXHIBIT B - Shell Plans and Specifications......................... 29
EXHIBIT C - Building Shell Definition.............................. 30
EXHIBIT D - Tenant Improvement Plans and Specifications............ 32
EXHIBIT E - Guaranty of Lease...................................... 33
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1. PARTIES: THIS LEASE, is entered into on this 19th day of November,
1996, between the JOHN AND SUSAN SOBRATO 1979 REVOCABLE TRUST, whose address is
10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and FLEXTRONICS
INTERNATIONAL USA, INC., a California Corporation, whose address is 2241 Lundy
Avenue, San Jose, CA 95131, hereinafter called respectively Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
San Jose, County of Santa Clara, State of California, commonly known and
designated as 2090 Fortune Drive consisting of 71,750 rentable square feet
("Building") with parking for approximately 260 cars as outlined in red on
Exhibit "A". Unless expressly provided otherwise, the term Premises as used
herein shall include the Tenant Improvements (defined in Section 7.B)
constructed by Tenant pursuant to Section 7.B.
3. USE: Tenant shall use the Premises only for the following purposes
and shall not change the use of the Premises without the prior written consent
of Landlord: Office, research and development, marketing, light manufacturing,
storage and other incidental uses. Landlord makes no representation or warranty
that any specific use of the Premises desired by Tenant is permitted pursuant to
any Laws.
4. TERM AND RENTAL: The term ("Lease Term") shall be for one hundred
twenty (120) months, commencing, on the "Commencement Date" as determined
pursuant to Section 7.H, and ending one hundred twenty (120) months thereafter
("Expiration Date"). In addition to all other sums payable by Tenant under this
Lease, beginning six (6) months following the Commencement Date, Tenant shall
pay as base monthly rent ("Base Monthly Rent") for the Premises the amount of
Sixty Four Thousand Seven Hundred Ninety and No/100 Dollars ($64,790.00), which
amount shall be subject to increase pursuant to Section 4.A below. Base Monthly
Rent shall be due in advance on or before the first day of each calendar month
during the Lease Term. All sums payable by Tenant under this Lease shall be paid
to Landlord in lawful money of the United States of America, without offset or
deduction and without prior notice or demand, at the address specified in
Section 1 of this Lease or at such place or places as may be designated by
Landlord during the Lease Term. Base Monthly Rent for any period less than a
calendar month shall be a pro rata portion of the monthly installment.
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A. RENTAL ADJUSTMENT: Beginning twelve (12) months after the
Commencement Date, and every twelve (12) months thereafter (an "Adjustment
Date"), the then- payable Base Monthly Rent shall be subject to adjustment based
on the increase, if any, in the Consumer Price Index that has occurred during
the twelve (12) months preceding the then-applicable Adjustment Date. The basis
for computing the adjustment shall be the U.S. Department of Labor, Bureau of
Labor Statistic's Consumer Price Index for All Urban Consumers, All Items,
1982-84=100, for the San Francisco-Oakland-San Jose area ("Index"). The Index
most recently published preceding the Commencement Date for the first Adjustment
(or previous Adjustment Date, as applicable), shall be considered the "Base
Index". If the Index most recently published preceding the Adjustment Date
("Comparison Index") is greater than the Base Index, the then- payable Base
Monthly Rent shall be increased by multiplying the then-payable Base Monthly
Rent by a fraction, the numerator of which is the Comparison Index and the
denominator of which is the Base Index. On adjustment of the Base Monthly Rent,
Landlord shall notify Tenant by letter stating the new Base Monthly Rent.
Landlord's calculation of the Base Monthly Rent escalation shall be conclusive
and binding unless Tenant objects to said calculation within thirty (30) days of
Tenant's receipt from Landlord of such calculation. Landlord's failure to adjust
Base Monthly Rent on an Adjustment Date shall not prevent Landlord from
retroactively adjusting Base Monthly Rent at any subsequent time during the
Lease Term. If the Index base year is changed so that it differs from
1982-84=100, the Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. If the Index is discontinued or revised during the Lease Term, such
other government index or computation with which it is replaced shall be used in
order to obtain substantially the same result as would be obtained if the index
had not been discontinued or revised.
5. SECURITY DEPOSIT: Concurrently with Tenant's execution of this Lease,
Tenant has deposited with Landlord the sum of Sixty Four Thousand Seven Hundred
Ninety and No/100 Dollars ($64,790.00) ("Security "Deposit"). Landlord shall not
be required to separate the Security Deposit from Landlord's other funds and
Tenant shall not be entitled to interest on the Security Deposit. If Tenant
defaults with respect to any provisions of the Lease, including but not limited
to the provisions relating to payment of Base Monthly Rent or other charges,
Landlord may, to the extent reasonably necessary to remedy Tenant's default, use
any or all of the Security Deposit towards payment of the following: (i) Base
Monthly Rent or other charges in default; (ii) any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default; and (iii)
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied, Tenant
shall, within ten (10) days after written demand from Landlord, deposit cash
with Landlord in an amount sufficient to restore the Security Deposit to its
full original amount, and shall pay to Landlord such other sums as necessary to
reimburse Landlord for any sums paid by Landlord. If Tenant shall default more
than three (3) times in any twelve (12) month period, irrespective of whether or
not such default is cured, then the Security Deposit shall, within ten (10) days
after demand by Landlord, be increased by Tenant to an amount equal to three (3)
times the Base Monthly Rent.
Page 2
<PAGE> 6
The Security Deposit shall be returned to Tenant within thirty
(30) days after the Expiration Date and surrender of the Premises to Landlord,
less any amount deducted in accordance with this Section, together with
Landlord's written notice itemizing the amounts and purposes for such deduction.
In the event of termination of Landlord's interest in this Lease, Landlord shall
transfer the Security Deposit to Landlord's successor in interest.
6. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant
to Landlord of Base Monthly Rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which is extremely difficult to ascertain. Such costs include but are not
limited to: administrative, processing, accounting, and late charges which may
be imposed on Landlord by the terms of any contract, revolving credit, mortgage,
or trust deed covering the Premises. Accordingly, if any installment of Base
Monthly Rent or other sum due from Tenant shall not be received by Landlord or
its designee when due, Tenant shall pay to Landlord a late charge equal to five
(5%) percent of such overdue amount, which late charge shall be due and payable
on the same date that the overdue amount was due. Landlord agrees to waive said
late charge in the event all amounts set forth in any notice served upon Tenant
by Landlord to pay rent or quit in connection with the overdue amount are paid
in full by cashier's check within five (5) days after Landlord's service upon
Tenant of such notice to pay rent or quit. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance by Landlord of such late
charge shall not constitute a waiver of Tenant's default with respect to such
overdue amount nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
Base Monthly Rent, then the Base Monthly Rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding any provision
of this Lease to the contrary.
7. CONSTRUCTION AND POSSESSION:
A. BUILDING SHELL CONSTRUCTION. Landlord shall cause the shell
of the Building ("Building Shell") to be constructed by independent contractors
to be employed by and under the supervision of Landlord's affiliated
construction company, Sobrato Construction Corporation ("General Contractor"),
in accordance with the Building Shell plans and guideline specifications
prepared by Arctec ("Architect") and approved by Landlord and Tenant, which are
attached hereto as Exhibit "B" ("Shell Plans and Specifications"). General
Contractor shall construct the Building Shell in accordance with all applicable
municipal, local, state and federal laws, statutes, rules, regulations and
ordinances. Landlord shall pay for all costs and expenses associated with the
construction of the Building Shell. The Building Shell shall include those items
set forth in the attached Exhibit "C" ("Building Shell Definition").
B. TENANT IMPROVEMENT PLANS. Tenant, at Tenant's sole cost and
expense, has also
Page 3
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hired the Architect to prepare plans and outline specifications which shall be
attached hereto as Exhibit "D" ("Tenant Improvement Plans and Specifications")
with respect to the construction of improvements to the interior premises
("Tenant Improvements"). The Tenant Improvements shall consist of all items not
included within the scope of the Building Shell Definition. The Tenant
Improvement Plans and Specifications shall be completed and submitted to
Landlord by December 31, 1996 in sufficient detail to allow General Contractor
to construct the Tenant Improvements. Landlord shall cause General Contractor to
construct the Tenant Improvements in accordance with all Tenant Improvement
Plans and Specifications. The Tenant Improvements shall become the property of
Tenant upon installation and shall not be removed or altered by Tenant without
the prior written consent of Landlord as provided in Section 10. Tenant shall
have the right to depreciate and claim and collect any investment tax credits in
the Tenant Improvements during the initial Lease Term. Upon expiration of the
Lease Term or any earlier termination of the Lease, the Tenant Improvements
shall become the property of Landlord and shall remain upon and be surrendered
with the Premises, and title thereto shall automatically vest in Landlord
without any payment therefore.
C. PRELIMINARY COST ESTIMATE. Within fourteen (14) days after
Tenant's delivery of the Tenant Improvement Plans and Specifications to
Landlord, General Contractor shall deliver to Tenant a preliminary cost estimate
to construct the Tenant Improvements. The preliminary cost estimate shall
contain sufficient detail for Tenant to understand the cost element of each
portion of the proposed Tenant Improvements.
D. FINAL PRICING. Within ten (10) days after Tenant's approval
of the preliminary cost estimate for the Tenant Improvements, the General
Contractor shall submit to Tenant competitive bids from at least three (3)
subcontractors for each aspect of the work which is to be performed. General
Contractor must utilize the low bid in each case unless Tenant approves General
Contractor's use of another subcontractor, and the cost of the Tenant
Improvements shall be based upon construction expenses equal to the sum of the
bid amounts as approved by Tenant. Upon Tenant's written approval of the
contract bids, Landlord and Tenant shall be deemed to have given their
respective approvals of the final Tenant Improvement Plans and Specifications on
which the cost estimate was made, and General Contractor shall proceed with the
construction of the Tenant Improvements in accordance with the terms of Section
7.H below. If Tenant does not specifically approve or disapprove the bids within
seven (7) days, Tenant shall be deemed to have disapproved the bids.
E. CHANGE ORDERS. Tenant shall have the right to order changes
in the manner and type of construction of the Building Shell or the Tenant
Improvements. Any change order submitted by Tenant after ten (10) days from the
date of issuance by the City of San Jose of a building permit for the
construction of the Tenant Improvements, which causes General Contractor's
construction schedule to be delayed, shall cause the Commencement Date to occur
one (1) day in advance of the date the Building is Substantially Complete (as
defined in Section 7.H) for each day of delay. Upon
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request and prior to Tenant's submitting any binding change order, General
Contractor shall promptly provide Tenant with written statements of the cost to
implement and the time delay and increased construction costs associated with
any proposed change order, which statements shall be binding on Landlord. If no
time delay or increased construction cost amount is noted on the written
statement, the parties agree that there shall be no adjustment to the
construction cost or the Commencement Date associated with such change order. If
ordered by Tenant, General Contractor shall implement such change order and the
cost of constructing the Tenant Improvements shall be increased in accordance
with the cost statement previously delivered by General Contractor to Tenant for
any such change order.
F. BUILDING SHELL COSTS. Landlord shall pay all costs
associated with the Building Shell.
G. TENANT IMPROVEMENT COSTS. The cost of Tenant Improvements
shall consist of only the following to the extent actually incurred by General
Contractor in connection with the construction of Tenant Improvements:
construction costs, permitting costs, and Landlord overhead as described in
Section 7.I below. During the course of construction of Tenant Improvements,
General Contractor may deliver to Tenant not more than once each calendar month
a written request for payment which shall include and be accompanied by General
Contractor's certified statements setting forth the amount requested, certifying
the percentage of completion of each item for which reimbursement is requested,
and certifying that the progress payment requested is due to a subcontractor of
General Contractor pursuant to a contract between General Contractor and the
subcontractor. Tenant shall pay General Contractor, within fifteen (15) days
after Tenant's receipt of the above items, the costs incurred by General
Contractor in connection with Tenant Improvements installed in the Building in
accordance with the Tenant Improvement Plans and Specifications, minus the
retention set forth below. Tenant shall be entitled to retain ten percent (10%)
of the amount invoiced by General Contractor until the Tenant Improvements are
Substantially Complete as defined in Section 7.H below. Tenant shall pay the
retained balance owing to General Contractor within fifteen (15) days following
the date that the Tenant Improvements are Substantially Complete. All costs for
Tenant Improvements shall be fully documented to and verified by Tenant. The
amounts charged to Tenant shall be limited as provided in Section 7.D above.
H. CONSTRUCTION. Landlord shall use its best efforts to obtain
a building permit from the City of San Jose as soon as possible after Tenant's
approval of the Tenant Improvement Plans and Specifications. The Building Shell
and Tenant Improvements shall be deemed substantially complete ("Substantially
Complete") when the Building Shell and Tenant Improvements have been
substantially completed in accordance with the Shell Plans and Specifications
and Tenant Improvement Plans and Specifications, as evidenced by the issuance of
a certificate of occupancy or its equivalent by the appropriate governmental
authority for the Building Shell and Tenant Improvements, and the issuance of a
certificate by the Architect certifying that the Building Shell and Tenant
Improvements have been completed in accordance with the plans.
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I. GENERAL CONTRACTOR OVERHEAD & PROFIT. As compensation to
General Contractor for its services related to construction of the Building
Shell and Tenant Improvements, General Contractor shall receive a fee of six
percent (6%) to cover all of the following: field personnel and superintendent,
temporary on-site facilities, home office administration, supervision, and
coordination and construction profit. Except as provided therein, Landlord or
General Contractor shall not receive any other fee or payment from Tenant in
connection with General Contractor's services.
J. INSURANCE/INDEMNITY. General Contractor shall indemnify,
protect, defend and hold Tenant harmless from and against all liability, cost,
expense, or damage, including attorneys fees, arising from construction of the
Building Shell or Tenant Improvements; construction defects; or failure to
properly construct the Building Shell or Tenant Improvements in accordance with
the approved Shell Plans and Specifications or Tenant Improvement Plans and
Specifications. Tenant's review and approval of plans, specifications, or any
other documents shall not relieve General Contractor from its obligations under
the foregoing indemnification. General Contractor shall procure (as a cost of
the Building Shell) and keep in effect from the Lease execution date until Lease
termination a "Broad Form" liability insurance policy in the amount of Three
Million Dollars ($3,000,000.00), insuring all General Contractor's activities
with respect to the Building and Premises, including Landlord's indemnity
obligations under this Section 7.J. Landlord shall also procure (as a cost of
the Building Shell) builder's risk insurance for the full replacement cost of
the Building Shell and Tenant Improvements while the Building and Tenant
Improvements are under construction, up until the date that the fire insurance
policy described in Lease Section 12 is in full force and effect.
K. PUNCH LIST & WARRANTY. After the Building Shell and Tenant
Improvements are Substantially Complete, Landlord shall cause the General
Contractor to immediately correct any construction defect or other "punch list"
item which Tenant brings to General Contractor's attention. All such work shall
be performed so as to cause the least possible interruption to Tenant and its
activities on the Premises. General Contractor shall provide a standard
contractor's warranty with respect to the Premises for one (1) year from the
Commencement Date. Such warranty shall exclude routine maintenance, damage
caused by Tenant's negligence or misuse, and acts of God. Landlord shall assign
to Tenant any manufacturer's warranties on equipment installed as a part of the
construction of the Building Shell and Tenant Improvements.
L. OTHER WORK BY TENANT. All work not within the scope of work
normally performed by the construction trades employed on the Building and not
described in the Shell Plans and Specifications or Tenant Improvement Plans and
Specifications, such as furniture, telephone equipment, telephone wiring and
office equipment work, shall be furnished and installed by Tenant. When the
construction of the Tenant Improvements has proceeded to the point where
Tenant's work of installing its fixtures and equipment in the Premises can be
commenced, General Contractor shall notify Tenant and shall permit Tenant and
its authorized representatives and contractors access to
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the Premises before the Commencement Date for the purpose of installing Tenant's
trade fixtures and equipment. Any such installation work by Tenant or its
authorized representatives and contractor shall be undertaken upon the following
conditions: (i) if the entry into the Premises by Tenant or its representatives
or contractors interferes with or delays General Contractor's work, Tenant shall
cause the party responsible for such interference or delay to leave the
Premises; and (ii) its entry on the Premises shall not interfere with General
Contractor's work.
8. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER: On the
Commencement Date, Landlord shall deliver and Tenant shall accept the Premises
as being in good and sanitary order, condition and repair, and shall accept the
Substantially Complete Premises and the other improvements in their present
condition. Within ninety (90) days after the Commencement Date, Tenant agrees to
be in occupancy of at least fifty percent (50%) of the rentable square footage
of the Premises.
Tenant further agrees on Expiration Date or on the sooner
termination of this Lease, to surrender the Premises to Landlord in good
condition and repair, reasonable wear and tear excepted. "Good condition" means
that all interior walls, floors, suspended ceilings, and carpeting within the
Premises will be cleaned to the same condition as existed at the Commencement
Date, normal wear and tear excepted. Tenant agrees, at its sole cost, to remove
all phone and data cabling from the suspended ceiling, repair or replace broken
ceiling tiles, and relevel the ceiling if required. On or before the Expiration
Date or sooner termination of this Lease, Tenant shall remove all its personal
property and trade fixtures from the Premises. All property and fixtures not so
removed shall be deemed as abandoned by Tenant. Tenant shall ascertain from
Landlord within sixty (60) days before the Expiration Date whether Landlord
desires to have the Premises or any parts thereof restored to their condition as
of the Commencement Date, or to cause Tenant to surrender all Alterations (as
defined in Section 10) in place to Landlord. If Landlord provides written notice
that it shall so desire, Tenant shall, at Tenant's sole cost and expense, remove
such Alterations as Landlord requires and shall repair and restore said Premises
or such parts thereof before the Expiration Date. Such repair and restoration
shall include causing the Premises to be brought into compliance with all
applicable building codes and laws in effect at the time of the removal to
extent such compliance is necessitated by the repair and restoration work. If
the Premises are not surrendered at the Expiration Date or sooner termination of
this Lease in the condition required by this Section 8, Tenant shall be deemed
in a holdover tenancy pursuant to Section 34, and Tenant shall indemnify,
defend, and hold Landlord harmless against loss or liability resulting from
delay by Tenant in so surrendering the Premises including, without limitation,
any claims made by any succeeding tenant founded on such delay.
9. USES PROHIBITED: Tenant shall not commit or suffer to be committed
on the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose. Tenant
shall not place any loads upon the floor, walls, or ceiling which endanger
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the structure, nor use any machinery or apparatus which will in any manner
vibrate or shake the Premises, nor shall Tenant place any harmful liquids, waste
materials, or hazardous materials in the drainage system or upon or in the soils
surrounding the Building. No materials, supplies, equipment, finished products
or semi-finished products, raw materials or articles of any nature, or any waste
materials, refuse, scrap or debris, shall be stored upon or permitted to remain
on any portion of the Premises outside of the Building without Landlord's prior
approval, which approval may be withheld in its sole discretion.
10. ALTERATIONS AND ADDITIONS: Tenant shall not make, or suffer to be
made, any alteration or addition to the Premises ("Alterations"), or any part
thereof, without obtaining Landlord's prior written consent and delivering to
Landlord the proposed architectural and structural plans for all such
Alterations. After obtaining Landlord's consent, Tenant shall not proceed to
make such Alterations until Tenant has obtained all required governmental
approvals and permits, and provided Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics' lien
claims. Tenant agrees to provide Landlord written notice of the anticipated and
actual start-date of the work, and a complete set of half-size (15" X 21")
vellum as-built drawings. All Alterations shall be constructed in compliance
with applicable buildings codes and laws. Any Alterations, except movable
furniture and trade fixtures, shall become at once a part of the realty and
belong to Landlord but shall nevertheless be subject to removal by Tenant as
provided in Section 8 above. Alterations which are not deemed as trade fixtures
include heating, lighting, electrical systems, air conditioning, partitioning,
carpeting, or any other installation which has become an integral part of the
Premises. All Alterations shall be maintained, replaced or repaired by Tenant at
its sole cost and expense.
11. MAINTENANCE OF PREMISES: Tenant shall, at its sole cost, keep,
maintain, repair, and replace said Premises and appurtenances and every part
hereof in good and sanitary order, condition, and repair, including but not
limited to the following: exterior walls, roof, glazing, caulking, sidewalks,
parking areas, elevator, telephone, plumbing, electrical, HVAC systems, and all
Tenant Improvements. Tenant shall provide Landlord a copy of a service contract
between Tenant and: (i) a licensed air-conditioning and heating contractor
providing for bi-monthly maintenance of all air conditioning and heating
equipment at the Premises; and (ii) a licensed elevator maintenance contractor
providing for monthly maintenance of all elevator related systems. Tenant shall
pay the cost of all air conditioning, heating, and elevator equipment repairs or
replacements which are excluded from such service contract or any existing
equipment warranties. All wall surfaces and floor tile are to be maintained in
an as good a condition as when Tenant took possession free of holes, gouges, or
defacements.
Tenant shall also be responsible, at its sole cost and expense, for
the preventive maintenance of the membrane of the roof, which responsibility
shall be deemed properly discharged if Tenant contracts, at its sole cost, with
a licensed roof contractor reasonably satisfactory to Tenant and Landlord to
inspect the roof membrane at least every six (6) months, with the first
inspection
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due the sixth (6th) month after the Commencement Date; and Tenant performs, at
Tenant's sole cost, all preventive maintenance recommendations made by such
contractor within a reasonable time after such recommendations are made. Such
preventive maintenance might include acts such as clearing storm gutters and
drains, removing debris from the roof membrane, trimming trees overhanging the
roof membrane, applying coating materials to seal roof penetrations, repairing
blisters, and other routine measures. Tenant shall provide Landlord a copy of
such preventive maintenance contract and paid invoices for the recommended work.
Tenant agrees, at its sole cost, to water, maintain, and replace when necessary,
any shrubbery and landscaping.
12. HAZARD INSURANCE:
A. TENANT'S USE: Tenant shall not use or permit the Premises, or
any part thereof, to be used for any purpose other than that for which the
Premises are hereby leased; and no use of the Premises shall be made or
permitted, nor acts done, which will cause an increase in premiums or a
cancellation of any insurance policy covering the Premises or any part thereof,
nor shall Tenant sell or permit to be sold, kept, or used in or about the
Premises, any article prohibited by the standard form of fire insurance
policies. Tenant shall, at its sole cost, comply with all requirements of any
insurance company or organization necessary for the maintenance of reasonable
fire and public liability insurance covering the Premises and appurtenances.
B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in
force fire, extended coverage, earthquake (at Landlord's election if
commercially available), owner's liability, and 12- month rental loss insurance.
The amount of the fire, extended coverage and earthquake insurance shall equal
the replacement cost of the Building (not including any Tenant Improvements or
Alterations paid for by Tenant from sources other than the Work Allowance) as
determined by Landlord's insurance company's appraisers. Tenant agrees to pay
Landlord as additional rent, on demand, the full cost of said insurance as
evidenced by insurance billings to Landlord, and in the event of damage covered
by said insurance, the amount of any deductible under such policy. Payment shall
be due to Landlord within ten (10) days after written invoice to Tenant.
Notwithstanding the foregoing, Tenant's obligation to pay the cost of earthquake
insurance premiums shall be limited to an amount no greater than three (3) times
the cost of the fire and extended coverage premiums. It is understood and agreed
that Tenant's obligation under this Section will be prorated to reflect the
Lease Commencement and Expiration Dates. Tenant reserves the right to provide
the hazard insurance for the Premises provided (i) Tenant can obtain such
insurance at a more favorable rate than Landlord; (ii) the form of coverage and
insurer are satisfactory to Landlord and its lender; (iii) Landlord and its
lender are named as additional insured; (iv) such insurance provides that it may
not be subject to cancellation or change except after at least sixty (60) days
written notice to Landlord; and (v) Tenant has delivered to Landlord a
certificate of insurance evidencing such policy is in effect.
C. TENANT'S INSURANCE: Tenant agrees, at its sole cost, to insure
its personal property,
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Tenant Improvements (for which it has paid from sources other than the Work
Allowance), and Alterations for their full replacement value (without
depreciation) and to obtain worker's compensation and public liability and
property damage insurance for occurrences within the Premises with combined
limits for bodily injury and property damage of at least $1,000,000.00 per
occurrence and a general aggregate limit of at least $5,000,000.00. Tenant's
liability insurance shall be primary insurance containing a cross-liability
endorsement, and shall provide coverage on an "occurrence" rather than on a
"claims made" basis. Tenant shall name Landlord and Landlord's lender as an
additional insured and shall deliver a copy of the policies and renewal
certificates to Landlord. All such policies shall provide for thirty (30) days'
prior written notice to Landlord of any cancellation, termination, or reduction
in coverage. Notwithstanding the above, Landlord retains the right to have
Tenant provide other forms of insurance which may be reasonably required to
cover future risks.
D. WAIVER: Landlord and Tenant hereby waive all rights each
may have against the other on account of any loss or damage sustained by
Landlord or Tenant, as the case may be, or to the Premises or its contents,
which may arise from any risk covered by their respective insurance policies (or
which would have been covered had such insurance policies been maintained in
accordance with this Lease) as set forth above. The parties shall use their
reasonable efforts to obtain from their respective insurance companies a waiver
of any right of subrogation which said insurance company may have against
Landlord or Tenant, as the case may be.
13. TAXES: Tenant shall be liable for and shall pay as additional
rental, prior to delinquency, the following: (i) all taxes and assessments
levied against Tenant's personal property and trade or business fixtures; (ii)
all real estate taxes and assessment installments or other impositions or
charges which may be levied on the Premises or upon the occupancy of the
Premises, including any substitute or additional charges which may be imposed
applicable to the Lease Term; and (iii) real estate tax increases due to a sale,
transfer or other change of ownership of the Premises as it appears on the City
and County tax bills during the Lease Term. Tenant's obligation under this
Section shall be prorated to reflect the Lease Commencement and Expiration
Dates. If, at any time during the Lease Term a tax, excise on rents, business
license tax or any other tax, however described, is levied or assessed against
Landlord as a substitute or addition, in whole or in part, for taxes assessed or
imposed on land or Buildings, Tenant shall pay and discharge its pro rata share
of such tax or excise on rents or other tax before it becomes delinquent; except
that this provision is not intended to cover net income taxes, inheritance, gift
or estate tax imposed upon Landlord. In the event that a tax is placed, levied,
or assessed against Landlord and the taxing authority takes the position that
Tenant cannot pay and discharge its pro rata share of such tax on behalf of
Landlord, then at Landlord's sole election, Landlord may increase the Base
Monthly Rent by the exact amount of such tax and Tenant shall pay such increase.
Landlord agrees to promptly provide Tenant a copy of any notices received
regarding an increase in the assessed value of the Premises (other than the
standard 2% annual increase allowed under Proposition 13). Tenant, at its
expense, shall have the right at any time to seek a reduction in the assessed
valuation of the Premises or to contest any real
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property taxes that are to be paid by Tenant. In such event, Landlord shall join
in the proceeding or contest or permit it to be brought in Landlord's name,
provided that Landlord is not required to bear any cost in connection therewith.
If by virtue of any application or proceeding brought by or on behalf of
Landlord, there results a reduction in the assessed value of the Premises during
the Lease Term, Tenant agrees to reimburse Landlord for all reasonable costs
incurred by Landlord in connection with such application or proceeding.
14. UTILITIES: Tenant shall pay directly to the providing utility all
water, gas, electric, telephone, and other utilities supplied to the Premises.
Landlord shall not be liable for loss of or injury to person or property,
however occurring, through or in connection with or incidental to furnishing or
failure to furnish utilities to the Premises, and Tenant shall not be entitled
to abatement or reduction of any portion of Base Monthly Rent or any other
amount payable under this Lease. Notwithstanding the foregoing, if utility
services to the Premises are interrupted for a period of thirty (30) continuous
business days through no fault of Tenant, then Tenant shall be entitled to an
abatement of rent to the extent of the interference with Tenant's use of the
Premises occasioned thereby beginning on the expiration of such thirty (30) day
period.
15. ABANDONMENT: Tenant shall not vacate or abandon the Premises at any
time during the Lease Term. In the event Tenant abandons, vacates or surrenders
the Premises or is dispossessed by process of law or otherwise, any personal
property belonging to Tenant left on the Premises shall be deemed as abandoned
at the option of Landlord, except such property as may be mortgaged to Landlord.
16. FREE FROM LIENS: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within ten (10) days after receiving notice of the
filing, Landlord shall be entitled to discharge the lien at Tenant's expense and
all resulting costs incurred by Landlord, including attorney's fees shall be due
from Tenant as additional rent. If Tenant shall acquire trade fixtures,
equipment, machinery or other personal property subject to a secured purchase
money security interest or lease, Landlord shall, upon request from Tenant,
execute a waiver of any right it may have to secure a lien against such goods or
fixtures for Tenant's failure to pay rent or any other default under this Lease.
Such waiver shall be in a form reasonably satisfactory to all parties.
17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Tenant shall, at its sole
cost and expense, comply with and faithfully observe in its use of the Premises
all laws, regulations and other requirements of all Municipal, County, State and
Federal authorities now in force, or which may hereafter be in force, pertaining
to the Premises. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action or proceeding against Tenant (whether Landlord
be a party thereto or not) that Tenant has violated any such law, regulation or
other requirement in its use of the Premises shall be conclusive of that fact as
between Landlord and
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Tenant.
18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. TENANT'S RESPONSIBILITY: Without the prior written consent
of Landlord, Tenant shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or toxicity or
substances or materials which are listed on any of the Environmental Protection
Agency's lists of hazardous wastes or which are identified in Division 22 Title
26 of the California Code of Regulations as the same may be amended from time to
time ("Hazardous Materials"). In order to obtain consent, Tenant shall deliver
to Landlord its written proposal describing the toxic material to be brought
onto the Premises, measures to be taken for storage and disposal thereof, safety
measures to be employed to prevent pollution of the air, ground, surface and
ground water. Landlord's approval may be withheld in its reasonable judgment. In
the event Landlord consents to Tenant's use of Hazardous Materials on the
Premises, Tenant represents and warrants that it will do the following: (i)
adhere to all reporting and inspection requirements imposed by Federal, State,
County or Municipal laws, ordinances or regulations and will provide Landlord a
copy of any such reports or agency inspections; (ii) obtain and provide Landlord
copies of all necessary permits required for the use and handling Hazardous
Materials on the Premises; (iii) enforce Hazardous Materials handling and
disposal practices consistent with industry standards; (iv) surrender the
Premises free from any Hazardous Materials arising from Tenant's bringing,
using, permitting, generating, creating, releasing, emitting or disposing of
Hazardous Materials; and (v) properly close the facility with regard to
Hazardous Materials including the removal or decontamination of any process
piping, mechanical ducting, storage tanks, containers, or trenches which have
come into contact with Hazardous Materials and obtain a closure certificate from
the local administering agency prior to the Expiration Date.
B. TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant
shall, at its sole cost, comply with all laws pertaining to, and shall indemnify
and hold Landlord harmless from, any claims, liabilities, costs or expenses
incurred or suffered by Landlord arising from the bringing, using, permitting,
generating, emitting or disposing of Hazardous Materials by Tenant or a third
party through the surface soils of the Premises during the Lease Term. Tenant's
indemnification and hold harmless obligations include, without limitation, the
following: (i) claims, liability, costs or expenses resulting from or based upon
administrative, judicial (civil or criminal) or other action, legal or
equitable, brought by any private or public person under common law or under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Resource Conservation and Recovery Act of 1980 ("RCRA") or any
other Federal, State, County or Municipal law, ordinance or regulation; (ii)
claims, liabilities, costs or expenses pertaining to the identification,
monitoring, cleanup, containment, or removal of Hazardous Materials from soils,
riverbeds or aquifers including the provision of an alternative public drinking
water source; and (iii)
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all costs of defending such claims. Notwithstanding the foregoing, Tenant shall
not be responsible for the presence of Hazardous Materials which existed prior
to the Commencement Date or which come to be present from an offsite source.
C. ACTUAL RELEASE BY TENANT: Tenant agrees to notify Landlord
of any lawsuits or orders which relate to the remedying of or actual release of
Hazardous Materials on or into the soils or ground water at or under the
Premises. Tenant shall also provide Landlord all notices required by Section
25359.7(b) of the Health and Safety Code and all other notices required by law
to be given to Landlord in connection with Hazardous Materials. Without limiting
the foregoing, Tenant shall also deliver to Landlord, within twenty (20) days
after receipt thereof, any written notices from any governmental agency alleging
a material violation of, or material failure to comply with, any federal, state
or local laws, regulations, ordinances or orders, the violation of which of
failure to comply with poses a foreseeable and material risk of contamination of
the ground water or injury to humans (other than injury solely to Tenant, its
agents and employees within the Building).
In the event of any release on or into the Premises or into
the soil or ground water under the Premises of any Hazardous Materials used,
treated, stored or disposed of by Tenant, Tenant agrees to comply, at its sole
cost, with all laws, regulations, ordinances and orders of any federal, state or
local agency relating to the monitoring or remediation of such Hazardous
Materials. In the event of any such release of Hazardous Materials, Tenant
agrees to meet and confer with Landlord and its Lender to attempt to eliminate
and mitigate any financial exposure to such Lender and resultant exposure to
Landlord under California Code of Civil Procedure section 736(b) as a result of
such release, and promptly to take reasonable monitoring, cleanup and remedial
steps given, inter alia, the historical uses to which the Property has and
continues to be used, the risks to public health posed by the release, the then
available technology and the costs of remediation, cleanup and monitoring,
consistent with acceptable customary practices for the type and severity of such
contamination and all applicable laws. Nothing in the preceding sentence shall
eliminate, modify or reduce the obligation of Tenant under Section 18.B of this
Lease to indemnify and hold Landlord harmless from any claims liabilities, costs
or expenses incurred or suffered by Landlord. Tenant shall provide Landlord
prompt written notice of Tenant's monitoring, cleanup and remedial steps.
In the absence of an order of any federal, state or local
governmental or quasi-governmental agency relating to the cleanup, remediation
or other response action required by applicable law, any dispute arising between
Landlord and Tenant concerning Tenant's obligation to Landlord under this
Section 18.C concerning the level, method, and manner of cleanup, remediation or
response action required in connection with such a release of Hazardous
Materials shall be resolved by mediation and/or arbitration pursuant to the
provisions of Section 45 of this Lease.
D. ENVIRONMENTAL MONITORING: Landlord and its agents shall
have the right to inspect, investigate, sample and monitor the Premises
including any air, soil, water, ground water or other sampling or any other
testing, digging, drilling or analysis to determine whether Tenant is
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complying with the terms of this Section 18. If Landlord discovers that Tenant
is not in compliance with the terms of this Section 18, any such costs incurred
by Landlord, including attorneys' and consultants' fees, shall be due and
payable by Tenant to Landlord within five (5) days following Landlord's written
demand therefore.
19. INDEMNITY: As a material part of the consideration rendered to
Landlord, Tenant hereby waives all claims against Landlord for damages to goods,
wares and merchandise, and all other personal property in, upon or about said
Premises and for injuries to persons in or about said Premises, from any cause
arising at any time to the fullest extent permitted by law, and Tenant shall
indemnify and hold Landlord exempt and harmless from any damage or injury to any
person, or to the goods, wares and merchandise and all other personal property
of any person, arising from the use of the Premises, Building, and/or Project by
Tenant, its employees, contractors, agents and invitees or from the failure of
Tenant to keep the Premises in good condition and repair as herein provided,
except to the extent due to the active negligence or willful misconduct of
Landlord. Further, in the event Landlord is made party to any litigation due to
the acts or omission of Tenant, its employees, contractors, agents and invitees,
Tenant will indemnify and hold Landlord harmless from any such claim or
liability including Landlord's costs and expenses and reasonable attorney's fees
incurred in defending such claims.
20. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the Premises any signs not approved by the city or
other governing authority. Tenant will not place or permit to be placed upon the
Premises any signs, advertisements or notices without the written consent of
Landlord as to type, size, design, lettering, coloring and location, which
consent will not be unreasonably withheld. Any sign placed on the Premises shall
be removed by Tenant, at its sole cost, prior to the Expiration Date or promptly
following the earlier termination of the lease, and Tenant shall repair, at its
sole cost, any damage or injury to the Premises caused thereby, and if not so
removed, then Landlord may have same so removed at Tenant's expense.
21. ATTORNEY'S FEES: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant herein; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall also
be entitled to recover all costs and expenses including reasonable attorney's
fees incurred in enforcing any judgment or award against the other party. The
foregoing provision relating to post-judgment costs is severable from all other
provisions of this Lease.
22. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant: (i) Tenant's
failure to pay any rent due under this Lease by the date such rent is due, which
failure continues for five (5) days after written notice
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from Landlord; (ii) the abandonment or vacation of the Premises by Tenant; (iii)
Tenant's failure to observe and perform any other required provision of this
Lease, where such failure continues for thirty (30) days after written notice
from Landlord (provided however, that if the nature of the default is such that
it cannot reasonably be cured within the 30-day period, Tenant shall not be
deemed in default if Tenant commences within such period to cure the default and
thereafter diligently prosecutes the cure to completion); (iv) Tenant's making
of any general assignment for the benefit of creditors; (v) the filing by or
against Tenant of a petition to have Tenant adjudged a bankrupt or of a petition
for reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant, the same is dismissed after the
filing); (vi) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days; or (vii) the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. The notice requirements set forth herein are in lieu of and not in
addition to the notices required by California Code of Civil Procedure Section
1161. Any notice given by Landlord to Tenant pursuant to California Code of
Civil Procedure 1161 regarding Tenant's failure to pay rent under this Lease by
the date due shall provide Tenant with a period of at least ten (10) days to pay
such rent or quit.
A. REMEDIES: In the event of any such default by Tenant, then
in addition to other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event Landlord elects to so terminate this Lease, Landlord may recover from
Tenant all the following: (i) the worth at time of award of any unpaid rent
which had been earned at the time of such termination; (ii) the worth at time of
award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss for
the same period that Tenant proves could have been reasonably avoided; (iii) the
worth at time of award of the amount by which the unpaid rent for the balance of
the Lease Term after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; (iv) any other amount necessary
to compensate Landlord for all detriment proximately caused by Tenant's failure
to perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; and (v) at Landlord's election, such
other amounts in addition to or in lieu of the foregoing as may be permitted by
applicable California law. The term "rent", as used herein, is defined as the
minimum monthly installments of Base Monthly Rent and all other sums required to
be paid by Tenant pursuant to this Lease, all such other sums being deemed as
additional rent due hereunder. As used in (i) and (ii) above, "worth at the time
of award" shall be computed by allowing interest at a rate equal to the discount
rate of the Federal Reserve Bank of San Francisco plus five (5%) percent per
annum. As used in (iii) above, "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one (1%) percent.
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B. RIGHT TO RE-ENTER: In the event of any such default by
Tenant, Landlord shall have the right, after terminating this Lease, to re-enter
the Premises and remove all persons and property. Such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant, and disposed of by Landlord in any manner permitted by law.
C. ABANDONMENT: If Landlord does not elect to terminate this
Lease as provided in Section 22.A or 22.B above, then the provisions of
California Civil Code Section 1951.4, (Landlord may continue the lease in effect
after Tenant's breach and abandonment and recover rent as it becomes due if
Tenant has a right to sublet and assign, subject only to reasonable limitations)
as amended from time to time, shall apply and Landlord may from time to time,
without terminating this Lease, either recover all rental as it becomes due or
relet the Premises or any part thereof for such term or terms and at such rental
or rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. In the event that Landlord elects to so relet, rentals received by
Landlord from such reletting shall be applied in the following order to: (i) the
payment of any indebtedness other than Base Monthly Rent due hereunder from
Tenant to Landlord; (ii) the payment of any cost of such reletting; (iii) the
payment of the cost of any alterations and repairs to the Premises; and (iv) the
payment of Base Monthly Rent due and unpaid hereunder. The residual rentals, if
any, shall be held by Landlord and applied in payment of future Base Monthly
Rent as the same may become due and payable hereunder. In the event the portion
of rentals received from such reletting which is applied to the payment of rent
hereunder during any month be less than the rent payable during that month by
Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately
upon demand. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred by
Landlord in such reletting or in making such alterations and repairs not covered
by the rentals received from such reletting.
D. NO TERMINATION: Landlord's re-entry or taking possession of
the Premises pursuant to 22.B or 22.C of this Section 22 shall not be construed
as an election to terminate this Lease unless written notice of such intention
is given to Tenant or unless the termination is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any default by Tenant, Landlord may at any time after such reletting
elect to terminate this Lease for any such default.
23. SURRENDER OF LEASE: The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not automatically effect a
merger of the Lease with Landlord's ownership of the Premises. Instead, at the
option of Landlord, Tenant's surrender may terminate all or any existing
subleases or subtenancies or may operate as an assignment to Landlord of any or
all such subleases or subtenancies, thereby creating a direct Landlord-Tenant
relationship between Landlord and any subtenants.
24. HABITUAL DEFAULT: The provisions of Section 22 notwithstanding, the
parties agree
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that if Tenant shall have defaulted in the performance of any (but not
necessarily the same) term or condition of this Lease for three or more times
during any 12-month period during the Lease Term, then such conduct shall, at
the election of the Landlord, represent a separate event of default which cannot
be cured by Tenant. Tenant acknowledges that the purpose of this provision is to
prevent repetitive defaults by Tenant, which work a hardship upon Landlord and
deprive Landlord of Tenant's timely performance under this Lease.
25. LANDLORD'S DEFAULT: In the event of Landlord's failure to perform
any of its covenants or agreements under this Lease, Tenant shall give Landlord
written notice of such failure and shall give Landlord thirty (30) days to cure
or commence to cure such failure prior to any claim for breach or resultant
damages, provided, however, that if the nature of the default is such that it
cannot reasonably be cured within the 30-day period, Landlord shall not be
deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion. In addition, upon any such failure
by Landlord, Tenant shall give notice by registered or certified mail to any
person or entity with a security interest in the Premises ("Mortgagee") that has
provided Tenant with notice of its interest in the Premises, and shall provide
Mortgagee a reasonable opportunity to cure such failure, including such time to
obtain possession of the Premises by power of sale or judicial foreclosure, if
such should prove necessary to effectuate a cure. Tenant agrees that each of the
Mortgagees to whom this Lease has been assigned is an expressed third-party
beneficiary hereof. Tenant shall not make any prepayment of rent more than one
(1) month in advance without the prior written consent of Mortgagee. Tenant
waives any right under California Civil Code Section 1950.7 or any other present
or future law to the collection of any payment or deposit from Mortgagee or any
purchaser at a foreclosure sale of Mortgagee's interest unless Mortgagee or such
purchaser shall have actually received and not refunded the applicable payment
or deposit.
26. NOTICES: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at
least fifteen (15) days prior notice to the notifying party.
27. ENTRY BY LANDLORD: Upon prior notice to Tenant and subject to
Tenant's reasonable security regulations, Tenant shall permit Landlord and his
agents to enter into and upon the Premises at all reasonable times, and without
any rent abatement or reduction or any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned, for the
following purposes: (i) inspecting and maintaining the Premises; (ii) making
repairs, alterations or additions to the Premises, and (iii) performing any
obligations of Landlord under the Lease including remediation of hazardous
materials if determined to be the responsibility of Landlord. Tenant shall
permit Landlord and his agents, at any time within one hundred eighty (180) days
prior to the Expiration Date (or at any time during the Lease if Tenant is in
default hereunder), to place upon the Premises "For Lease" signs and exhibit the
Premises to real estate brokers and prospective
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tenants at reasonable hours.
28. DESTRUCTION OF PREMISES:
A. DESTRUCTION BY AN INSURED CASUALTY: In the event of a
partial destruction of the Premises during the Lease Term by a casualty for
which Landlord has received insurance proceeds sufficient to repair the damage
or destruction, Landlord shall repair the same to the extent of such proceeds,
provided the repairs can be made within one hundred eighty (180) days from the
date of receipt of all governmental approvals necessary under the laws and
regulations of State, Federal, County or Municipal authorities, as reasonably
determined by Landlord. Landlord agrees that a dispute about this determination
is a matter that may be submitted to arbitration pursuant to Section 44 hereof.
Such partial destruction shall not annul or void this Lease; however, Tenant
shall be entitled to a proportionate reduction of Base Monthly Rent while
repairs are being made, such proportionate reduction to be based upon the extent
to which the repairs interfere with Tenant's business in the Premises, as
reasonably determined by Landlord and Tenant. For purposes of this Section
"partial destruction" is defined as destruction of no greater than one-third
(1/3) of the replacement cost of the Premises, excluding the replacement cost of
Tenant Improvements paid for by Tenant. If the Premises are more than partially
destroyed or if the repairs cannot be made in 180 days, Landlord or Tenant may
terminate this Lease within fifteen (15) days of Landlord's determination of the
foregoing. In no event shall Landlord be required to replace or restore
Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance, or Tenant's fixtures or personal property. With respect to a
partial destruction which Landlord is obligated to repair or may elect to repair
under the terms of this Section, Tenant waives the provisions of Section 1932,
and Section 1933, Subdivision 4, of the Civil Code of the State of California,
and any other similarly enacted statute, and the provisions of this Section 28
shall govern in the case of such destruction. Tenant shall have the right to
terminate this Lease immediately, notwithstanding the provisions of this Section
28.A, in the event Landlord does not complete the required repairs within one
hundred eighty (180) days from the date of receipt of all governmental
approvals.
B. DESTRUCTION BY AN UNINSURED CASUALTY: In the event of a
total or partial destruction of the Premises during the Lease Term by a casualty
for which Landlord has not received insurance proceeds sufficient to repair the
damage or destruction, the Lease shall automatically terminate unless Landlord
elects to rebuild and the damage can be repaired within one hundred eighty (180)
days.
29. ASSIGNMENT OR SUBLEASE:
A. CONSENT BY LANDLORD: Except as specifically provided in
this Section 29, Tenant may not assign, sublet, hypothecate, or allow a third
party to use the Premises without the express written consent of Landlord. In
the event Tenant desires to assign this Lease or any interest herein
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including, without limitation, a pledge, mortgage or other hypothecation, or
sublet the Premises or any part thereof, Tenant shall deliver to Landlord
executed counterparts of any agreement and of all ancillary agreements with the
proposed assignee/subtenant, and a notice containing the name and address of the
proposed assignee/subtenant, proposed use of the Premises, rental rate and
current financial statement. At Landlord's request, Tenant shall also provide
additional information reasonably required by Landlord to determine whether it
will consent to the proposed assignment or sublease. Landlord shall have a
fifteen (15) day period following receipt of all the foregoing within which to
notify Tenant in writing that Landlord elects to: (i) terminate this Lease as to
the space so affected as of the date so specified by Tenant, in which case
Tenant will be relieved of all further obligations as to such space; (ii) permit
Tenant to assign or sublet such space to the named assignee/subtenant on the
terms and conditions set forth in the notice; or (iii) refuse consent. If
Landlord should fail to notify Tenant in writing of such election within the
15-day period, Landlord shall be deemed to have elected option (iii) above. In
the event Landlord elects option (i) above, this Lease shall expire with respect
to such part of the Premises on the date upon which the proposed sublease was to
commence, and from such date forward, Base Monthly Rent and Tenant's Allocable
Share of all other costs and charges shall be adjusted based upon the proportion
that the rentable area of the Premises remaining bears to the total rentable
area of the Premises. In the event Landlord does not elect option (i) above,
Landlord's written consent to the proposed assignment or sublease shall not be
unreasonably withheld, provided and upon the condition that: (i) the proposed
assignee or subtenant is engaged in a business that is limited to the use
expressly permitted under this Lease; (ii) the proposed assignee or subtenant is
a company with sufficient financial worth and management ability to undertake
the financial obligation of this Lease and Landlord has been furnished with
reasonable proof thereof; (iii) the proposed assignment or sublease is in form
reasonably satisfactory to Landlord; (iv) Tenant reimburses Landlord on demand
for any reasonable costs that may be incurred by Landlord in connection with
said assignment or sublease, including the costs of making investigations as to
the acceptability of the proposed assignee or subtenant and legal costs incurred
in connection with the granting of any requested consent; and (vi) Tenant shall
not have advertised or publicized in any way the availability of the Premises
without prior notice to Landlord. In the event all or any one of the foregoing
conditions are not satisfied, Landlord shall be considered to have acted
reasonably if it withholds its consent.
B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Any rent or other
economic consideration realized by Tenant under any sublease and assignment, in
excess of the rent payable hereunder and reasonable subletting and assignment
costs, shall be divided and paid fifty percent (50%) to Landlord and fifty
percent (50%) to Tenant. Tenant's obligation to pay over Landlord's portion of
the consideration constitutes an obligation for additional rent hereunder. The
above provisions relating to Landlord's right to terminate the Lease and
relating to the allocation of bonus rent are independently negotiated terms of
the Lease which constitute a material inducement for the Landlord to enter into
the Lease, and are agreed by the parties to be commercially reasonable. No
assignment or subletting by Tenant shall relieve it of any obligation under this
Lease. Any assignment or subletting which conflicts with the provisions hereof
shall be void.
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C. NO RELEASE: Any assignment or sublease shall be made only
if and shall not be effective until the assignee or subtenant shall execute,
acknowledge, and deliver to Landlord an agreement, in form and substance
satisfactory to Landlord, whereby the assignee or subtenant shall assume all the
obligations of this Lease on the part of Tenant to be performed or observed and
shall be subject to all the covenants, agreements, terms, provisions and
conditions in this Lease. Notwithstanding any such sublease or assignment and
the acceptance of rent by Landlord from any subtenant or assignee, Tenant and
any guarantor shall remain fully liable for the payment of Base Monthly Rent and
additional rent due, and to become due hereunder, for the performance of all the
covenants, agreements, terms, provisions and conditions contained in this Lease
on the part of Tenant to be performed and for all acts and omissions of any
licensee, subtenant, assignee or any other person claiming under or through any
subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed a violation by
Tenant. Tenant shall indemnify, defend and hold Landlord harmless from and
against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any real estate brokers or
other persons claiming compensation in connection with the proposed assignment
or sublease.
D. EFFECT OF DEFAULT: In the event of Tenant's default, Tenant
hereby assigns all rents due from any assignment or subletting to Landlord as
security for performance of its obligations under this Lease, and Landlord may
collect such rents as Tenant's Attorney-in-Fact, except that Tenant may collect
such rents unless a default occurs as described in Section 22 and 24 above. A
Lease termination due to Tenant's default shall not automatically terminate an
assignment or sublease then in existence; rather at Landlord's election, such
assignment or sublease shall survive the Lease termination, the assignee or
subtenant shall attorn to Landlord, and Landlord shall undertake the obligations
of Tenant under the sublease or assignment; except that Landlord shall not be
liable for prepaid rent, security deposits or other defaults of Tenant to the
subtenant or assignee, or for any acts or omissions of Tenant, its agents,
employees, contractors or invitees.
30. CONDEMNATION: If any part of the Premises shall be taken for any
public or quasi-public use, under any statute or by right of eminent domain or
private purchase in lieu thereof, and only a part thereof remains which is
susceptible of occupation hereunder, this Lease shall, as to the part so taken,
terminate as of the day before title vests in the condemnor or purchaser
("Vesting Date") and Base Monthly Rent payable hereunder shall be adjusted so
that Tenant is required to pay for the remainder of the Lease Term only such
portion of Base Monthly Rent as the value of the part remaining after such
taking bears to the value of the entire Premises prior to such taking; but in
such event, Landlord shall have the option to terminate this Lease as of the
Vesting Date. If all of the Premises or such part thereof be taken so that there
does not remain a portion susceptible for occupation hereunder or more than
twenty five percent (25%) of the Premises is effectively unusable by Tenant,
this Lease shall terminate on the Vesting Date. If part or all of the Premises
be taken, all compensation awarded upon such taking shall go to Landlord, and
Tenant shall have no claim
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thereto; but Landlord shall cooperate with Tenant, without cost to Landlord, to
recover compensation for damage to or taking of any Alterations, Tenant
Improvements paid for by Tenant from sources other than the Work Allowance, or
for Tenant's moving costs. Tenant hereby waives the provisions of California
Code of Civil Procedures Section 1265.130 and any other similarly enacted
statue, and the provisions of this Section 30 shall govern in the case of such
taking.
31. EFFECTS OF CONVEYANCE: As used in this Lease, the term "Landlord"
is defined only as the owner for the time being of the Premises, so that in the
event of any sale or other conveyance of the Premises or in the event of a
master lease of the Premises, Landlord shall be entirely freed and relieved of
all its covenants and obligations hereunder, and it shall be deemed and
construed, without further agreement between the parties and the purchaser at
any such sale or the master tenant of the Premises, that the purchaser or master
tenant of the Premises has assumed and agreed to carry out any and all covenants
and obligations of Landlord hereunder. Such transferor shall transfer and
deliver Tenant's security deposit to the purchaser at any such sale or the
master tenant of the Premises, and thereupon the transferor shall be discharged
from any further liability in reference thereto.
32. SUBORDINATION: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the form
presented to Tenant, which Landlord or Holder deems necessary or desirable for
such purposes. Landlord shall have the right to cause this Lease to be and
become and remain subject and subordinate to any and all Encumbrances which are
now or may hereafter be executed covering the Premises or any renewals,
modifications, consolidations, replacements or extensions thereof, for the full
amount of all advances made or to be made thereunder and without regard to the
time or character of such advances, together with interest thereon and subject
to all the terms and provisions thereof; provided only, that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, Holder agrees to recognize Tenant's rights under this Lease as
long as Tenant is not then in default and continues to pay Base Monthly Rent and
additional rent and observes and performs all required provisions of this Lease.
Within ten (10) days after Landlord's written request, Tenant shall execute any
documents required by Landlord or the Holder to make this Lease subordinate to
any lien of the Encumbrance. If Tenant fails to do so, then in addition to such
failure constituting a default by Tenant, it shall be deemed that this Lease is
so subordinated to such Encumbrance. Notwithstanding anything to the contrary in
this Section, Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
encumbrance.
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33. WAIVER: The waiver by Landlord of any breach of any term, covenant
or condition of this Lease shall not be deemed as a waiver of such term,
covenant or condition of any subsequent breach of the same or any other term,
covenant or condition. The subsequent acceptance of rent hereunder by Landlord
shall not be deemed as a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay the
particular rental so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent. No payment by Tenant or
receipt by Landlord of a lesser amount than any installment of rent due shall be
deemed as other than payment on account of the amount due. No delay or omission
in the exercise of any right or remedy by Landlord shall impair such right or
remedy or be construed as a waiver thereof by Landlord. No act or conduct of
Landlord, including, without limitation, the acceptance of keys to the Premises,
shall constitute acceptance of the surrender of the Premises by Tenant before
the Expiration Date. Only written notice from Landlord to Tenant of acceptance
shall constitute such acceptance of surrender of the Premises. Landlord's
consent to or approval of any act by Tenant which requires Landlord's consent or
approvals shall not be deemed to waive or render unnecessary Landlord's consent
to or approval of any subsequent act by Tenant.
34. HOLDING OVER: Any holding over after the termination or Expiration
Date with Landlord's consent, shall be construed as month-to-month tenancy,
terminable on thirty (30) days written notice from either party, and Tenant
shall pay as Base Monthly Rent to Landlord a rate equal to one hundred thirty
three percent (133%) of the Base Monthly Rent due in the month preceding the
termination or Expiration Date, plus all other amounts payable by Tenant under
this Lease. Any holding over shall otherwise be on the terms and conditions
herein specified, except those provisions relating to the Lease Term and any
options to extend or renew, which provisions shall be of no further force and
effect following the expiration of the applicable exercise period. Tenant shall
indemnify, defend, and hold Landlord harmless from all loss or liability
(including, without limitation, any loss or liability resulted from any claim
against Landlord made by any succeeding tenant) resulting from Tenant's failure
to timely surrender the Premises to Landlord and losses to Landlord due to lost
opportunities to lease the Premises to succeeding tenants.
35. SUCCESSORS AND ASSIGNS: Subject to the provisions of Section 29,
the covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all parties hereto; and all
parties hereto shall be jointly and severally liable hereunder.
36. ESTOPPEL CERTIFICATES: At any time during the Lease Term, Tenant
shall, within ten (10) days following written notice from Landlord, execute and
deliver to Landlord a written statement certifying, if true, the following: (i)
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification); (ii) the date to which rent and other
charges are paid in advance, if any; (iii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on Landlord's part hereunder (or
specifying such defaults if they are claimed); and (iv) such other information
as Landlord may reasonably request. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of Landlord's interest
in the
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Premises. Tenant's failure to deliver such statement within such time shall be
conclusive upon the Tenant that this Lease is in full force and effect without
modification, except as may be represented by Landlord, and that there are no
uncured defaults in Landlord's performance. Tenant agrees to provide, within
five (5) days of Landlord's request, Tenant's most recent three (3) years of
audited financial statements for Landlord's use in financing the Premises or
Landlord's interest therein.
37. OPTION TO EXTEND THE LEASE TERM:
A. GRANT AND EXERCISE OF OPTION: Landlord grants to Tenant,
subject to the terms and conditions set forth in this Section , four (4) options
(the "Options") to extend the Lease Term for an additional term (the "Option
Term"). Each Option Term shall be for a period of sixty (60) months and shall be
exercised, if at all, by written notice to Landlord no earlier than eighteen
(18) months prior to the Expiration Date but no later than twelve (12) months
prior to the Expiration Date. If Tenant exercises the Option, all of the terms,
covenants and conditions of this Lease except this Section shall apply during
the Option Term as though the expiration date of the Option Term was the date
originally set forth herein as the Expiration Date, provided that Base Monthly
Rent for the Premises payable by Tenant during the Option Term shall be the
greater of either the Base Monthly Rent applicable to the period immediately
prior to the commencement of the Option Term, or the Fair Market Rental as
hereinafter defined. Notwithstanding anything herein to the contrary, if Tenant
is in monetary or material non-monetary default under any of the terms,
covenants or conditions of this Lease either at the time Tenant exercises the
Option or at any time thereafter prior to the commencement date of the Option
Term, Landlord shall have, in addition to all of Landlord's other rights and
remedies provided in this Lease, the right to terminate the Option upon notice
to Tenant, in which event the expiration date of this Lease shall be and remain
the Expiration Date. As used herein, the term "Fair Market Rental" is defined as
the rental and all other monetary payments, including any escalations and
adjustments thereto (including without limitation Consumer Price Indexing) that
Landlord could obtain during the Option Term from a third party desiring to
lease the Premises, based upon the current use and other potential uses of the
Premises, as determined by the rents then being obtained for new leases of space
comparable in age and quality to the Premises in the locality of the Building
Fair Market Rental shall further take into account that Tenant is in occupancy
and making functional use of the Premises in its then existing condition, and
that no brokerage commission is payable.
B. DETERMINATION OF FAIR MARKET RENTAL: If Tenant exercises
the Option, Landlord shall send Tenant a notice setting forth the Fair Market
Rental for the Option Term within thirty (30) days following the Exercise Date.
If Tenant disputes Landlord's determination of Fair Market Rental for the Option
Term, Tenant shall, within thirty (30) days after the date of Landlord's notice
setting forth Fair Market Rental for the Option Term, send to Landlord a notice
stating that Tenant either elects to terminate its exercise of the Option, in
which event the Option shall lapse and this Lease shall terminate on the
Expiration Date, or that Tenant disagrees with Landlord's determination of Fair
Market Rental for the Option Term and elects to resolve the disagreement as
provided in Section
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37.C below. If Tenant does not send Landlord a notice as provided in the
previous sentence, Landlord's determination of Fair Market Rental shall be the
basis for determining the Base Monthly Rent payable by Tenant during the Option
Term. If Tenant elects to resolve the disagreement as provided in Section 37.C
and such procedures are not concluded prior to the commencement date of the
Option Term, Tenant shall pay to Landlord as Base Monthly Rent the Fair Market
Rental as determined by Landlord in the manner provided above. If the Fair
Market Rental as finally determined pursuant to Section 37.C is greater than
Landlord's determination, Tenant shall pay Landlord the difference between the
amount paid by Tenant and the Fair Market Rental as so determined in Section
37.C within thirty (30) days after such determination. If the Fair Market Rental
as finally determined in Section 37.C is less than Landlord's determination, the
difference between the amount paid by Tenant and the Fair Market Rental as so
determined in Section 37.C shall be credited against the next installments of
rent due from Tenant to Landlord hereunder.
C. RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to
Landlord's notice setting forth the Fair Market Rental, Landlord and Tenant
shall meet at least two (2) times at a mutually agreeable time and place, in an
attempt to resolve the disagreement.
2. If within the 30-day period referred to above, Landlord and
Tenant cannot reach agreement as to Fair Market Rental, each party shall select
one appraiser to determine Fair Market Rental. Each such appraiser shall arrive
at a determination of Fair Market Rental and submit their conclusions to
Landlord and Tenant within thirty (30) days after the expiration of the 30-day
consultation period described above.
3. If only one appraisal is submitted within the requisite
time period, it shall be deemed as Fair Market Rental. If both appraisals are
submitted within such time period and the two appraisals so submitted differ by
less than ten percent (10%), the average of the two shall be deemed as Fair
Market Rental. If the two appraisals differ by more than 10%, the appraisers
shall immediately select a third appraiser who shall, within thirty (30) days
after his selection, make and submit to Landlord and Tenant a determination of
Fair Market Rental. This third appraisal will then be averaged with the closer
of the two previous appraisals and the result shall be Fair Market Rental.
4. All appraisers specified pursuant to this Section shall be
members of the American Institute of Real Estate Appraisers with not less than
ten (10) years experience appraising office and industrial properties in the
Santa Clara Valley. Each party shall pay the cost of the appraiser selected by
such party and one-half of the cost of the third appraiser.
38. OPTIONS: All Options provided to Tenant in this Lease are personal
and granted to Flextronics International and are not exercisable by any third
party should Tenant assign or sublet all
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or a portion of its rights under this Lease, unless Landlord consents to permit
exercise of any option by any assignee or subtenant, in Landlord's sole
discretion. In the event Tenant has multiple options to extend this Lease, a
later option to extend the Lease cannot be exercised unless the prior option has
been so exercised.
39. QUIET ENJOYMENT: Upon Tenant's faithful and timely performance of
all the terms and covenants of the Lease and except as otherwise provided in
this Lease, Tenant shall quietly have and hold the Premises for the Lease Term
and any extensions thereof.
40. BROKERS: Tenant represents it has not utilized or contacted a real
estate broker or finder with respect to this Lease and Tenant agrees to
indemnify, defend and hold Landlord harmless against any claim, cost, liability
or cause of action asserted by any other broker or finder claiming through
Tenant.
41. LANDLORD'S LIABILITY: If Tenant recovers a money judgment against
Landlord arising in connection with this Lease, the judgment shall be satisfied
only out of Landlord's interest in the Premises, including the improvements and
real property, and neither Landlord nor any of its partners, officers,
directors, agents, trustees, shareholders or employees shall be liable
personally for any deficiency. Tenant expressly waives all rights to proceed
against the individual partners or the officers, directors or shareholders of
any corporate partner, except to the extent of their interest in said limited
partnership.
42. AUTHORITY OF PARTIES: Tenant represents and warrants that it is
duly formed and in good standing, and is duly authorized to execute and deliver
this Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. At Landlord's request, Tenant shall
provide Landlord with corporate resolutions or other proof in a form acceptable
to Landlord, authorizing the execution of the Lease.
43. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government
agency or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or program, Tenant agrees that the cost of TDM
imposed facilities required on the Premises, including but not limited to
employee showers, lockers, cafeteria, or lunchroom facilities, shall be paid by
Tenant. Further, any ongoing costs or expenses associated with a TDM program
which are required for the Premises and not provided by Tenant, such as an
on-site TDM coordinator, shall be provided by Landlord with such costs being
included as additional rent and reimbursed to Landlord by Tenant within thirty
(30) days after demand.
44. DISPUTE RESOLUTION: Except for the Tenant's failure to timely pay
Base Monthly Rent, any controversy, dispute, or claim of whatever nature arising
out of, in connection with, or in
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relation to the interpretation, performance or breach of this Lease, including
any claim based on contract, tort, or statute, shall be resolved at the request
of any party to this agreement through a two-step dispute resolution process
administered by JAMS or another judicial and mediation service mutually
acceptable to the parties involving first mediation, followed, if necessary, by
final and binding arbitration administered by and in accordance with the
then-existing rules and practice of the judicial and mediation service selected,
and judgment upon any award rendered by the arbitrator(s) may be entered by any
State or Federal Court having jurisdiction thereof.
45. LEASE GUARANTY: A material provision of the Lease and a material
inducement of Landlord to enter into this Lease is the guaranty of this Lease by
Flextronics International, Ltd., a Singapore Company, ("Guarantor") which is
attached hereto as Exhibit "E" and made a part hereof
46. MISCELLANEOUS PROVISIONS:
A. RENT: All monetary sums due from Tenant to Landlord under
this Lease, including, without limitation those referred to as "additional
rent", shall be deemed as rent.
B. MANAGEMENT FEE: Tenant shall pay Landlord a fee of one
percent (1%) of the Base Monthly Rent to reimburse Landlord for property
management costs related to the Premises.
C. PERFORMANCE BY LANDLORD: If Tenant fails to perform any
obligation required under this Lease or by law or governmental regulation,
Landlord in its sole discretion may, without notice, without waiving any rights
or remedies and without releasing Tenant from its obligations hereunder, perform
such obligation, in which event Tenant shall pay Landlord as additional rent all
sums paid by Landlord in connection with such substitute performance, including
interest as provided in Section 46.D below within ten (10) days of Landlord's
written notice for such payment.
D. INTEREST: All rent due hereunder, if not paid when due,
shall bear interest at ten percent (10%) per annum, accruing from the date due
until the date paid to Landlord.
E. RIGHTS AND REMEDIES: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law, and are in
addition to all other rights and remedies in law and in equity.
F. SURVIVAL OF INDEMNITIES: All indemnification, defense, and
hold harmless obligations of Landlord and Tenant under this Lease shall survive
the expiration or sooner termination of the Lease.
G. SEVERABILITY: If any term or provision of this Lease is
held unenforceable or invalid by a court of competent jurisdiction, the
remainder of the Lease shall not be invalidated thereby but shall be enforceable
in accordance with its terms, omitting the invalid or unenforceable term.
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H. CHOICE OF LAW: This Lease shall be governed by and
construed in accordance with California law. Venue shall be Santa Clara County.
I. TIME: Time is of the essence hereunder.
J. ENTIRE AGREEMENT: This Lease contains all of the agreements
and conditions made between the parties hereto and may not be modified orally or
in any other manner other than by written agreement signed by all parties hereto
or their respective successors in interest. This Lease supersedes and revokes
all previous negotiations, letters of intent, lease proposals, brochures,
agreements, representations, promises, warranties, and understandings, whether
oral or in writing, between the parties or their respective representatives or
any other person purporting to represent Landlord or Tenant.
K. REPRESENTATIONS: Tenant acknowledges that neither Landlord
nor any of its employees or agents have made any agreements, representations,
warranties or promises with respect to the Premises or with respect to present
or future rents, expenses, operations, tenancies or any other matter. Except as
herein expressly set forth herein, Tenant relied on no statement of Landlord or
its employees or agents for that purpose.
L. NO PRESUMPTION AGAINST DRAFTER: Landlord and Tenant
understand, agree and acknowledge that this Lease has been freely negotiated by
both parties; and that in any controversy, dispute, or contest over the meaning,
interpretation, validity, or enforceability of this Lease or any of its terms or
conditions, there shall be no inference, presumption, or conclusion drawn
whatsoever against either party by virtue of that party having drafted this
Lease or any portion thereof.
M. HEADINGS: The headings or titles to the Sections of this
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part thereof.
N. EXHIBITS: All exhibits referred to are attached to this
Lease and incorporated by reference.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
LANDLORD: JOHN AND SUSAN SOBRATO TENANT: FLEXTRONICS INTERNATIONAL,USA, INC.
1979 REVOCABLE TRUST a California Corporation
By: By:
-------------------------- ------------------------------
Its: Trustee Its:
------------------------------
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EXHIBIT "A" - PREMISES, BUILDING & PROJECT
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EXHIBIT "B" - SHELL PLANS AND SPECIFICATIONS
(sheet references to be attached)
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EXHIBIT "C" - BUILDING SHELL DEFINITION
The Building Shell shall include the following items:
1. BUILDING STRUCTURE
(a) All foundations to include footings, piers, caissons, pilings,
grade beams, foundation walls or other building foundation components required
to support the building structure.
(b) All steel box or pipe columns, glu-lam beams, joists, purlins, web
trusses, or other structural members to support the roof and roofing membrane.
(c) Five inch (5") thick concrete slab on grade.
(d) Exterior concrete walls that enclose the perimeter of the building,
with steel reinforcing and structural connections that may be necessary or
required.
(e) Exterior glass and glazing with anodized aluminum frames, soffets
and overhangs. All exterior doors, door closers and locking devices necessary
for proper functioning.
(f) 2"x4" roof panels with 1/2" plywood and roof drains.
(g) Three (3) ply built up roofing with cap sheet by Owens-Corning,
John Manville, or equal and all flashings.
(h) Exterior painting of all concrete with Tex-Coat or Kel-Tex textural
paint, all caulking of exterior concrete joints in preparation for painting.
(i) Offsite improvements costs required by the City of San Jose to
obtain a building permit.
2. SITEWORK
(a) All work outside the building perimeter walls shall be considered
site work for the Building Shell and shall include grading, asphalt concrete,
paving, landscaping, landscape irrigation, storm drainage, utility service
laterals, curbs, gutters, sidewalks, specialty paving (if required, i.e.
reinforced roadway section to truck doors), retaining walls, planters, parking
lot and landscape lighting and other exterior lighting per code
(b) Paving sections for automobile and truck access shall be according
to the Geologic Soils Report.
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(c) All parking lot striping to include handicap spaces and signage.
(d) Underground site storm drainage system shall be connected to the
city storm system main.
3. PLUMBING
(a) Underground sanitary sewer laterals connected to the city sewer
main in the street and stubbed to the building.
(b) Domestic water mains connected to the city water main in the street
and stubbed to the building.
(c) Roof drain leaders and downspouts piped and connected to the site
storm drainage system.
(d) Gas lines connected to the city or public utility mains and run to
gas meters adjacent to, and in close proximity to the building. Meter supplied
by utility company.
4. ELECTRICAL
(a) A primary electrical raceway service from the street to the
building, including underground conduit and transformer pads. Transformer
supplied by utility company. Underground conduits and secondary feeders from
transformer pads into the building.
(b) Underground conduit from the street to the building for telephone
trunk lines by Pacific Telephone.
(c) An electrically operated landscape irrigation system, with
controller, that is a complete and functioning system.
(e) Underground conduit from the building to the main fire protection
system post indicator valve (PIV) for installation of supervisory alarm wiring.
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EXHIBIT "D" - TENANT IMPROVEMENT PLANS AND SPECIFICATIONS
(sheet references to be attached)
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EXHIBIT "E" - GUARANTY OF LEASE
This Guaranty of Lease ("Guaranty") is made as of this 19th day of November,
1996 by FLEXTRONICS INTERNATIONAL, LTD., a Singapore Company, ("Guarantor") in
favor of Landlord, and recites as follows:
WHEREAS, as an inducement for Landlord to enter into the Lease, Guarantor
desires to guarantee the full performance of all obligations of Tenant under the
Lease upon the terms set forth below.
NOW THEREFORE, in consideration of the execution of the Lease by Landlord,
Guarantor unconditionally guarantee and agree as follows:
1. GUARANTY. Guarantor, continually, directly and unconditionally hereby
guarantee the full performance by Tenant of each and every term, covenant,
condition and obligation of the Lease to be performed by Tenant (the foregoing
obligations are hereinafter sometimes collectively referred to as the
"Guaranteed Obligations"). The Guaranteed Obligations shall include, without
limitation, the payment of Base Rent, Additional Rent and all other sums
becoming due under the Lease and the compliance with all the provisions of the
Lease which relate to Hazardous Materials.
2. CONTINUING GUARANTY. This Guaranty is a continuing one and shall
terminate only upon the full and complete performance by Tenant of all of the
Guaranteed Obligations. Guarantor's liability under this Guaranty with respect
to the full and unconditional performance of the Guaranteed Obligations shall
continue following the termination of the Lease Term to the extent any of the
Guaranteed Obligations have not otherwise been performed. Guarantor may not
revoke the continuing nature of this Guaranty. In the event that Landlord should
seek to enforce any of its rights provided in this Guaranty, and demand payment
or performance from Guarantor, such demand and compliance thereto shall not
release, extinguish, exonerate or, in any way, affect or diminish Guarantor's
continuing obligations hereunder.
3. LEASE MODIFICATIONS. This Guaranty shall continue in full force and
effect as to any and all renewals, modifications, amendments or extensions of
the Lease, whether or not Guarantor shall have received any notice of or
consented to such renewals, modifications, amendments or extensions. No renewal,
modification, amendment or extension of the Lease shall in any manner release,
discharge or diminish the obligations of Guarantor hereunder. This paragraph
modifies the provision of California Civil Code Section 2819. Notwithstanding
the foregoing, Landlord shall give Guarantor five (5) day prior notice before
Landlord's approval of any said renewal, modification, amendments or extensions
of the Lease.
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4. ASSIGNMENT BY LANDLORD. Landlord may, without notice, assign,
transfer, hypothecate, encumber or otherwise dispose of, in whole or in part,
any of Landlord's rights, claims or interests in the Lease, the Premises or this
Guaranty. No assignment, hypothecation, encumbrance, disposition or other
transfer of the Lease, the Premises or this Guaranty shall operate to extinguish
or diminish, in any way, the obligations of Guarantor hereunder.
5. ASSIGNMENT BY TENANT. This Guaranty shall continue and remain
unconditionally unaffected by any assignment of the Lease by Tenant, any sublet
by Tenant of the Premises, or any change in the entity comprising Tenant. Upon
any assignment of the Lease or any sublet, the Guarantor shall continue to
remain liable and obligated for the full performance by Tenant's successor of
the Guaranteed Obligations. "Tenant" as used in this Guaranty shall include all
successors and assigns of Tenant.
6. ADDITION OR RELEASE OF SECURITY. This Guaranty shall remain in full
force and effect notwithstanding the receipt by Landlord of any additional
security, whether from Guarantor, Tenant or a third party, securing the
performance of the Guaranteed Obligations. The release by Landlord of any
security held for the performance of any of the Guaranteed Obligations shall not
release, extinguish or, in any way, affect or diminish the obligations of
Guarantor hereunder.
7. LOSSES DUE TO LEASE DEFAULT. Landlord may terminate the Lease upon
default by Tenant of any term, covenant or condition of the Lease. Such
termination, however shall not extinguish, release or, in any way, affect or
diminish the obligations of Guarantor hereunder. In no event shall Landlord be
obligated to lease the Premises to Guarantor after such termination. Upon
termination of the Lease, as a result of Tenant's default thereunder, this
Guaranty shall extend to the payment to Landlord of all damages payable by
Tenant.
8. ACTIONS OF LANDLORD. This Guaranty shall not be released,
extinguished, modified or, in any way, affected or diminished by failure, on the
part of Landlord, to enforce any or all of the rights or remedies of Landlord
under the Lease, or by Landlord's grant of any indulgences or extensions of time
to Tenant for the performance of any of the Guaranteed Obligations. This
Guaranty shall remain in full force and effect notwithstanding the failure of
Landlord to insist, in any one or more instances, upon a strict performance or
observance of the Guaranteed Obligations or upon the exercise of any of
Landlord's rights under the Lease. Receipt by Landlord of Base Rent or other
performance from Tenant, after breach by Tenant, with the knowledge of such
breach, shall not be deemed a waiver of such breach. Any reference herein to any
liability of Tenant shall, at the same time, refer to the obligations of
Guarantor hereunder.
9. ABILITY TO PROCEED DIRECTLY AGAINST GUARANTOR. Landlord may, at
Landlord's option, proceed immediately and directly against Guarantor, jointly
or severally, in order to enforce the performance of the Guaranteed Obligations
under the Lease. Landlord shall give written notice to Guarantor and give
Guarantor the same cure period available to Tenant upon the monetary or non-
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monetary default of Tenant prior to proceeding against Guarantor hereunder.
Landlord shall not be required to first institute suit, proceedings, or
otherwise exhaust its legal remedies against Tenant.
10. This paragraph intentionally left blank.
11. GUARANTOR'S WAIVERS. Guarantor hereby waives (i) all defenses based
upon any legal disability of Tenant or any discharge or limitation of liability
of Tenant, to Landlord, whether consensual or arising by operation of law or any
bankruptcy, insolvency or debtor-relief proceeding or from any other cause; and
(ii) all rights to be exonerated hereunder pursuant to the provisions of
California Civil Code Section 2819 and/or 2845 and/or 2850 and pursuant to any
other statute or rule of law of similar import.
12. STATUS OF TENANT. Guarantor represent and warrant that Tenant is
under no disability in connection with the execution and delivery of the Lease
and that there are no defenses to Tenant's full performance and payment of the
obligations required by the Lease.
13. GUARANTOR REMAIN LIABLE TO LANDLORD. Tenant, or any persons or
entities comprising Tenant, may be released from Tenant's obligations under the
Lease, without notice to Guarantor, and Guarantor shall nevertheless remain
liable to Landlord under this Guaranty.
14. ENFORCEMENT OF GUARANTY UPON DEFAULT. The enforcement of this
Guaranty upon the default of Tenant shall not constitute an assignment to
Guarantor, by Landlord, of any rights or claims which Landlord may have against
Tenant.
15. DUTY OF GUARANTOR/BINDING EFFECT. The obligations of Guarantor
hereunder are direct, unconditional and independent of those of Tenant under the
Lease. Guarantor shall punctually perform their obligations hereunder upon
demand by Landlord. This Guaranty shall be binding upon the Guarantor, their
respective successors and assigns.
16. OTHER GUARANTOR. This Guaranty shall remain in full force and
effect, notwithstanding that other guarantors from time to time may guarantee or
otherwise become responsible for the performance of any of the terms, covenants
and conditions of the Lease.
17. RIGHT OF SET-OFF. In enforcing this Guaranty, Landlord reserves the
right to set-off any claims or rights Guarantor may have against Landlord,
whether or not such claims or rights arise out of the Lease or otherwise.
Failure of Landlord to so set-off shall not constitute a waiver of any future
rights of set-off that Landlord may exercise.
18. RIGHTS CUMULATIVE. All rights of Landlord under this Guaranty are
cumulative and are in addition to any other rights which Landlord may otherwise
have.
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19. PROVISIONS SEVERABLE. The provisions of this Guaranty are
severable, and if any provision herein is invalid, the balance of this Guaranty
shall remain in force and effect to the fullest extent permitted by law.
20. CONDEMNATION. In the event that the Premises, for any reason, are
condemned by a public entity, Guarantor shall have no rights or claims to any
condemnation awards recovered by Landlord or Tenant therefrom.
21. ESTOPPEL CERTIFICATE. Upon demand by Landlord, Guarantor shall
deliver to Landlord and to any prospective purchaser, mortgagee and/or
beneficiary under a deed of trust, or other lender designated by Landlord, an
estoppel certificate, executed and acknowledged by Guarantor, to the effect that
this Guaranty is in full force and effect and has not been amended or
terminated. Guarantor shall also certify such other matters relating to the
Lease, the Premises or this Guaranty as may be requested by a lender making a
loan to Landlord or a purchaser of the Premises from Landlord if the foregoing
is true.
22. BANKRUPTCY OF TENANT. This Guaranty shall remain and continue in
full force and effect, notwithstanding: (i) the commencement or continuation of
any case, action, or proceeding by, against or concerning Tenant, under any
federal or state bankruptcy, insolvency, or other debtor's relief law,
including, without limitation: (x) a case under Title 11 of the United States
Code concerning Tenant, whether under Chapter 7, 11 or 13 of such Title or under
any other Chapter, or (y) a case, action or proceeding seeking Tenant's
financial reorganization or an arrangement with any of Tenant's creditors; (ii)
the voluntary or involuntary appointment of a receiver, trustee, keeper or other
person who takes possession of substantially all of Tenant's assets or o~ any
asset used in Tenant's business on the Premises, regardless of whether such
appointment occurs as a result of insolvency or other cause; or (iii) the
execution of an assignment for the benefit of creditors of substantially all
assets of Tenant available by law for the satisfaction of judgment creditors.
23. NO CONDITION PRECEDENT. This Guaranty shall not be subject to any
condition precedent to the effectiveness hereof.
24. ATTORNEYS' FEES. In the event any action or proceeding is brought
to enforce any of the terms, covenants or conditions of this Guaranty; then the
losing party shall pay to the prevailing party reasonable attorney's fees
including the expense of expert witnesses, depositions and court testimony as
part of its costs which shall be deemed to have accrued on the commencement of
such action. The prevailing party shall also be entitled to recover all costs
and expenses including reasonable attorney's fees incurred in enforcing any
judgment or award against the other party. The foregoing provision relating to
post-judgment costs is severable from all other provisions of this Agreement.
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25. NOTICE PROVISION. Any notice to be delivered hereunder shall be in
writing and shall be deemed delivered upon personal service or upon seventy-two
(72) hours after deposited in the U.S. Postal Service, postage prepaid,
registered or certified, return receipt requested, addressed as follows:
Flextronics International, Ltd.
2241 Lundy Avenue
San Jose, CA 95131
26. MODIFICATIONS IN WRITING. This Guaranty may not be changed, waived,
discharged or terminated orally or by course of conduct, but rather only by an
instrument in writing signed by the party against whom enforcement of the
charge, waiver, discharge or termination is sought.
27. CHOICE OF LAW. The parties agree that the terms of the Lease and
this Guaranty of Lease were negotiated in the County of Santa Clara, State of
California. This Guaranty of Lease shall be governed by and construed in
accordance with the laws of the State of California. Guarantor hereby submits to
the legal jurisdiction of the State of California and to the service of process
of any court of the State of California. The parties agree that all disputes
shall be determined by resort to the courts of California of competent
jurisdiction, with venue in Santa Clara County.
28. DESCRIPTIVE HEADINGS. Descriptive headings are for reference
purposes only and shall not affect any meaning, construction or interpretation
of this Guaranty.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this agreement as of
November __, 1996.
GUARANTOR: FLEXTRONICS INTERNATIONAL, LTD.
by:
---------------------------------
its:
---------------------------------
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<PAGE> 1
Exhibit 10.2
DATED THE 29th DAY OF NOVEMBER 1996
Between
FLEXTRONICS INTERNATIONAL LTD
as Purchaser
FICO FOREST INDUSTRIAL CO. LIMITED
as Vendor
and
FICO INVESTMENT HOLDING LIMITED
as the Company
SALE AND PURCHASE AGREEMENT
relating to 4,000 ordinary shares
consisting of
40% of all the ordinary shares
in the share capital of
FICO INVESTMENT HOLDING LIMITED
<PAGE> 2
TABLE OF CONTENTS
Clause Heading Page
- ------ ------- ----
1. DEFINITIONS AND INTERPRETATION ......................... 2
2. SALE OF THE SALE SHARES ................................ 6
3. CONDITIONS ............................................. 6
4. CONSIDERATION FOR THE SALE SHARES ...................... 7
5. POST-CLOSING ADJUSTMENT ................................ 8
6. COMPLETION ............................................. 8
7. VENDOR'S WARRANTIES .................................... 11
8. VENDOR'S AND COMPANY'S UNDERTAKINGS .................... 14
9. INDEMNITY .............................................. 14
10. PROFIT TARGET .......................................... 15
11. COVENANTS AND UNDERTAKINGS ............................. 16
12. CONFIDENTIALITY ........................................ 19
13. RESTRICTION ON ANNOUNCEMENTS ........................... 20
14. COSTS .................................................. 20
15. GENERAL ................................................ 20
16. ILLEGALITY ............................................. 21
17. NOTICES ................................................ 21
18. REMEDIES AND WAIVERS ................................... 22
19. TIME OF ESSENCE ........................................ 22
20. GOVERNING LAW AND DISPUTE RESOLUTION ................... 22
21. COUNTERPARTS ........................................... 23
SCHEDULE 1 PARTICULARS OF THE COMPANY ............... 25
SCHEDULE 2 CALL OPTION AGREEMENT .................... 26
SCHEDULE 3 CHARGE ................................... 46
SCHEDULE 4 EMPLOYMENT AGREEMENT - LAW SING HONG ..... 55
EMPLOYMENT AGREEMENT - LAW SHUN HANG ..... 64
EMPLOYMENT AGREEMENT - LAW KIN PING ...... 73
SCHEDULE 5 ESCROW AGREEMENT ......................... 82
SCHEDULE 6 FICO CALL OPTION AGREEMENT ............... 89
SCHEDULE 7 PARTICULARS OF FICO(PRC) ................. 97
SCHEDULE 8 DEED OF INDEMNITY ........................ 98
SCHEDULE 9 MEMORANDUM OF DISCLOSURE ................. 105
SCHEDULE 10 PRC PROPERTY ............................. 108
SCHEDULE 11 PUT OPTION AGREEMENT ..................... 109
SCHEDULE 12 SHAREHOLDERS' AGREEMENT .................. 117
SCHEDULE 13 REPRESENTATIONS AND WARRANTIES ........... 136
SCHEDULE 14 ASSUMPTIONS AND POLICIES REGARDING
THE PROFIT TARGET UNDER CLAUSE 10 ....... 158
<PAGE> 3
THIS AGREEMENT is made on the 29th day of November 1996 BETWEEN
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore and
having its registered office at 36 Robinson Road, City House, #18-01,
Singapore 068877 ("Purchaser");
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("Vendor"); and
(3) FICO INVESTMENT HOLDING LIMITED, a company incorporated in Hong Kong
and having its registered office at Rm 10, 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("Company").
WHEREAS:
(A) The Company and FICO(PRC) (as defined below) are in the business of the
sale and manufacture of plastic material products and its by-products.
(B) The Company was incorporated in Hong Kong on 12 September 1996 and has,
at the date hereof, an authorized share capital of 10,000 ordinary
shares of HK$1.00 each of which 10,000 ordinary shares are issued and
paid-up. The relevant particulars of the Company are set out in
Schedule 1.
(C) FICO(PRC) has, at the date hereof, an authorised capital of
HK$55,000,000 and pursuant to the Capital Verification Certificate
dated 9 April 1996 from Shenzhen Baoan Certified Public Accountants,
HK$42,981,525 has been paid up.
(D) The Vendor is the legal and beneficial owner of all the issued shares
in the share capital of the Company and the owner of FICO(PRC).
(E) The Vendor has agreed to transfer ownership of FICO(PRC) to the Company
such that, by the Completion Date of this Agreement, FICO(PRC) shall be
a subsidiary of the Company. FICO(PRC) will be the only subsidiary of
the Company.
(F) The Vendor has offered to sell to the Purchaser 4,000 Shares (as
defined below) consisting of forty percent. (40%) of the issued and
paid-up share capital of the Company, which are or shall, be legally
and beneficially held by the Vendor by the Completion Date of this
Agreement.
(G) The Vendor is desirous of selling, and the Purchaser is desirous of
purchasing, all the Sale Shares (as defined below) for the
consideration and on the terms and subject to the conditions, contained
in this Agreement and further to that, have agreed to the terms and
execution of, and agreed to procure the execution of the Employment
Agreements (as defined below), the Put Option Agreement (as defined
below), the Call Option Agreement (as defined below), the Escrow
Agreement (as defined below), the Fico Call Option Agreement (as
defined below), the Shareholders' Agreement (as defined below) the Deed
of Indemnity (as defined below) and the Charge (as defined below), upon
the Completion of this Agreement.
<PAGE> 4
NOW IT IS HEREBY AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and in the Schedules unless the context requires
otherwise:
"Articles" means the articles of association of each Group Company;
"Audited Accounts" means the consolidated pro-forma audited accounts
for the financial period ended the Balance Sheet Date prepared by the
Purchaser's Auditors;
"Audited Net Asset Value" shall have the meaning ascribed to it in
Clause 5.1;
"Balance Consideration" shall have the meaning ascribed to it in Clause
4.2(ii);
"Balance Sheet Date" means 30 September 1996;
"Business" shall have the meaning ascribed to it in Clause 11.3(vi);
"Business Day" means a day (other than a Saturday, a Sunday or a public
holiday in Hong Kong) on which commercial banks are open for business
in Hong Kong;
"Call Option Agreement" means the conditional call option agreement to
be entered into between the Vendor and the Purchaser substantially in
the form set out in Schedule 2;
"Charge" means the first fixed charge to secure the various covenants,
guarantees and undertakings of the Vendor under and pursuant to this
Agreement, the Call Option Agreement, Fico Call Option Agreement, Put
Option Agreement, Escrow Agreement, Deed of Indemnity and the
Shareholders' Agreement, over the Shares constituting sixty per cent.
(60%) of the issued and paid-up capital of the Company, to be executed
by the Vendor in favour of the Purchaser substantially in the form set
out in Schedule 4;
"Chinese Party" means any governmental, regulatory, provincial, state
or statutory authority in the PRC or any person exercising such
functions;
"Companies Ordinance" means the Hong Kong Companies Ordinance;
"Completion" means completion of the sale and purchase of the Sale
Shares as specified in Clause 6;
"Completion Date" means the date falling twenty (20) Business Days
after the fulfillment of the last of the conditions in Clause 3.1 but
in any event, not later than 15 December 1996 or such other date as the
parties may mutually agree;
"Confidential Information" means any information which is proprietary
and confidential to a party including but not limited to the terms and
conditions of this Agreement, information concerning or relating in any
way whatsoever to its distributorship arrangements, principals, any of
the trade secrets or confidential operations, processes or inventions
carried on or used by a party, any information concerning the
Organisation, business, finances, transactions or affairs of a party,
dealings of a party, secret or confidential information which relates
to the business or party or any of its principals', clients' or
customers' transactions or affairs, any party's technology, designs,
documentation, manuals, budgets, financial statements or information,
accounts, dealers' lists, customer lists, marketing studies, drawings,
notes, memoranda and the information contained therein, any information
therein in respect of trade secrets, technology and technical or other
information relating to the development, manufacture, clinical testing,
analysis, marketing,
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<PAGE> 5
sale or supply or proposed development, manufacture, clinical testing,
analysis, marketing, sale or supply of any products or services by a
party; and plans for the development or marketing of such products or
services and information and material which is either marked
confidential or is by its nature intended to be exclusively for its
knowledge of the recipient alone;
"Consideration" means the consideration for the Sale Shares as
specified in Clause 4;
"Deed of Indemnity" means a deed of indemnity entered or to be entered
into between the Vendor, the Purchaser and the Group Companies
substantially in the form set out in Schedule 8;
"Deferred Consideration Payment Date" means the date falling four (4)
calendar months after the Completion Date;
"Encumbrance" means any mortgage, assignment of receivables, debenture,
lien, charge, pledge, title retention, right to acquire, security
interest, options, rights of first refusal and any other encumbrance or
condition whatsoever;
"Employment Agreements" means the employment agreements to be executed
by Law Sing Hong, Law Shun Hang and Law Kin Ping substantially in the
forms respectively set out in Schedule 4;
"Escrow Agent" means Ernst & Young, an international accounting firm
having its place of business at 1O/F Tower 2, The Gateway 25-27, Canton
Road, Kowloon, Hong Kong, or any successor escrow agent appointed by
the Purchaser;
"Escrow Agreement" means the escrow agreement to be executed by the
Vendor, the Purchaser and the Escrow Agent pursuant to the terms of
this Agreement which is substantially set out in Schedule 5;
"Fico Call Option Agreement" means the conditional call option
agreement to be entered into between the Vendor and the Purchaser
substantially in the form set out in Schedule 6;
"FICO (PRC)" means Forest Keyboard Manufacturing (Shenzhen) Ltd., a
company registered and validly existing in Shenzhen, the PRC, relevant
particulars of which are set out in Schedule 7;
"FICO (PRC) Litigation" means the claim initiated by FICO(PRC) against
Shenzhen City Number Four Construction Engineering Company
("Defendant"), a company having its place of business in Shenzhen, PRC,
for an order by the Shenzhen City Special Economic Zone Peoples' Court
to (i) terminate the Shenzhen City Construction Engineering Works
Contract signed between FICO(PRC) and the Defendant on 21 July 1995 for
the failure by the Defendant to comply with certain quality standards
stipulated in the said contract, (ii) order the Defendant to refund to
FICO(PRC) the advance of 600,000 RMB paid by FICO(PRC) for the
construction of a factory building located at BaoAn Gong Min Town,
YuLui Village, and (iii) order the Defendant to bear the costs and
expenses of the FICO(PRC) Litigation;
"FIL Group Companies" means the Purchaser and the FIL Subsidiaries and
"FIL Group Company" means any of them;
"FIL Subsidiaries" means the subsidiaries and related companies of the
Purchaser at any time and from time to time and "FIL Subsidiary" means
any of them;
"Financial Period" shall have the meaning ascribed to it in Clause
10.1(i);
3
<PAGE> 6
"FY96 Audited Accounts" means the consolidated audited accounts of the
Company for the financial year ending 31 December 1 996 prepared by the
Purchaser's Auditors pursuant to Clause 5.4;
"Group Companies" means the Company and FICO(PRC) and "Group Company"
shall mean any one of them;
"HK$" or "Hong Kong Dollars" means the lawful currency of Hong Kong;
"HKIAC" means the Hong Kong International Arbitration Centre;
"HKIAC Rules" means the HKIAC Procedures for Arbitration in force at
the date of this Agreement, including such additions to the UNCITRAL
Arbitration Rules as are therein contained;
"Intellectual Property Right" means any trademark, pending trademark
application, patent, pending patent application, know-how, registered
and unregistered design, copyright, trade secrets, licences relating to
any of the above or other similar industrial or commercial right;
"Management Accounts" means the management accounts of the Group
Companies for the month immediately preceding the Completion Date;
"Memorandum of Disclosure" means the memorandum of disclosure dated on
or before the Completion Date from the Vendor to the Purchaser, in the
form set out in Schedule 9 disclosing information constituting
exceptions to the Warranties;
"Net Profits After Taxation of the Company" shall have the meaning
ascribed to it in Clause 10.1(ii);
"Notice of Dispute" shall have the meaning ascribed to it in Clause
20.4;
"Post-Closing Adjustment" shall have the meaning ascribed to it in
Clause 5.3;
"PRC" means the People's Republic of China;
"PRC Property" means the land and building currently being constructed
by FICO(PRC) at Shenzhen relevant particulars of which are set out in
Schedule 10;
"Profit Target" shall have the meaning ascribed to it in Clause
10.1(iii);
"Purchaser's Auditors" mean each of (a) Ernst & Young, an international
accounting firm and having its place of business in Hong Kong and (b)
Shenzhen Shekou Schinda Certified Public Accountants having its place
of business at Shekou, Shenzhen, PRC;
"Put Option Agreement" means the conditional put option agreement, to
be executed by the Vendor and the Purchaser substantially in the form
set out in Schedule 11;
"RMB" means the Renmimbi, lawful currency of PRC;
"S$" or "Singapore Dollars" means the lawful currency of Singapore;
"Sale Shares" means the 4,000 ordinary shares of HK$1.00 each
consisting of forty per cent. (40%) of the issued and paid-up share
capital of the Company, which collectively, are or shall be, legally
and beneficially held by the Vendor immediately prior to or by the
Completion Date;
4
<PAGE> 7
"Shares' means all or any part of the ordinary shares of HK$1.00 each
in the share capital of the Company;
"Shareholders' Agreement" means the shareholders' agreement to be
executed by the Vendor and the Purchaser substantilly in the form set
out in Schedule 12;
"SIAC" means the Singapore International Arbitration Centre;
"SIAC Rules" means the SIAC Arbitration Rules in force at the date of
this Agreement, including such additions to the UNCITRAL Arbitration
Rules as are therein contained;
"Special Accounts" shall have the meaning ascribed to it in Clause
10.2(i);
"Specific Indemnities" shall have the meaning ascribed to it in Clause
7.14;
"Taxes" or "Taxation" means all forms of taxation whether of Singapore,
Hong Kong, or the PRC including all state or local taxation, past,
present and deferred (including, without limitation, income tax
(including net income and gross income), corporate, value added,
occupation, real and personal property, social security, gross
receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, occupation,
premium or windfall profit taxes, estate duty, stamp duty, customs and
other import or export duties, or charges of any kind whatsoever,
estimated and other taxes, together with any interest and levies and
all penalties, charges, costs and additions to tax, payable by or due
from any of the Group Companies, or any additional amounts imposed by
any government, governmental agency, statutory body or any revenue
authority, upon any Group Company;
"US GAAP" means generally accepted accounting principles in the United
States;
"Warranties" means the representations, warranties, indemnities and
undertakings made by the Vendor on the Group Companies contained or
referred to in Clause 7 and Schedule 13; and
"$" or "Dollars" means the lawful currency of the United States of
America.
1.2 References to statutory provisions shall be construed as references to
those provisions as respectively amended or re-enacted or as their
application is modified by other provisions (whether before or after
the date hereof) from time to time and shall include any provisions of
which they are re-enactments (whether with or without modification).
1.3 References herein to Clauses and the Schedules are to clauses in and
the schedules to this Agreement (unless the context otherwise
requires). The Schedules form part of this Agreement and have the same
force and effect as if expressly set out in the body of this Agreement.
1.4 All warranties, representations, indemnities, covenants, agreements and
obligations given or entered into by more than one person are given or
entered into jointly and severally.
1.5 The headings are inserted for convenience only and shall not affect the
construction of this Agreement.
1.6 Words importing the singular shall include the plural and vice versa;
words importing a specific gender shall include the other genders
(male, female or neuter); and "person" shall include an individual,
corporation, company, partnership, firm, trustee, trust, executor,
administrator or other legal personal representative, unincorporated
association, joint venture, syndicate or other business enterprise, any
governmental, administrative or
5
<PAGE> 8
regulatory authority or agency (notwithstanding that "person" may be
sometimes used herein in conjunction with some of such words), and
their respective successors, legal personal representatives and
assigns, as the case may be, and pronouns shall have a similarly
extended meaning.
1.7 Any thing or obligation to be done under this Agreement which requires
or falls to be done on a Business Day, shall be done on the next
succeeding Business Day, if the day upon which that thing or obligation
to be done falls on a day which is not a Business Day.
1.8 The word "subsidiary" shall have the same meaning in this Agreement as
its definition in the Companies Ordinance.
2. SALE OF THE SALE SHARES
2.1 Subject to the terms and conditions of this Agreement, the Vendor shall
sell as legal and beneficial owner and the Purchaser, relying on the
several representations, warranties and undertakings contained in this
Agreement, shall purchase free from all Encumbrances and together with
all rights and benefits now and hereafter attaching thereto, all the
Sale Shares.
2.2 The Purchaser shall not be obliged to complete the purchase of any of
the Sale Shares unless the purchase of all the Sale Shares is completed
simultaneously.
3. CONDITIONS
3.1 The sale and purchase of the Sale Shares is conditional upon:
(i) the Memorandum of Disclosure to be delivered to the Purchaser
on Completion being in form and substance satisfactory to the
Purchaser;
(ii) completion of a special audit by the Purchaser and the
Purchaser's Auditors (if the Purchaser so chooses to conduct)
and a due diligence exercise over the business and records of
the Group Companies and the results of the special audit and
the due diligence exercise, being satisfactory to the
Purchaser in its sole and absolute discretion;
(iii) the Warranties remaining true and not misleading in any
respect at Completion, as if repeated at Completion and at all
times between the date of this Agreement and Completion;
(iv) the Vendor having performed all of the covenants and
agreements required to be performed or caused to be performed
by it under this Agreement on or before the Completion Date;
(v) the Vendor supplying, or procuring each of the Group Companies
or its officers to supply to the Purchaser, all of the
information (in such detail as may be satisfactory to the
Purchaser) requested by the Purchaser from time to time before
the Completion Date;
(vi) all other consents and approvals required under any and all
applicable laws for the sale and purchase of the Sale Shares
and to give effect to the transactions contemplated hereunder
being obtained; and
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(vii) the transfer of the ownership of FICO(PRC) to the Company and
all consents and approvals required under all applicable laws
relating thereto, whether in the PRC or Hong Kong, being
obtained.
3.2 The Vendor shall procure the fulfilment of the conditions set out in
Clause 3.1 by the Completion Date. Unless specifically waived by the
parties hereto, if any of the conditions stated in Clause 3.1 shall not
be fulfilled on or before the Completion Date or such other date as the
parties shall mutually agree, this Agreement shall ipso facto cease and
determine and neither party shall have any claim against the other for
costs, damages, compensation or otherwise, save for any claim by the
Purchaser against the Vendor arising from antecedent breach of the
terms hereof including its undertaking contained in this Clause 3.2.
4. CONSIDERATION FOR THE SALE SHARES
4.1 The Consideration for the purchase of the Sale Shares shall be the
aggregate sum of $5,200,000 (Dollars Five Million Two Hundred Thousand)
for all the Sale Shares which shall be paid in accordance with Clause
4.2.
4.2 The Consideration shall be satisfied:
(i) by the payment of $3,000,000 (Dollars Three Million) on
Completion; and
(ii) by the payment of the balance of $2,200,000 (Dollars Two
Million Two Hundred Thousand) on the Deferred Consideration
Payment Date ("Balance Consideration"), as may be adjusted
pursuant to Clause 4.2(B),
Provided that the Balance Consideration shall not be paid unless the
Purchaser is satisfied with the state of affairs of the Company as
reported in the audited accounts of the Company for the financial year
ending 31 December 1996 and that all the Warranties are true in all
respects, on the Deferred Consideration Payment Date. In the event that
the Purchaser, at its sole and absolute discretion and determination:
(A) is not satisfied with the state of affairs of the Company as
reported in the audited accounts of the Company for the
financial year ending 31 December 1996, the Purchaser shall
exercise its rights under the Put Option Agreement; and
(B) is satisfied with the state of affairs of the Company as
reported in the FY96 Audited Accounts, the Purchaser shall pay
to the Vendor the Balance Consideration pursuant to Clause 4.3
save that the Purchaser shall deduct from the Balance
Consideration, such amounts payable by the Vendor to the
Company pursuant to Clauses 11.1 (ii) and (iii) and pay the
same to the Company on the Deferred Consideration Payment Date
and the payment of the Balance Consideration as adjusted
hereunder shall constitute full and final payment of all sums
due as Consideration under this Agreement and the Vendor shall
have no further claim to the same.
4.3 Payment of the Consideration in the manner set out in Clause 4.2 above
shall be effected by way of telegraphic transfer of the amount payable
to an account designated by the Vendor and notified to the Purchaser
not later than three (3) Business Days prior to the date of payment or
by way of a cashier's order or banker's draft issued by a bank licensed
in Singapore or in Hong Kong or in such other form as the Vendor and
the Purchaser may agree.
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4.4 The Consideration stated herein to be paid to the Vendor, and the
manner in which it is proposed to be paid, may be adjusted further
according to the outcome and results of the due diligence
investigations and special audit referred to in Clause 3.1 (ii) to be
conducted by the Purchaser of the Group Companies.
5. POST-CLOSING ADJUSTMENT
5.1 In the event the net asset value of the Group (excluding the PRC
Property) calculated in accordance with US GAAP as recorded in the
audited accounts for the financial year ending 31 December 1996 (in
this Clause 5.1, the "Audited Net Asset Value") exceeds $5,000,000, the
Vendor shall be entitled to be paid by the Company in cash as
additional consideration for the transfer of the ownership of FICO(PRC)
to the Company an amount equal to the difference between the Audited
Net Asset Value and $5,000,000.
5.2 In the event that the Audited Net Asset Value is less than $5,000,000,
the Vendor shall pay to the Company in cash by way of additional moneys
payable by the Vendor for the transfer of the ownership of FICO(PRC) to
the Company, an amount equal to the difference between $5,000,000 and
the Audited Net Asset Value. Such sum shall be credited to the
Company's share premium account.
5.3 The sum payable by the Company or, as the case may be, the Vendor
pursuant to Clause 5.1 or Clause 5.2 (as the case may be) shall be
referred to as the "Post-Closing Adjustment".
5.4 The determination of the Audited Net Asset Value shall be as follows:
(i) As promptly as practicable (but in no event later than 16
April 1997), the Purchaser's Auditors shall submit to the
Purchaser and the Vendor the FY96 Audited Accounts of the
Group Companies;
(ii) The FY96 Audited Accounts of the Company and FICO(PRC) shall
be prepared according to US GAAP; and
(iii) The FY96 Audited Accounts shall be final and binding on the
Vendor and the Purchaser and shall set forth the Audited Net
Asset Value as of 31 December 1996.
5.5 Payment of the Post-Closing Adjustment determined in accordance with
Clause 5.1 or, as the case may be, Clause 5.2 shall be effected on the
Deferred Consideration Payment Date.
6. COMPLETION
6.1 Subject to Clause 3, Completion shall take place on the Completion Date
in Hong Kong at the Hong Kong branch office of FIL (or at such other
place as may be agreed) where all of the events described below shall
occur.
6.2 At Completion, the Vendor shall deliver to or, in the case of Clauses
6.2 (vi), (vii) and (viii) below make available for inspection by, the
Purchaser:
(i) evidence satisfactory to the Purchaser of the satisfaction of
the conditions specified in Clause 3.1 above;
(ii) a certificate signed by a director of the Vendor and a
director of the Company confirming that all the
representations and warranties contained in Clause 7 and
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<PAGE> 11
Schedule 13 have been complied with and would be correct in all
respects as if repeated on the Completion Date by reference to the
circumstances then existing and that all the undertakings on the part
of the Vendor contained in Clause 11 have been fully performed and
observed by the Vendor;
(iii) duly executed transfers and duly executed sold notes in respect of the
Sale Shares in favour of the Purchaser (including all powers of
attorney or other authorities under which the transfers and sold notes
in respect of the Sale Shares have been executed) or as it may direct
accompanied by the relative share certificates for the Sale Shares;
(iv) certified true copies of the resolutions passed by the board of
directors of the Company:
(a) approving the transfer of the Sale Shares to the Purchaser, or
the transfer of any part of the Sale Shares to a nominee
appointed by the Purchaser, save that such approval shall be
conditional on the instruments of transfer being duly stamped
in accordance with the Stamp Duty Ordinance;
(b) authorising the issue of the new share certificates in respect
of the Sale Shares in favour of the Purchaser or such nominee
of the Purchaser;
(c) approving the entering in the Register of Members of the
Company, the name of the Purchaser as holder of the Sale
Shares or that of its nominee, save that such approval shall
be conditional on the instruments of transfer being duly
stamped in accordance with the Stamp Duty Ordinance;
(d) appointing as directors of the Company, the persons nominated
by the Purchaser as notified to the Vendor in writing upon
execution of this Agreement with effect from the Completion
Date;
(e) revoking all existing authorities to bankers in respect of the
operation of its bank accounts and giving authority in favor
of such persons as the Purchaser and the Vendor may nominate
(such nomination to be communicated to the Vendor prior to
Completion) to operate such accounts;
(f) authorising the execution and delivery of the Deed of
Indemnity by the Company and its execution under seal of the
Company; and
(g) authorising the execution and delivery by the Company of each
of the Shareholders' Agreement and the Employment Agreements;
(v) certified true copies of the resolutions passed by the shareholders of
the Vendor:
(a) approving the sale of the Sale Shares to the Purchaser; and
(b) authorising the execution and delivery by the Vendor of each
of the Put Option Agreement, the Call Option Agreement, the
Fico Call Option Agreement, the Shareholders' Agreement, the
Escrow Agreement, the Charge and the Deed of Indemnity;
(vi) all necessary corporate or other approvals necessary to be passed by
all relevant person or persons for the adoption of the Articles;
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<PAGE> 12
(vii) all the statutory and other books (duly written up to date) of
each Group Company, the certificate of incorporation, the
common seal and any other papers and documents of each Group
Company in the Vendor's possession;
(viii) the title deeds, land use right certificates, building
ownership certificates, leases and tenancy agreements in
respect of properties, if any, owned or leased by the Group
Companies in Hong Kong and the PRC, together with all other
documents relating to such properties and of all other
properties of the Group Companies;
(ix) the certificates of incorporation, certificates of
incorporation on change of name, common seals (if any), the
memoranda and articles of association, cheque books and
statutory books and records and current business registration
certificates and business licenses of each Group Company (duly
written up-to-date);
(x) such waivers or consents as may be necessary to enable the
Purchaser or its nominee to be registered as holder of any and
all of the Sale Shares;
(xi) deeds executed by the vendor and each of the existing
directors of each Group Company confirming that they each have
no claim against such Group Company and if there are any
claims that they shall release and disclaim all their rights
to such claims, which letters shall be in such form as parties
shall agree;
(xii) the Shareholders' Agreement duly executed by the Vendor;
(xiii) the Employment Agreements duly executed by each Law Sing Hong,
Law Shun Hang and Law Kin Ping;
(xiv) the Put Option Agreement duly executed by the Vendor;
(xv) the Call Option Agreement duly executed by the Vendor;
(xvi) the Fico Call Option Agreement duly executed by the Vendor;
(xvii) the Charge duly executed by the Vendor;
(xviii) the Deed of Indemnity duly executed by the Vendor;
(xix) the Escrow Agreement duly executed by the Vendor and the
Escrow Agent;
(xx) a list of all bank accounts maintained by each of the Group
Companies; and
(xxi) a legal opinion by the Vendor's solicitors in a form and
substance satisfactory to the Purchaser.
6.3 On Completion and against compliance with the respective provisions of
Clauses 2.2 and 6.2, the Purchaser shall deliver to the Vendor:
(i) the sum of $3,000,000 referred to in Clause 4.2(i) in the
manner set out in Clauses 4.3 and 4.4;
(ii) the Shareholders' Agreement duly executed by the Purchaser;
(iii) the Put Option Agreement duly executed by the Purchaser;
(iv) the Call Option Agreement duly executed by the Purchaser;
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<PAGE> 13
(v) the Fico Call Option Agreement duly executed by the Purchaser;
(vi) the Charge duly executed by the Purchaser;
(vii) the Deed of Indemnity duly executed by the Purchaser; and
(viii) the Escrow Agreement duly executed by the Purchaser.
6.4 On Completion, the Vendor shall procure:
(i) the execution by the Company of the Shareholders' Agreement;
(ii) the execution by the Company of the Deed of Indemnity;
(iii) the execution by the Company of the Employment Agreements; and
(iv) that the Company shall hold a shareholders meeting to amend
the Articles to conform the Articles with the terms and
conditions of the Shareholders' Agreement and for such
amendment to be effective by the Completion Date.
6.5 Without prejudice to any other remedies available, if in any respect
the provisions of this Clause 6 are not complied with by the Vendor or,
as the case may be the Purchaser ("Defaulting Party") on the Completion
Date, the party not in default ("Non-Defaulting Party") may:
(i) defer Completion to a date not more than twenty-eight (28)
days after the Completion Date (and so that the provisions of
this sub-clause shall apply to Completion as so deferred); or
(ii) proceed to Completion so far as practicable (without prejudice
to their rights hereunder); or
(iii) rescind this Agreement.
6.6 No party shall be obliged to perform any of its obligations under
Clauses 6.2, 6.3 and 6.4 unless (simultaneously with such performance)
the other parties perform their respective obligations under such
Clauses.
6.7 In the event that Completion should not take place due to any failure
to satisfy any or all the conditions precedent mentioned in Clause 3.1
or the occurrence of any event which is beyond the control of the
Purchaser, this Agreement shall ipso facto cease and all parties hereto
shall have no claims against each other save for antecedent breaches of
any representations or undertakings and all the rights and obligations
of the parties hereto shall cease.
7. VENDOR'S WARRANTIES
7.1 The Vendor hereby represents, warrants and undertakes to and with the
Purchaser (with the intent that the provisions of this Clause 7.1 shall
continue to have full force and effect notwithstanding Completion)
that:
(i) the Vendor is currently the legal and beneficial holder of the
Sale Shares, and that the Sale Shares, in aggregate,
represent, and shall on Completion represent, forty per cent.
(40%) of the issued and paid-up share capital of the Company;
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<PAGE> 14
(ii) on Completion, it shall be the legal and beneficial owner of
and is entitled to sell and transfer the Sale Shares to the
Purchaser and/or its nominee, free from all and any
Encumbrances together with all rights and benefits attaching
thereto as at the Completion Date and no other person has or
shall have any rights of pre-emption over such Sale Shares;
(iii) on Completion, the Sale Shares are and shall have been
authorised, validly issued, allotted and fully paid-up;
(iv) on Completion, the ownership of FICO(PRC) shall have been
legally and validly transferred, free from Encumbrances, to
the Company and that the Company shall be the legal and
beneficial owner of FICO(PRC);
(v) the execution and delivery of, and the performance by it of
its obligations under this Agreement shall not:
(a) result in a breach of, or constitute a default under,
any instrument, contract, document or agreement, to
which it or the Company or FICO(PRC) is a party or by
which it or the Company or FICO(PRC) is bound; and/or
(b) result in a breach of any law, rules, regulations,
ordinances, order, judgment or decree of or
undertaking to any court, government body, statutory
authority or regulatory body (including, without
limitation, any relevant stock exchange or securities
council) to which it or the Company or FICO(PRC) is a
party or by which it or the Company or FICO(PRC) is
bound, whether in Hong Kong or the PRC or anywhere
else in the world; and
(vi) each of the Warranties is true and accurate in all respects
save as expressly disclosed in the Memorandum of Disclosure,
save that notwithstanding specific disclosure has or will be
made of the FICO(PRC) Litigation in the Memorandum of
Disclosure, the Vendor shall continue to be liable for all
costs and expenses arising from the FICO(PRC) Litigation in
the manner determined in Clause 8.1.
Each of the representations, warranties and undertakings above shall be
separate and independent and shall not be limited by anything in this
Agreement. The representations, warranties and undertakings given under
or pursuant to this Clause 7.1 above shall not in any respect be
extinguished or affected by Completion except by a specific and duly
authorised waiver or release in writing by the Purchaser.
7.2 The Vendor represents and warrants to the Purchaser that the Company is
a company duly incorporated and validly existing under the laws of Hong
Kong and has all requisite power and authority (corporate and
otherwise) to own its properties and assets and carry on its business
as now being conducted and that the Company has full power and
authority to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated
hereby and thereby.
7.3 The Vendor further warrants and undertakes to and with the Purchaser
(with the intent that the provisions of this Clause 7.3 shall continue
to have full force and effect notwithstanding Completion) that:
(i) all Warranties herein contained will be fulfilled and will be
true and correct at Completion in all respects as if they had
been entered into afresh at Completion; and
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<PAGE> 15
(ii) in relation to any Warranty which refers to the knowledge,
information or belief of the Vendor, that the Vendor has made
reasonable enquiry into the subject matter of that Warranty.
7.4 The Vendor warrants and undertakes to the Purchaser that each of the
Group Companies shall be free of any debt or liability of any nature
whatsoever (whether actual, contingent or otherwise) as at the Deferred
Consideration Payment Date.
7.5 The Warranties are given subject to matters fully, fairly and
specifically disclosed in the Memorandum of Disclosure.
7.6 The Vendor acknowledges that the Purchaser has entered into this
Agreement in reliance upon and on the basis of each of the Warranties.
7.7 The Warranties shall be separate and independent and save as expressly
provided shall not be limited by reference to any other Clause or
anything in this Agreement or any other paragraph of Schedule 13, the
Specific Indemnities or the Deed of Indemnity.
7.8 If prior to Completion, any event shall occur which results or may
result in any of the Warranties being unfulfilled, untrue or incorrect
at Completion, the Vendor shall immediately notify the Purchaser in
writing thereof prior to Completion and the Vendor shall make any
investigation concerning the event or matter which the Purchaser may
reasonably require.
7.9 The Vendor shall procure that it shall not do, allow or procure any act
or omission before Completion which would constitute a breach of any of
the Warranties if they were given at Completion or which would make any
of the Warranties inaccurate or misleading if they were so given.
7.10 In the event of it becoming apparent on or before Completion that the
Vendor is in breach of any of the Warranties or any other term of this
Agreement, the Purchaser may, at its sole discretion, rescind this
Agreement by notice in writing to the Vendor. Upon termination of this
Agreement under this Clause 7.10, the Purchaser shall, in addition to
its rights to damages, be entitled to be paid legal, accounting and
other costs and expenses incurred by the Purchaser in connection with
this Agreement.
7.11 The Vendor shall use its best endeavours to give to the Purchaser, and
its solicitors, financiers, consultants, advisers and accountants and
the Purchaser's Auditors up to Completion all such information and
documentation relating to the Company and FICO(PRC) in his power,
custody, possession or control as the Purchaser shall require to enable
it to be satisfied as to the accuracy and due observance of the
Warranties.
7.12 Save for this Clause 7 and Schedule 13, each of the parties hereto
makes no other representations or warranties, express or implied, to
the other parties and each of the parties hereto acknowledges to the
other parties that it has not relied on or been induced by any other
warranties or representations made by the relevant party or its agents
or representatives to enter into this Agreement.
7.13 The Warranties and all other provisions of this Agreement and the Deed
of Indemnity insofar as the same shall not have been performed at
Completion shall not in any respect be extinguished or affected by
Completion, or by any other event or matter whatsoever, except by a
specific and duly authorised written waiver or release by the
Purchaser.
7.14 In addition to and without prejudice to all other rights and remedies
available to the Purchaser, including the right to damages, the Vendor
indemnifies the Purchaser against any claim, action, damage, loss,
liability, expense or outgoing (including all expenses of investigation
and enforcement of these indemnities and all legal fees and expenses)
which
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<PAGE> 16
the Purchaser or any of the Group Companies (either jointly or
severally) pays, suffers, incurs or is liable for in respect of or in
connection with the following (collectively, the "Specific
Indemnities"):
(i) any claim by the Chinese Party arising out of the Chinese
Party's entitlement or claim of entitlement to any equity or
shareholding interest in FICO(PRC);
(ii) any claim by the Chinese Party or any other third party,
including any relevant authorities (whether or not
governmental or regulatory) of whatsoever nature in connection
with the change in ownership of the Company arising out of the
sale and purchase of the Sale Shares under this Agreement; or
(iii) any claim by the Chinese Party after the Completion Date for
the return to it by FICO(PRC) or the Company of all or part of
the rights and interests in and to any of the PRC Property
that were originally contributed by the Chinese Party to
FICO(PRC) or any claim by the Chinese Party to any
distribution of the assets of FICO(PRC) upon the liquidation
of FICO(PRC).
8. VENDOR'S AND COMPANY'S UNDERTAKINGS
8.1 The Vendor undertakes with the Company and the Purchaser that,
notwithstanding Completion:
(i) any and all losses, costs, damages, claims, demands, actions,
proceedings, liabilities and expenses whatsoever (including
but not limited to all legal costs or attorney's fees on a
full indemnity basis) arising out of the FICO(PRC) Litigation
shall be borne solely and fully by the Vendor and the Vendor
shall keep the Purchaser and the Group Companies fully and
effectively indemnified against any and all such losses,
costs, damages, claims, demands, actions, proceedings,
liabilities and expenses whatsoever (including but not limited
to all legal costs or attorney's fees on a full indemnity
basis) that the Purchaser or any Group Company may incur or
suffer in connection with or arising from the FICO(PRC)
Litigation; and
(ii) all proceeds arising from the FICO(PRC) Litigation shall be
for the benefit of the Vendor and in the event that such
monies are received by any Group Company, all such monies
shall be paid to the Vendor by the Company or FICO(PRC (as the
case may be) within fourteen (14) days of such receipt.
8.2 The Vendor and the Company jointly and severally undertake:
(i) to assist and procure that the Company and any and/or all of
the Company's directors, officers, agents and servants,
provide the necessary assistance to the Purchaser and the
Purchaser's Auditors in the conduct of the special audit and
due diligence exercise referred to in Clause 3.1(ii) above and
the preparation and issue of the Audited Accounts; and
(ii) pay or cause to be paid, at the times required by any relevant
revenue authority all unpaid Taxes, of the Company and
FICO(PRC) for all periods, or portions thereof, ended on or
before the Completion Date,
and all costs and expenses incurred thereon shall be borne by the
Vendor.
8.3 The Vendor agrees that the Group Companies shall adopt the standard
employment contract in the form prescribed by the Purchaser from time
to time, for the employment of all employees of the Group Companies
(save for its directors and executive officers).
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9. INDEMNITY
9.1 The Vendor hereby irrevocably undertakes to keep the Purchaser and the
Group Companies fully and effectively indemnified against any and all
losses, costs, damages, claims, demands, actions, proceedings,
liabilities and expenses whatsoever (including but not limited to all
legal costs or attorney's fees on a full indemnity basis) that the
Purchaser or any Group Company may incur or suffer in connection with
or arising from any breach of or inaccuracies of any of the Warranties
and/or any breach of the Deed of Indemnity and/or the Specific
Indemnities and/or any default by the Vendor of its obligations under
this Agreement. The Purchaser shall not make a claim against the Vendor
under this Clause 9.1 for losses, costs, damages, claims, demands,
actions, proceedings, liabilities and expenses that the Purchaser or
any Group Company may incur if such breach of or inaccuracies of any of
the Warranties and/or any breach of the Deed of Indemnity and/or the
Specific Indemnities and/or any default by the Vendor of its
obligations under this Clause shall occur after the date falling after
the third anniversary date of this Agreement save in respect of the
Warranties contained in Clause 7.1.
9.2 in the event of default by the Vendor in the payment on demand of any
sum due under Clause 8.1 or this Clause 9 determined by agreement or
pursuant to an order of a court or by the Purchaser's Auditors
hereunder, the liability of the Vendor shall be increased to include
interest on such sum from the due date of payment of such sum by the
Vendor toward satisfaction of any liability of the Vendor under or
pursuant to Clause 9.1 as the case may be, above to the date of actual
payment by the Vendor (as well after as before judgment) at a rate per
annum being two per cent. (2%) above the prime lending rate for Dollars
as quoted by Citibank, Singapore Branch from time to time. Interest
determined in accordance with this Clause 9.2 shall be calculated on
the basis of a 360-day year and on the actual number of days elapsed
and shall accrue from day to day.
9.3 Where the Vendor is required by law to make any deductions or
withholding from any sum payable by it to the Purchaser or any Group
Company under this Agreement, the Vendor shall forthwith pay to the
Purchaser or such Group Company (as the case may be), such additional
amount or amounts so as to ensure that the net amount received by the
Purchaser or such Group Company shall be equal to the full amount which
it or they would have received had no such deduction or withholding
been made or required to be made.
9.4 Any liability to the Purchaser and any Group Company hereunder may in
whole or in part be released, compounded or compromised or time or
indulgence given by the Purchaser in its absolute discretion without in
any way prejudicing or affecting its rights against the Vendor. Any
release or waiver or compromise shall be in writing and shall not be
deemed to be a release, waiver or compromise of similar conditions in
the future.
10. PROFIT TARGET
10.1 For the purposes of Clauses 10 and 11
(i) the expression "Financial Period" shall mean the financial
period commencing on 1 January 1997 and ending on 31 December
1997;
(ii) the expression "Net Profits After Taxation of the Company"
shall be determined in accordance with Clause 10.2 below; and
(iii) the expression "Profit Target" shall mean, in respect of the
Financial Period, $2,500,000.
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10.2 The Net Profits After Taxation of the Company shall mean the audited
consolidated net profits of the Company and FICO(PRC) and shall be
determined as follows:
(i) the consolidated accounts of the Company and FICO(PRC) for the
relevant financial period ("Special Accounts") shall be
prepared and audited by the Purchaser's Auditors in accordance
with the assumptions and policies set out in Schedule 14 and
US GAAP no later than sixty (60) days after the end of the
relevant financial period to determine the audited
consolidated net profits after taxation of the Company;
(ii) the Special Accounts will be delivered by the Purchaser's
Auditors to the Purchaser, the Vendor and the Company; and
(iii) the Special Accounts in respect of the relevant financial
period shall be binding on each of the Vendor, the Purchaser
and the Company.
10.3 In the event that the Net Profit After Taxation of the Company for the
Financial Period as set out in the Special Accounts shall exceed the
Profit Target, the Purchaser may exercise its rights under the Call
Option Agreement.
10.4 In the event that the Profit Target shall have exceeded the Net Profit
After Taxation of the Company for the Financial Period as set out in
the Special Accounts, the Purchaser may exercise its rights under the
Put Option Agreement.
11. COVENANTS AND UNDERTAKINGS
11.1 The Vendor hereby undertakes to the Purchaser and the Company that:
(i) it shall transfer or procure the transfer of the ownership of
FICO(PRC) to the Company by the Completion Date and do all
necessary things so that such transfer shall be legal and
valid pursuant to the relevant laws of the PRC;
(ii) all products manufactured by FICO(PRC) and sold to the Company
up until the Completion Date ("Finished Products") shall be
sold at prices not exceeding eighty per cent. (80%) of the
price at which the Company is able to sell the Finished
Products to its customers. In the event that the Company is
unable to sell all such Finished Products at the expiry of
three (3) months from the Completion Date, the Vendor
undertakes that it shall purchase all such remaining Finished
Products from the Company at the same price upon which these
same Finished Products were purchased from FICO(PRC);
(iii) all raw materials purchased by the Company which is not
utilised by the Company at the expiry of three (3) months from
the Completion Date shall be purchased by the Vendor from the
Company at the price at which the said raw materials (or any
part thereof) were originally purchased by the Company from
its suppliers or the Vendor (as the case may be);
(iv) it shall purchase from FICO(PRC) the PRC Property so that, by
the Completion Date, the PRC Property shall not constitute any
part of the assets of FICO(PRC);
(v) it shall utilise the sum of $3,000,000 paid pursuant to Clause
4.2(i) to discharge all the debts of FICO(PRC) and the Company
by the Deferred Consideration Payment Date so that the Group
Companies shall be free of debt and all liabilities (whether
actual, contingent or otherwise) by the Deferred Consideration
Payment Date;
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<PAGE> 19
(vi) the Net Profit After Taxation of the Company for the Financial
Period shall be not less than the Profit Target; and
(vii) neither of the Group Companies shall engage in any transaction
or have an interest in any transaction in which any company,
partnership, joint venture or sole proprietorship in which it
has an interest or shall be engaged or otherwise have an
interest,
and in the event that payments to be made by the Vendor to the Company
under Clauses 11.1(ii) and (iii) above shall not have been discharged
in full as at the Deferred Consideration Payment Date, the Vendor
herewith authorises the Purchaser (in the event that Clause 4.2(B)
shall apply) to deduct all sums payable by the Vendor to the Company
under Clauses 11.1(ii) and (iii) above, from the Balance Consideration
on the Deferred Consideration Payment Date.
11.2 The Vendor undertakes to the Purchaser to procure that, between the
date of this Agreement and Completion:
(i) each of the Group Companies shall preserve and maintain in
full force and effect its corporate existence;
(ii) each of the Group Companies shall carry on business only in
the ordinary course;
(iii) each of the Group Companies shall preserve and maintain all of
its properties and assets, owned or used in the conduct of its
business, in good working order and condition, ordinary wear
and tear excepted; and keep insured so much of its properties
and assets, in such amounts and against such risks, as are
presently insured by each such Group Company as at the date of
this Agreement;
(iv) each of the Group Companies shall comply in all material
respects with all applicable laws, rules, regulations and
orders to which it is subject;
(v) each of the Group Companies shall keep such books of record
and accounts, in which full and in all material respects
correct entries shall be made of all its financial
transactions and its assets and business in accordance with
the present practice of each such Group Company as at the date
of this Agreement and generally accepted accounting principles
consistently applied;
(vi) each of the Group Companies shall pay and discharge in
accordance with the present practice of such Group Company as
at the date of this Agreement, (a) all taxes, assessments and
governmental charges imposed upon it or upon its property and
(b) all lawful and valid claims which, if unpaid, might by law
become a lien upon its property; and maintain such reserves in
respect of taxes, assessments, governmental charges and levies
as are required under generally accepted accounting principles
consistently applied;
(vii) each of the Group Companies shall provide the Purchaser, the
Purchaser's Auditors and their respective authorised
representatives reasonable access during normal business hours
to all its books, records, offices and other facilities and
properties, and allow the Purchaser and the Purchaser's
Auditors to make such inspections thereof and copies of and
extracts from such books and records, as the Purchaser or the
Purchaser's Auditors may reasonably request, and cause its
officers to furnish the Purchaser or the Purchaser's Auditors
with such financial and operating data, including all
financial statements prepared or used by its management, and
other information with respect to its financial condition,
business and property, as the Purchaser or the Purchaser's
Auditors may from time to time reasonably
17
<PAGE> 20
request whether in connection with the special audit referred
to in Clause 3.1(ii), the preparation of the Audited Accounts,
the preparation of the Special Accounts or otherwise;
(viii) each of the Group Companies shall promptly upon obtaining
knowledge thereof, give notice to the Purchaser of (a) any
litigation, investigation or proceeding affecting it that
could reasonably be expected to have a material adverse effect
on its business, operations, properties, prospects or
financial condition or (b) any event or matter that has
resulted in a material adverse change in its business,
operations, prospects or financial condition;
(ix) each of the Group Companies shall not declare any dividends or
make any other distributions to its shareholders prior to
Completion; and
(x) the Vendor shall not discuss, negotiate or finalise any
arrangements with any third party with a view to or in
connection with (a) the sale of the Sale Shares or any of
them, (b) any acquisition or purchase of all or substantially
all of the assets of any Group Company or (c) any other
material transaction incompatible with the acquisition
contemplated hereby.
11.3 The Vendor covenants with and undertakes to each of the Purchaser and
the Company that it shall not do any of the following without first
obtaining the written consent of the Purchaser:
(i) directly or indirectly carry on (whether alone or in
partnership or joint venture with anyone else) or otherwise be
concerned with or interested in (whether as trustee,
principal, agent, shareholder, unit holder or in any other
capacity) any business similar to or competitive with the
Business (as defined below) of the Group Companies for two (2)
years after Completion, in any countries where the Group
Companies carry on the Business and/or sell their products,
including, without limitation, Hong Kong and the PRC;
(ii) solicit or persuade any person or corporation which is a
customer or client of either of the Company or any other Group
Company, or who was in the twelve (12) month period before the
Completion Date a customer or client of or in respect of the
Business, to cease doing business with the Company or any
other Group Company or reduce the amount of business which the
customer or client would normally do in respect of the
Business for two (2) years after Completion;
(iii) accept from a customer or client referred to in Clause
11.3(ii) above any business of the kind ordinarily forming
part of the Business for two (2) years after Completion;
(iv) at any time use or disclose to any third party any trade
secrets, product information or Confidential Information of
the Business which is not generally known or available in the
market place or which but for a breach of this Clause 11.3
would not be generally known or available in the market place;
(v) at any time induce or attempt to induce any person who is at
the time of Completion or who later becomes an employee of the
Group Companies in the Business to terminate his or her
employment with the Group Companies;
(vi) for the purposes of this Clause 11.3, the expression
"Business" shall mean the sale and manufacture of plastic
material products and its by-products (including all
associated importation, exportation, marketing and related
activities) carried on by the Group Companies anywhere in the
world;
18
<PAGE> 21
(vii) each and every obligation under this Clause11.3 shall be
treated as a separate obligation and shall be severally
enforceable as such and in the event of any obligation or
obligations being or becoming unenforceable in whole or in
part such part or parts as are unenforceable shall be deleted
from this Clause11.3and any such deletion shall not affect the
enforceability of all such parts of this Clause 11.3 as remain
not so deleted; and
(viii) while the restrictions contained in this Clause 11.3 are
considered by the parties to be reasonable in all the
circumstances it is recognised that restrictions of the nature
in question may fail for technical reasons unforeseen and
accordingly it is hereby agreed and declared that if any of
such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection
of the interests of the Group Companies and the Purchaser but
would be valid if part of the wording thereof were deleted or
the periods thereof reduced or the range of activities or area
dealt with thereby reduced in scope the said restriction shall
apply with such modifications as may be necessary to make it
valid and effective.
11.4 As a separate and independent obligation, the Vendor hereby undertakes
to keep the Purchaser fully and effectively indemnified against any and
all losses, costs, damages, claims, demands, actions, proceedings,
liabilities and expenses whatsoever (including but not limited to legal
costs on an indemnity basis) that the Purchaser may incur or suffer in
connection with or arising from the breach by the Vendor of any of the
covenants, undertakings and agreements contained in this Clause 11.
11.5 Each of the obligations of the Vendor under this Clause 11 is a
separate and independent primary obligation and shall survive and shall
not be extinguished in any way by Completion. Each and every such
obligation shall be severally enforceable and in the event of any
obligation or obligations being or becoming unenforceable shall be
deleted from this Clause 11 and any such deletion shall not affect the
enforceability of all such parts of this Clause 11 as remain not so
deleted.
12. CONFIDENTIALITY
12.1 Each of the parties agrees to keep strictly secret and confidential,
and under no circumstances to disclose to any person or entity which is
not a party hereto, any Confidential Information arising from or in
connection with this Agreement unless disclosure of such information is
expressly permitted by the prior written consent in writing of all the
other parties.
12.2 Notwithstanding Clause 12.1, the confidentiality obligation shall not
apply to:
(i) any information obtained from any party hereto which becomes
generally known to the public, other than by reason of any
wilful or negligent act or omission of any party hereto or any
of their agents, advisers or employees;
(ii) any information which is required to be disclosed to any
competent governmental or statutory authority or pursuant to
rules or regulations of any relevant regulatory body
(including, without limitation, any relevant stock exchange or
securities council);
(iii) any information which is required to be disclosed pursuant to
any legal process issued by any court or tribunal whether in
Hong Kong, the PRC or elsewhere; and
19
<PAGE> 22
(iv) any information disclosed by any of the parties to their
respective bankers, financial advisers, consultants and legal
or other advisers for the purpose of this Agreement.'
13. RESTRICTION ON ANNOUNCEMENTS
Save as may be required to be disclosed pursuant to any applicable
requirement issued by any competent governmental or statutory authority
or rules or regulations of any relevant regulatory body (including,
without limitation, any relevant stock exchange or securities council),
each party undertakes that prior to Completion it will not make any
announcement in connection with this Agreement unless the other party
hereto shall have given its consent to such announcement (which consent
may not be unreasonably withheld).
14. COSTS
14.1 Each party to this Agreement shall pay its own costs of and incidental
to this Agreement and the sale and purchase hereby agreed to be made.
14.2 The Purchaser shall bear any and all stamp duties payable in connection
with the transfer of the Sale Shares from the Vendor to the Purchaser.
15. GENERAL
15.1 This Agreement shall be binding upon and inure for the benefit of the
successors and estates of the parties and the assignees or nominees of
the Purchaser. The Vendor agrees that the Purchaser shall be entitled
to assign the benefit of the Warranties and any cause of action in
connection therewith to any member of the FIL Group or to any other
party. Any reference in this Agreement to either of the parties shall
be construed accordingly.
15.2 The provisions of this Agreement including the representations,
warranties, covenants and undertakings herein contained (insofar as the
same shall not have been fully performed at Completion) shall remain in
full force and effect notwithstanding Completion. Completion shall not
prejudice any rights of any of the parties which may have accrued
hereunder prior to Completion.
15.3 The Vendor and the Purchaser shall do and execute or procure to be done
and executed all such further acts, deeds, things and documents as may
be necessary to give effect to the terms of this Agreement, and to
provide such assistance and record as the other may reasonably request
in connection with any tax return, tax investigation or audit, judicial
or administrative proceeding or other similar matter relating to the
Group Companies.
15.4 This Agreement sets out the entire agreement and understanding between
the parties in connection with the sale and purchase of the Sale Shares
and none of the parties has entered into this Agreement in reliance
upon any representation, warranty or undertaking of any other party
which is not set out or referred to in this Agreement. The parties
agree that no variations or modifications shall be made to this
Agreement unless agreed to by the parties in writing.
15.5 Save as expressly provided herein, any right of termination conferred
upon the Purchaser or the Vendor shall be in addition to and without
prejudice to all other rights and remedies available to it and no
exercise or failure to exercise such a right of termination shall
constitute a waiver of any such other right or remedy.
20
<PAGE> 23
15.6 As all parties have participated in the drafting of this agreement, the
parties agree that any applicable rule requiring the construction of
this Agreement against the party drafting this Agreement, shall not
apply.
16. ILLEGALITY
The illegality, invalidity or unenforceability of any provision of this
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.
17. NOTICES
Any notice required to be given by any party hereto to any other party
shall be deemed validly served by hand delivery or by telefax or by
prepaid registered letter or by a recognised courier service sent to
its address or facsimile number given herein or such other address or
facsimile number as may from time to time be notified for this purpose.
The initial addresses and telefax numbers of the parties are:
The Purchaser: Flextronics International Ltd
514 Chai Chee Lane, #04-13
Singapore 469029
Fax Number: (65) 449-9548
Attention: Mr Goh Chan Peng
The Vendor Fico Forest Industrial Co. Limited
Rm 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number: (852) 2412-0791
Attention Mr Law Sing Hong
The Company Fico Investment Holding Limited
Unit 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number: (852) 2412-0791
Attention: Mr Law Sing Hong
Any such notice or communication shall be deemed to have been served:
(i) if delivered by hand, at the time of delivery; or
21
<PAGE> 24
(ii) if posted by prepaid ordinary mail, at the expiration of three
(3) days after the envelope containing the same shall have
been put into the post; or
(iii) if sent by facsimile, upon the receipt by the sender of the
confirmation note indicating that the notice or communication
has been sent in full to the recipient's facsimile machine, or
such other similar medium of receipt; or
(iv) if sent by courier, at the expiration of two (2) days after
the package containing the same shall have been received by
the relevant courier company.
In proving such service it shall be sufficient to prove that delivery
by hand was made or that the envelope containing such notice or
document was properly addressed and posted as a prepaid ordinary mail
letter or that the facsimile confirmation note indicates the
transmission was successful, or the package as the case may be
containing such notice or document was properly addressed and sent to
the relevant courier company.
18. REMEDIES AND WAIVERS
No failure on the part of any party to this Agreement to exercise, and
no delay on its part in exercising, any right or remedy under this
Agreement will operate as a waiver thereof, nor will any single or
partial exercise of any right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy. The
rights provided in this Agreement are cumulative and not exclusive of
any rights or remedies provided by law.
19. TIME OF ESSENCE
Any date, time or period mentioned in any provision of this Agreement
may be extended by mutual agreement between the parties hereto but as
regards any time, date or period originally fixed and not extended or
any time, date or period so extended as aforesaid time shall be of the
essence.
20. GOVERNING LAW AND DISPUTE RESOLUTION
20.1 This Agreement shall be governed by, and construed in accordance with,
the laws of Hong Kong.
20.2 Any dispute or difference arising out of or in connection with this
Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 20.2 save to the extent that they are
inconsistent with the express terms of this Agreement.
20.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Purchaser, one of
whom shall be appointed by the Vendor, and the third (who shall act as
Chairman of the arbitral tribunal) to be appointed by the Chairman of
SIAC or HKIAC, as the case may be.
20.4 For the purpose of this Agreement a dispute shall be deemed to arise
when one party serves on the other party a notice in writing (in this
Clause, a "Notice of Dispute") stating the nature of the dispute.
22
<PAGE> 25
20.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
20.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
20.7 The prevailing party in the Arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
21. COUNTERPARTS
This Agreement may be signed in any number of counterparts, all of
which taken together shall constitute one and the same instrument. Any
party may enter into this Agreement by signing any such counterpart and
each counterpart may be signed and executed by the parties and
transmitted by facsimile transmission and shall be as valid and
effectual as if executed as an original.
23
<PAGE> 26
IN WITNESS WHEREOF this Agreement has been entered into on the date appearing at
the head hereof.
The Purchaser
SIGNED by /s/ S. L. Tsui )
-------------------- )
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of: )
/s/ Christine Knight
- -------------------------------
Christine Knight
Solicitor
Hong Kong
The Vendor
SIGNED by ) [LOGO] For and On Behalf of
)
- ----------------------------------- ) FICO FOREST INDUSTRIAL CO., LTD.
for and behalf of )
FICO FOREST INDUSTRIAL ------------------
CO. LIMITED Authorized Signature
in the presence of:
- -----------------
- -----------------
Solicitor, Hong Kong
FICO
SIGNED by ) [LOGO] For and On Behalf of
)
- ----------------------------------- ) FICO INVESTMENT HOLDING LIMITED
for and behalf of )
FICO INVESTMENT HOLDING LIMITED ------------------
in the presence of: Authorized Signature
- -----------------
- -----------------
Solicitor, Hong Kong
24
<PAGE> 27
SCHEDULE 1
PARTICULARS OF THE COMPANY
<PAGE> 28
SCHEDULE 1
PARTICULARS OF THE COMPANY
<TABLE>
<S> <C> <C>
(i) Company Registration Number: 565060
(ii) Business Registration Certificate: 20258126-000-09-96-1
(iii) Registered Office: Rm 10, 18/F, Blk B
Kong Nam Ind. Building
603 Castle Peak Road
Tsuen Wan, New Territories
Hong Kong
(iv) Date and Place of Incorporation: 12 September 1996,
Hong Kong
(v) Authorised Share Capital: HK$10,000.00
(vi) Issued and Fully Paid-up Share Capital: HK$10,000.00
<S> <C> <C> <C>
(vii) Shareholders:
Name Number of Shares Percentage of Shares
Law Sing Hong 1 0.0001% (held on
trust for
Fico Forrest
Industrial
Co. Limited)
Fico Forrest Industrial Co. 9,999 99.9999%
Limited
(viii) Directors: Law Sing Hong
Law Kin Ping
Law Shun Hang
(ix) Secretary: Siu Pui Chun
(x) Auditors: (Not currently appointed)
(xi) Accounting Reference Date: 31 March
</TABLE>
25
<PAGE> 29
SCHEDULE 2
CALL OPTION AGREEMENT
DATED THIS 20th Day of December 1996
Between
FLEXTRONICS INTERNATIONAL LTD
And
FICO FOREST INDUSTRIAL CO. LIMITED
CALL OPTION AGREEMENT
relating to 6,000 ordinary shares
consisting of
60% of all the ordinary shares
in the share capital of
FICO INVESTMENT HOLDING LIMITED
<PAGE> 30
TABLE OF CONTENTS
Clause Heading Page
1. INTERPRETATION .................................................. 1
2. CALL OPTION ..................................................... 3
3. PURCHASE PRICE .................................................. 3
4. ADJUSTMENT TO PURCHASE PRICE .................................... 5
5. CALL OPTION COMPLETION .......................................... 5
6. DURATION OF OBLIGATIONS ......................................... 6
7. VENDOR'S WARRANTIES ............................................. 6
8. FIL'S WARRANTIES ................................................ 7
9. COMMUNICATIONS .................................................. 8
10. GENERAL ......................................................... 8
11. GOVERNING LAW AND DISPUTE RESOLUTION ............................ 9
APPENDIX A FORM OF FIRST CONSIDERATION NOTE ................... 11
APPENDIX B FORM OF SECOND CONSIDERATION NOTE .................. 15
<PAGE> 31
THIS AGREEMENT is made the 20th day of December 1996 BETWEEN:
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore and
having its registered office at 36 Robinson Road, City House, #18-01,
Singapore 068877 ("FIL");
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("VENDOR").
WHEREAS:
(A) Fico Investment Holding Limited ("COMPANY") is a company limited by
shares and incorporated in Hong Kong and has at the date hereof an
authorised share capital of HK$10,000 ordinary shares of HK$1.00 each,
of which 10,000 of the said ordinary shares have been issued and are
fully paid-up.
(B) The Vendor is the legal and beneficial owner of 6,000 ordinary shares
of HK$1.00 each in the Company consisting sixty per cent, (60%) of the
issued and paid-up capital of the Company.
(C) This Agreement is entered into pursuant to a Sale and Purchase
Agreement ("SALE AND PURCHASE AGREEMENT") dated 29 November 1996, made
between (1) FIL as purchaser, (2) the Vendor and (3) the Company. The
Vendor wishes to grant to FIL a call option, being the right of FIL to
purchase from the Vendor the Call Option Shares (as defined below) for
the consideration and on the terms and conditions set out in this
Agreement.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement except to the extent that the context otherwise
requires:
"BANKER'S DRAFT" means a banker's draft drawn on a bank in Singapore;
"CALL OPTION" shall have the meaning ascribed to it in Clause 2.1;
"CALL OPTION NOTICE" means a notice exercising the Call Option given
pursuant to Clause 2.3;
"CALL OPTION COMPLETION" means the performance by the Vendor and FIL of
the obligations assumed by them respectively under Clause 5.2;
"CALL OPTION COMPLETION DATE" means 11.00 a.m. on the date falling
fourteen (14) days from the Exercise Date;
"CALL OPTION PERIOD" means the period commencing on the date of receipt
by FIL of the signed audited accounts (including the profit and loss
account and the balance sheet) of the Company for the Financial Period
and expiring on the date falling three (3) calendar months of such date
(both dates inclusive);
"CALL OPTION SHARES" means the 6,000 Shares consisting sixty per cent,
(60%) of the issued and paid-up capital of the Company;
"CASH CONSIDERATION" shall mean the amount determined in accordance
with Clause 3.3;
"CONSIDERATION SHARES" shall have the meaning ascribed to it in Clause
3.4;
<PAGE> 32
"EXERCISE DATE" means the date of service of a Call Option Notice under
Clause 2.3;
"FIL AVERAGE SHARE PRICE" means the average of the "closing prices" per
FIL Share on each of the Trading Days for the twenty-one (21) Trading
Days prior to the Call Option Completion Date. On any such Trading Day,
the "closing price" per FIL Share means the last sale price as reported
through the NASDAQ National Market or, if no sale occurred on any such
Trading Day, the average of the highest closing "bid" price and the
lowest closing "asked" price on such Trading Day as reported through
the NASDAQ National Market;
"FIL SHARES" means ordinary shares of S$0.01 each in the capital of FIL
and "FIL SHARE" shall be construed accordingly;
"FIRST CONSIDERATION NOTE" shall mean the promissory note substantially
in the form of Appendix A (or in such other form as FIL and the Vendor
may agree in writing) and issued pursuant to Clause 3 of this
Agreement;
"FIRST DEFERRED CONSIDERATION DATE" means the first anniversary date of
the Call Option Completion Date;
"PURCHASE PRICE" shall have the meaning ascribed to it in Clause 3.1;
"SEC" means the United States Securities and Exchange Commission;
"SECOND CONSIDERATION NOTE" shall mean the promissory note
substantially in the form of Appendix B (or in such other form as FIL
and the Vendor may agree in writing) and issued pursuant to Clause 3 of
this Agreement;
"SECOND DEFERRED CONSIDERATION DATE" means the second anniversary date
of the Call Option Completion Date;
"SECOND FINANCIAL PERIOD" shall have the meaning ascribed to it in
Clause 3.6;
"SHARES" means ordinary shares of HK$1.00 each in the share capital
of the Company;
"TRADING DAY" means any day on which the New York Stock Exchange is
open for business, provided that any day on which trading on the New
York Stock Exchange or the NASDAQ National Market is suspended or
halted, or on which trading in FIL Shares is suspended or halted by the
SEC, the National Association of Securities Dealers, Inc., NASDAQ or
any regulatory or self-regulatory body in the United States of America,
shall not be a Trading Day;
"TRANSFER TERMS" means the entire legal and beneficial interest in all
the Call Option Shares shall be sold and purchased free from any
Encumbrance and together with all rights attaching thereto as at the
Exercise Date or at any time thereafter and that the consideration for
the Call Option Shares shall be the Purchase Price;
"US$" means the lawful currency of the United States of America; and
"VALUATION" means the fair market value of the Company as determined
under Clause 3.3.
1.2 All terms and references used in this Agreement and which are defined
or construed in the Sale and Purchase Agreement but are not defined or
construed in this Agreement shall have the same meaning and
construction in this Agreement. All references in this Agreement to the
Sale and Purchase Agreement are to the Sale and Purchase Agreement as
from time to time amended, modified or supplemented.
2
<PAGE> 33
1.3 References to Recitals and Clauses are to recitals and clauses of this
Agreement. The headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement. Words importing
the singular number include the plural number and vice versa.
References to documents include variations and replacements thereof and
supplements thereto. References to a party include its permitted
assigns and transferees and its successors-in-title.
2. CALL OPTION
2.1 In consideration of the sum of US$1.00 (receipt of which the Vendor
hereby acknowledges), the Vendor hereby grants to FIL the right to
require the Vendor to sell to FIL all the Call Option Shares on the
terms and subject to the conditions of this Agreement ("CALL OPTION").
2.2 On the exercise of the Call Option, the Vendor will become bound to
sell and FIL will become bound to complete the purchase of the Call
Option Shares on the Transfer Terms.
2.3 The Call Option must be exercised by notice in writing by FIL served
only during the Call Option Period, failing which it will lapse and
cease to have any further effect.
3. PURCHASE PRICE
3.1 The consideration for the purchase of the Call Option Shares ("PURCHASE
PRICE") pursuant to the exercise of the Call Option shall comprise
the following:
(i) the Cash Consideration (as adjusted by Clause 3.4);
(ii) (where Clause 3.4 applies) the Consideration Shares;
(iii) the First Consideration Note; and
(iv) the Second Consideration Note,
subject to the rights of FIL under Clause 4. The Purchase Price shall
be paid in accordance with Clause 3.2.
3.2 The Purchase Price shall be satisfied:
(i) by the payment of the Cash Consideration (and where Clause 3.4
applies, the Consideration Shares) on Call Option Completion;
(ii) by the issue of the First Consideration Note to the Vendor on
Call Option Completion, payment in respect of which shall be
made on the First Deferred Consideration Date; and
(iii) by the issue of the Second Consideration Note to the Vendor on
Call Option Completion, payment in respect of which shall be
made on the Second Deferred Consideration Date,
subject to the rights of FIL under Clause 4.
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<PAGE> 34
3.3 The Cash Consideration as part consideration for the purchase of the
Call Option Shares is the sum which is sixty per cent. (60%) of the
Valuation. The Valuation is the sum derived by the following formula:
Y = (A X 10 x 0.6)
where
Y = the Valuation;
A = Net Profit After Taxation of the Company for the Financial Period.
Payment of the Cash Consideration (or any part thereof, in the event
that Clause 3.4 applies) shall be effected by way of telegraphic
transfer to an account designated by the Vendor and notified to the
Purchaser not later than three (3) Business Days prior to the Call
Option Completion Date or by way of a banker's draft or in such other
form as the Vendor and FIL may agree.
3.4 FIL shall have the option of satisfying up to a maximum of forty per
cent. (40%) of the Cash Consideration by allotting and issuing FIL
Shares to the Vendor on Call Option Completion. The number of FIL
Shares to be allotted and issued to the Vendor on Call Option
Completion rounded downwards to the nearest whole FIL Share
("CONSIDERATION SHARES") shall be derived by dividing that part of the
Cash Consideration which FIL elects to have satisfied by the issue of
FIL Shares by the FIL Average Share Price. The Cash Consideration
payable on Call Option Completion shall be reduced accordingly. FIL
shall use its reasonable best efforts to file, within ninety (90) days
of the issuance of any Consideration Shares, a registration statement
with the SEC covering the resale of such Consideration Shares.
3.5 The First Consideration Note and the Second Consideration Note as part
consideration for the purchase of the Call Option Shares shall be
issued and delivered to the Vendor on Call Option Completion.
3.6 The liability of FIL to the Vendor under and in respect of the First
Consideration Note shall be contingent upon the Net Profit After
Taxation of Company for the period commencing 1 January 1998 and ending
on 31 December 1998 ("SECOND FINANCIAL Period") (and shall be
determined in accordance with the terms of Clause 10.2 of the Sale and
Purchase Agreement) exceeding the Net Profit After Taxation of the
Company for the Financial Period by twenty per cent. (20%). In such
event, the amount payable by FIL to the Vendor under the First
Consideration Note shall be a cash sum equal to twenty per cent. (20%)
of the Valuation as determined pursuant to Clause 3.3. The First
Consideration Note shall not bear interest and the principal amount
thereof (as determined in accordance with this Clause 3.6 as adjusted
pursuant to Clause 4) shall be due and payable by FIL to the Vendor on
the First Deferred Consideration Date.
3.7 The liability of FIL to the Vendor under and in respect of the Second
Consideration Note shall be contingent upon the Net Profit After
Taxation of the Company for the period commencing on 1 January 1999 and
ending on 31 December 1999 (and shall be determined in accordance with
the terms of Clause 10.2 of the Sale and Purchase Agreement) exceeding
the Net Profit After Taxation of the Company for the Financial Period
by forty-four per cent. (44%). In such event, the amount payable by FIL
to the Vendor under the Second Consideration Note shall be a cash sum
equal to twenty per cent. (20%) of the Valuation as determined pursuant
to Clause 3.3. The Second Consideration Note shall not bear interest
and the principal amount thereof (as determined in accordance with
Clause 3.7 as adjusted pursuant to Clause 4) shall be due and payable
by FIL to the Vendor on the Second Deferred Consideration Date.
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4. ADJUSTMENT TO PURCHASE PRICE
4.1 The Cash Consideration and the principal amount of each of the First
Consideration Note and the Second Consideration Note shall be subject
to any claim in respect of the Deed of Indemnity, the Post-Closing
Adjustment, the Warranties and the Specific Indemnities. In the event
(a) any claim arises under the Deed of Indemnity, (b) the Company is
entitled to the Post-Closing Adjustment as against the Vendor under and
pursuant to Clause 5 of the Sale and Purchase Agreement, (c) there is a
breach of any of the Warranties by the Vendor or (d) any claim arises
in respect of any of the Specific Indemnities, such claim, entitlement
or breach (and the amount in respect thereof) as determined by FIL
shall be offset by FIL deducting such amount of the principal amount
and interest thereon from the Cash Consideration and each of the First
Consideration Note and the Second Consideration Note as shall in the
aggregate equal the amount of such claim, entitlement or breach in the
manner as provided in Clause 4.2.
4.2 The rights of offset of FIL in relation to the Deed of Indemnity, the
Post-Closing Adjustment, any breach of the Warranties or the Specific
Indemnities shall be exercisable by FIL as far as is practicable in the
order as each of the Cash Consideration, First Consideration Note and
the Second Consideration Note is due to be paid.
5. CALL OPTION COMPLETION
5.1 Completion of the sale and purchase of the Call Option Shares shall
take place in Hong Kong at the Hong Kong branch office of FIL (or at
such other place as may be agreed) on the Call Option Completion Date,
provided that if a such day is not a Business Day then Call Option
Completion shall take place at 12 noon on the first Business Day
thereafter.
5.2 On Call Option Completion:
(a) the Vendor shall deliver to FIL duly executed transfers and
duly executed sold notes in favour of FIL or as it may direct
in respect of the Call Option Shares accompanied by the
relative share certificate(s) and shall do all things and
execute such documents as shall be necessary or as FIL may
reasonably request to give effect to the sale of the Call
Option Shares pursuant to Clause 2 on the Transfer Terms;
(b) the Vendor shall procure the passing of a board resolution of
the Company approving the registration of the said share
transfers, subject to the same being duly stamped;
(c) the Vendor shall procure the resignations of the existing
Directors of the Company nominated by them pursuant to Clause
4(B) of the Shareholders' Agreement, which said resignations
shall take effect on the Call Option Completion;
(d) (subject to Clause 4) FIL shall pay the Cash Consideration
(or, where Clause 3.4 applies, the relevant part thereof) to
the Vendor in any manner contemplated by Clause 3.3;
(e) FIL shall deliver to the Vendor copies of the board
resolutions of FIL authorising:
(i) the payment of the Cash Consideration (or, where
Clause 3.4 applies, the relevant part thereof);
(ii) (where Clause 3.4 applies) the allotment and issue of
the Consideration Shares to the Vendor; and
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<PAGE> 36
(iii) the issuance of the First Consideration Note and the
Second Consideration Note;
(f) (where Clause 3.4 applies), FIL shall deliver to the Vendor
the Consideration Shares duly allotted and issued by FIL in
the name of the Vendor; and
(g) FIL shall deliver to the Vendor the First Consideration Note
and the Second Consideration Note subject to FIL's rights of
offset pursuant to Clause 4.
5.3 If any of the provisions of Clause 5.2 are not complied with on the
Call Option Completion Date the party not in default may (without
prejudice to his other rights and remedies):
(a) defer Call Option Completion to a date not more than
twenty-eight (28) days after the Call Option Completion Date
(and so that the provisions of this Clause 5 shall apply to
Call Option Completion as so deferred); or
(b) proceed to Call Option Completion so far as practicable
(without prejudice to his rights hereunder); or
(c) rescind the contract of sale arising by virtue of the exercise
of the Call Option.
6. DURATION OF OBLIGATIONS
6.1 This Agreement shall terminate on the date falling on the first
anniversary of the last day of the Call Option Period if no Call Option
Notice shall have been served on or prior to such date.
6.2 If the Call Option Notice shall have been served on or prior to the
date mentioned in Clause 6.1 this Agreement shall continue in force
after such date until the fulfilment of the parties' obligations
hereunder in relation to the Call Option Notice whereupon it shall
terminate.
7. VENDOR'S WARRANTIES
7.1 The Vendor warrants to FIL that it is and will remain until the
exercise or expiry of the Call Option the legal and beneficial owner of
the Call Option Shares, subject only to the Call Option and has and
will have full power and authority to grant an option in respect of the
same upon the terms and conditions of this Agreement.
7.2 The Vendor shall not prior to the exercise or expiry of the Call Option
transfer, dispose of or permit an Encumbrance save for the Call Option,
over its interest in any of the Call Option Shares and the Call Option
Shares shall upon Call Option Completion be sold free of any
Encumbrance.
7.3 At the date of this Agreement the Call Option Shares represent sixty
per cent. (60%) of the issued and paid-up capital of the Company issued
or agreed to be issued and there is no option or right outstanding in
favour of any third party to subscribe for any share or loan capital of
the Company.
7.4 The Vendor warrants that at Call Option Completion, the Call Option
Shares shall constitute sixty per cent. (60%) of the issued and paid-up
capital of the Company issued or agreed to be issued.
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<PAGE> 37
7.5 Such information relating to the Company as is known to the Vendor and
which is material to be known by a purchaser for value of the Call
Option Shares has been disclosed in writing to FIL prior to the date of
this Agreement and, upon the written request of FIL during the Call
Option Period, the Vendor shall provide such further information of
which the Vendor may become aware.
8. FIL'S WARRANTIES
8.1 FIL hereby represents and warrants to the Vendor as follows:
(i) FIL is a company validly existing under the laws of Singapore,
and has all requisite power and authority (corporate and
otherwise) to own its properties and carry on its business as
now being conducted. FIL has full power to execute and deliver
this Agreement and the agreements contemplated herein, and to
consummate the transactions contemplated hereby and thereby.
Certified copies of the Memorandum and Articles of Association
of FIL, as amended to date, have been previously delivered to
the Vendor, are complete and correct, and no amendments have
been made thereto or have been authorised since the date
thereof;
(ii) On 30 September 1996, FIL's authorised share capital consists
of 100,000,000 ordinary shares, S$0.01 par value, of which
13,324,759 ordinary shares were issued and outstanding. All of
the outstanding share capital of FIL have been duly and
validly issued and are fully paid and not subject to any call;
(iii) The delivery of this Agreement by FIL, and the agreements
provided for herein, and the consummation by FIL of the
transactions contemplated hereby and thereby, have been duly
authorised by all requisite corporate action. This Agreement
and all such other agreements and written obligations entered
into and undertaken in connection with the transactions
contemplated hereby constitute the valid and legally binding
obligations of FIL, enforceable against FIL in accordance with
their respective terms. The delivery and performance of this
Agreement and the agreements provided for herein, and the
consummation by FIL of the transactions contemplated hereby
and thereby, will not in any material respect (a) violate the
provisions of any law, rule or regulation applicable to FIL,
(b) violate the provisions of FIL's Memorandum or Articles of
Association, (c) violate any judgment, decree, order or award
of any court, governmental body or arbitrator, or (d) conflict
with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of FIL pursuant
to, any indenture, mortgage, deed of trust or other material
agreement or instrument to which FIL is a party;
(iv) The payment of the Cash Consideration, the issue of the First
Consideration Note and the Second Consideration Note, and the
allotment and issue of the Consideration Shares in payment of
the Call Option Consideration and the transactions
contemplated hereby will comply with the constitutional
documents of FIL and with all relevant material requirements
of all applicable laws, rules and regulations of Singapore;
(v) The directors of FIL have all necessary powers to pay the Cash
Consideration, issue the First Consideration Note and the
Second Consideration Note, allot and issue the Consideration
Shares in payment of the Call Option Consideration, and to pay
the expenses in the manner proposed hereby and to cause FIL to
enter into this Agreement;
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<PAGE> 38
(vi) The Consideration Shares, if any, to be issued in connection
with the Call Option Consideration will be allotted and issued
free from all claims, equities, liens, charges and
encumbrances whatsoever and will be issued with all rights
attaching and accruing to the FIL shares; and
(vii) All material consents, approvals, authorisations and other
requirements prescribed by any law, rule or regulation which
must be obtained or satisfied by FIL and which are necessary
for the consummation of the transactions contemplated by this
Agreement have been obtained and satisfied.
8.2 If prior to the Call Option Completion it shall be found that any of
the warranties on the part of FIL as set out in Clause 8.1 above have
not been carried out or complied with to the Vendor's reasonable
satisfaction or are otherwise untrue or misleading in any material
respect the Vendor shall be entitled by notice in writing to FIL to
terminate this Agreement and neither party shall thereafter have any
claim against the other under or in respect of this Agreement.
9. COMMUNICATIONS
9.1 Except as otherwise provided in the Agreement, all notices required or
permitted to be given hereunder shall be in writing and in the English
language and shall be sent by facsimile or in writing.
9.2 Any notice hereunder shall be addressed as follows:
In the case of the Vendor: Fico Forest Industrial Co. Limited
Unit 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number: (852) 2412-0791
Attention: Mr Law Sing Hong
In the case of FIL: Flextronics International Ltd
514 Chai Chee Lane, #04-13
Singapore 469029
Fax Number: (65) 449-9548
Attention: Mr Goh Chan Peng
9.3 Any party may from time to time by notice hereunder change its address
or telefax number for notice. Notice given by facsimile shall be deemed
to have been served on the next Business Day in the place of address
following the day of transmission.
10. GENERAL
10.1 This Agreement may be assigned in whole or in part by FIL.
Notwithstanding this, this Agreement shall not be assigned in whole or
in part by the Vendor. It is expressly agreed that this Agreement shall
be binding upon and shall enure for the benefit of the parties'
successors.
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<PAGE> 39
10.2 This Agreement supersedes any previous agreement between the parties
hereto in relation to the matters dealt with herein, represents
(together with any documents referred to herein) the entire agreement
between the parties herein in relation to such matters and no variation
hereof shall be effective unless made in writing.
10.3 The failure of any of the parties hereto at any time to require
performance by any other party or to claim a breach of any term of this
Agreement shall not be deemed to be a waiver of any right under this
Agreement.
10.4 The parties hereto shall, and shall use their respective reasonable
endeavours to procure that any necessary third parties shall, execute
and do all such further deeds, documents and things as either party may
reasonably require by notice in writing to the other party to carry the
provisions of this Agreement into full force and effect and (so far as
they are able) shall do anything necessary (including, without
limitation, exercising their powers as shareholders) to give effect to
the spirit and intent of this Agreement).
10.5 Any date or period mentioned in this Agreement may be extended by
agreement between the parties hereto (or such of the parties as may be
affected thereby), but as regards any date or period (whether or not
extended as aforesaid) time shall be of the essence of this Agreement.
10.6 Subject as specifically provided herein, each of the parties hereto
shall bear its own costs and expenses relating to this Agreement, save
that FIL shall bear all stamp duty payable in respect of the grant of
the Call Option and the purchase of the Call Option Shares.
10.7 The illegality, invalidity or unenforceability of any provision of this
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.
10.8 Notwithstanding the completion of the sale and purchase herein, the
terms and condition of this Agreement shall not merge with the transfer
or conveyance and be extinguished but shall remain in full force and
effect as between the Vendor and FIL insofar as the same shall not have
been fulfilled.
11. GOVERNING LAW AND DISPUTE RESOLUTION
11.1 This Agreement shall be governed by, and construed in accordance with,
the laws of Hong Kong.
11.2 Any dispute or difference arising out of or in connection with this
Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 11.2 save to the extent that they are
inconsistent with the express terms of this Agreement.
11.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by FIL, one of whom shall
be appointed by the Grantors, and the third (who shall act as Chairman
of the arbitral tribunal) to be appointed by the Chairman of SIAC or
HKIAC, as the case may be.
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<PAGE> 40
11.4 For the purpose of this Agreement a dispute shall be deemed to arise
when one party serves on the other party a notice in writing (in this
Clause, a "NOTICE OF DISPUTE") stating the nature of the dispute.
11.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
11.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
11.7 The prevailing party in the arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
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<PAGE> 41
APPENDIX A
FORM OF FIRST CONSIDERATION NOTE
PROMISSORY NOTE
Due [name actual date of First Deferred Consideration Date],
1999
[ ], 1996
This Promissory Note issued pursuant to the call option agreement
dated [ ] entered into between (1) Flextronics International
Ltd and (2) Fico Forest Industrial Co. Limited ("CALL OPTION
AGREEMENT") Terms defined in the Call Option Agreement shall unless the
context otherwise require, bear the same meaning in this First
Consideration Note. For value received, Flextronics International Ltd,
a corporation organized and existing under the laws of Singapore
("COMPANY"), hereby promises to pay, conditional upon the Net Profit
After Taxation of Fico Investment Holding Limited for the Second
Financial Period (as defined in the Call Option Agreement) (which shall
be determined in accordance with the terms of Clause 10.2 of the Sale
and Purchase Agreement) exceeding the Net Profit After Taxation of Fico
Investment Holding Limited for the Financial Period by twenty percent.
(20%) on the First Deferred Consideration Date, to the order of Fico
Forest Industrial Co. Limited a Hong Kong corporation ("HOLDER"), at
the offices of the Holder, the sum equal to twenty per cent. (20%) of
the Valuation (as defined in the Call Option Agreement), subject to
any rights of offset and adjustments pursuant to Clause 4 of the Call
Option Agreement.
1. INTEREST. This Promissory Note does not bear any interest.
2. PRINCIPAL. The Company promises to pay the principal in full on the
First Deferred Consideration Date, provided that the Company may at any
time prepay the principal or any part of it without premium or penalty
at any time.
3. EVENTS OF DEFAULT; ACCELERATION. In case one or more of the following
Events of Default shall have occurred and be continuing:
3.1 Default in the payment of the principal of this Promissory
Note as and when the same shall become due and payable either
at maturity, by declaration or otherwise; or
3.2 A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of sixty (60)
consecutive days; or
3.3 The Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any
substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
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<PAGE> 42
3.4 If all of Law Sing Hong, Law Shun Hang and Law Kin Ping shall
have their Employment Agreements terminated by Fico Investment
Holding Limited for any reason other than in accordance with
Clause 11 of their respective Employment Agreements,
then and in each and every such case, unless the principal of this
Promissory Note shall have already become due and payable, the Holder
of this Promissory Note, by notice in writing to the Company, may
declare the principal of this Promissory Note to be due and payable
immediately, and upon any such declaration the same shall become and
shall be immediately due and payable.
4. RIGHT OF OFFSET. The obligations of the Company under this Promissory
Note shall at all times be subject to the right of the Company to
offset against the principal of this Promissory Note such amount or
amounts in the aggregate as shall equal the amount or amounts of (a)
any claim under the Deed of Indemnity (as defined in the Call Option
Agreement), (b) the Post-Closing Adjustment (as defined in the Call
Option Agreement), (c) any damage, loss, liability or expense arising
out of or in connection with a breach of any of the Warranties (as
defined in the Call Option Agreement) and/or (d) any breach of the
Specific Indemnities, in accordance with the terms and conditions of
the Call Option Agreement.
5. ASSIGNMENT AND NEGOTIABILITY. This Promissory Note shall be freely
assignable and transferable by the Company to any of its affiliates and
shall be freely negotiable by the Holder.
6. GOVERNING LAW AND ARBITRATION.
6.1 This Promissory Note, and the rights of the parties hereunder,
shall be governed by, and construed and interpreted in
accordance with, the laws of Hong Kong.
6.2 (i) Any dispute or difference arising out of or in
connection with this Promissory Note, including any
question regarding its existence, validity or
termination, shall be referred to and finally
resolved by arbitration in Hong Kong on or before 31
March 1997 and thereafter in Singapore;
(ii) In respect of arbitration in Hong Kong, the
arbitration shall be in accordance with the HKIAC
Rules (as defined in the Agreement);
(iii) In respect of arbitration in Singapore, the
arbitration shall be in accordance with the SIAC
Rules (as defined in the Agreement); and
(iv) The HKIAC Rules and the SIAC Rules are deemed to be
incorporated by reference into this Clause 6.2 save
to the extent that they are inconsistent with the
express terms of this Promissory Note.
6.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Company,
one of whom shall be appointed by the Holder, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC (as such terms are
defined in the Agreement), as the case may be.
6.4 For the purpose of this Promissory Note a dispute shall be
deemed to arise when one party serves on the other party a
notice in writing (in this Clause, a "NOTICE OF DISPUTE")
stating the nature of the dispute.
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<PAGE> 43
6.5 The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
6.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time
as may be agreed between the parties or directed by the
Chairman of HKIAC or SIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of HKIAC or SIAC, as the case may
be, within fourteen (14) days after such time period. The
third arbitrator shall be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within twenty-eight (28) days of
the receipt of such Notice of Dispute.
6.7 The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
7. SUCCESSORS. The provisions of this Promissory Note shall inure to the
benefit of and be binding upon any successor to the Company.
8. AMENDMENTS. Any amendment of this Promissory Note shall be effective
only if made in writing and executed by the Company and the Holder.
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<PAGE> 44
IN WITNESS WHEREOF, the Company has caused this Promissory Note to be signed and
dated as of , 19 .
----------------
FLEXTRONICS INTERNATIONAL LTD
By:
----------------------
Name:
Title:
- ------------------------------------------------------
FLEXTRONICS INTERNATIONAL LTD
Promissory Note Due [ ], 1999
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<PAGE> 45
APPENDIX B
FORM OF SECOND CONSIDERATION NOTE
PROMISSORY NOTE
Due [name actual date of Second Deferred Consideration Date], 2000
[ ], 1996
This Promissory Note issued pursuant to the call option agreement dated
[ ] entered into between (1) Flextronics International Ltd and
(2) Fico Forest Industrial Co. Limited ("CALL OPTION AGREEMENT"). Terms
defined in the Call Option Agreement shall unless the context otherwise
require, bear the same meaning in this Second Consideration Note. For
value received, Flextronics International Ltd, a corporation organized
and existing under the laws of Singapore ("COMPANY"), hereby promises
to pay, conditional upon the Net Profit After Taxation of Fico
Investment Holding Limited for the period commencing on 1 January 1999
and ending on 31 December 1999 (which shall be determined in accordance
with the terms of Clause 10.2 of the Sale and Purchase Agreement)
exceeding the Net Profit After Taxation of Fico Investment Holding
Limited for the Financial Period by forty-four per cent. (44%) on the
Second Deferred Consideration Date, to the order of Fico Forest
Industrial Co. Limited, a Hong Kong corporation ("HOLDER"), at the
offices of the Holder, the sum equal to twenty per cent. (20%) of the
Valuation (as defined in the Call Option Agreement), subject to any
rights of offset and adjustments pursuant to Clause 4 of the Call
Option Agreement.
1. Interest. This Promissory Note does not bear any interest.
2. Principal. The Company promises to pay the principal in full on the
Second Deferred Consideration Date, provided that the Company may at
any time prepay the principal or any part of it without premium or
penalty at any time.
3. EVENTS OF DEFAULT; ACCELERATION. In case one or more of the following
Events of Default shall have occurred and be continuing:
3.1 Default in the payment of the principal of this Promissory
Note as and when the same shall become due and payable either
at maturity, by declaration or otherwise; or
3.2 A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of sixty (60)
consecutive days; or
3.3 The Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any
substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
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<PAGE> 46
3.4 If all of Law Sing Hong, Law Shun Hang and Law Kin Ping shall
have their Employment Agreements terminated by Fico Investment
Holding Limited for any reason other than in accordance with
Clause 11 of their respective Employment Agreements,
then and in each and every such case, unless the principal of this
Promissory Note shall have already become due and payable, the Holder
of this Promissory Note, by notice in writing to the Company, may
declare the principal of this Promissory Note to be due and payable
immediately, and upon any such declaration the same shall become and
shall be immediately due and payable.
4. Right of Offset. The obligations of the Company under this Promissory
Note shall at all times be subject to the right of the Company to
offset against the principal of this Promissory Note such amount or
amounts in the aggregate as shall equal the amount or amounts of (a)
any claim under the Deed of Indemnity (as defined in the Call Option
Agreement), (b) the Post-Closing Adjustment (as defined in the Call
Option Agreement), (c) any damage, loss, liability or expense arising
out of or in connection with a breach of any of the Warranties (as
defined in the Call Option Agreement) and/or (d) any breach of the
Specific Indemnities, in accordance with the terms and conditions of
the Call Option Agreement.
5. Assignment and Negotiability. This Promissory Note shall be freely
assignable and transferable by the Company to any of its affiliates and
shall be freely negotiable by the Holder.
6. Governing Law and Arbitration.
6.1 This Promissory Note, and the rights of the parties hereunder,
shall be governed by, and construed and interpreted in
accordance with, the laws of Hong Kong.
6.2 (i) Any dispute or difference arising out of or in
connection with this Promissory Note, including any
question regarding its existence, validity or
termination, shall be referred to and finally
resolved by arbitration in Hong Kong on or before 31
March 1997 and thereafter in Singapore;
(ii) In respect of arbitration in Hong Kong, the
arbitration shall be in accordance with the HKIAC
Rules (as defined in the Agreement);
(iii) In respect of arbitration in Singapore, the
arbitration shall be in accordance with the SIAC
Rules (as defined in the Agreement); and
(iv) The HKIAC Rules and the SIAC Rules are deemed to be
incorporated by reference into this Clause 6.2 save
to the extent that they are inconsistent with the
express terms of this Promissory Note.
6.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Company,
one of whom shall be appointed by the Holder, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC (as such terms are
defined in the Agreement), as the case may be.
6.4 For the purpose of this Promissory Note a dispute shall be
deemed to arise when one party serves on the other party a
notice in writing (in this Clause, a "NOTICE OF DISPUTE")
stating the nature of the dispute.
16
<PAGE> 47
6.5 The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
6.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time
as may be agreed between the parties or directed by the
Chairman of HKIAC or SIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of HKIAC or SIAC, as the case may
be, within fourteen (14) days after such time period. The
third arbitrator shall be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within twenty-eight (28) days of
the receipt of such Notice of Dispute.
6.7 The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
7. Successors. The provisions of this Promissory Note shall inure to the
benefit of and be binding upon any successor to the Company.
8. Amendments. Any amendment of this Promissory Note shall be effective
only if made in writing and executed by the Company and the Holder.
17
<PAGE> 48
IN WITNESS WHEREOF, the Company has caused this Promissory Note to be signed and
dated as of , 19 .
FLEXTRONICS INTERNATIONAL LTD
By:
--------------------------
Name:
Title:
- --------------------------------------------------
FLEXTRONICS INTERNATIONAL LTD
Promissory Note Due [ ], 2000
18
<PAGE> 49
IN WITNESS WHEREOF the parties have hereunto entered into this Agreement the
date first above written.
FIL
SIGNED by )
)
)
- ----------------- )
S. L. Tsui ) /s/ S.L. TSUI
)
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of: )
/s/ COSMAS WONG CIN TZIEH
------------------------------------
Cosmas Wong Cin Tzieh
Advocate & Solicitor
Singapore
FICO(HK)
SIGNED by )
)
for and on behalf of )
FICO FOREST INDUSTRIAL )
CO. LIMITED )
in the presence of: )
19
<PAGE> 50
IN WITNESS WHEREOF the parties have hereunto entered into this Agreement the
date first above written.
FIL
SIGNED by )
)
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of: )
FICO(HK)
SIGNED by )
)
)
) /s/ LAW SING HONG
Law Sing Hong and Law Shun Hang ) ------------------
)
for and on behalf of ) /s/ LAW SHUN HANG
FICO FOREST INDUSTRIAL ) ------------------
CO. LIMITED )
in the presence of: )
/s/ CHRISTINE C. KNIGHT
-------------------------------
Christine C. Knight
Solicitor
Hong Kong
19
<PAGE> 51
SCHEDULE 3
CHARGE
DATED THIS 20th DAY OF DECEMBER 1996
Between
FLEXTRONICS INTERNATIONAL LTD
(the Chargee)
And
FICO FOREST INDUSTRIAL CO. LIMITED
(the Chargor)
------------------------
CHARGE
------------------------
<PAGE> 52
TABLE OF CONTENTS
Clause Heading Page
- ------ ------- ----
1. INTERPRETATION ..................................................... 1
2. COVENANT AND CHARGE ................................................ 2
3. CONTINUING SECURITY ................................................ 2
4. REPRESENTATIONS AND WARRANTIES ..................................... 2
5. ADDITIONAL UNDERTAKINGS ............................................ 3
6. DIVIDENDS .......................................................... 3
7. POWER OF ATTORNEY .................................................. 3
8. REMEDIES AND SALE BY FIL ........................................... 4
9. SECURITY ........................................................... 4
10. WAIVER AND SEVERABILITY ............................................ 5
11. SUSPENSE ACCOUNT ................................................... 5
12. PROTECTION OF THIRD PARTIES ........................................ 5
13. NOTICE ............................................................. 5
14. GOVERNING LAW AND JURISDICTION ..................................... 6
15. FEES AND EXPENSES .................................................. 7
16. MISCELLANEOUS PROVISIONS ........................................... 7
17. APPLICABILITY OF THE S&P AGREEMENT ................................. 7
18. COUNTERPARTS ....................................................... 7
<PAGE> 53
THIS CHARGE is made on the 20th day of December 1996
BETWEEN:
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore and
having its registered office at 36 Robinson Road, City House #18-01,
Singapore 068877 ("FIL"); and
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("CHARGOR").
WHEREAS:
Pursuant to a sale and purchase agreement dated 29 November 1996 and entered
into between, the Chargor, FIL and Fico Investment Holding Limited ("COMPANY"),
("S&P AGREEMENT"), the Chargor has agreed with FIL to execute and deliver this
Charge to FIL on the terms set out herein as security for the obligations and
liabilities of the Chargor under the terms and conditions of the Agreements (as
defined below).
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 Unless the context otherwise requires terms and expressions defined in
the S&P Agreement shall have the same meaning when used in this Charge:
"AGREEMENTS" means the S&P Agreement, the Call Option Agreement, the Put
Option Agreement, the Fico Call Option Agreement, the Escrow Agreement,
the Deed of Indemnity and the Shareholders' Agreement;
"COMPANY" means Fico Investment Holding Limited, a company incorporated
in Hong Kong, and having its registered office at Rm 10, 18/F, Blk B,
Kong Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New
Territories, Hong Kong;
"OBLIGATIONS" means the obligations of the Chargor under the Agreements;
"RELATED CORPORATIONS" in relation to any entity means any subsidiary or
holding company or other subsidiary of the holding company of such
entity; and
"SHARES" means all the ordinary shares of HK$1.00 each in the share
capital of the Company beneficially owned by the Chargor which, in
aggregate, represent sixty per cent. (60%) of the issued and paid-up
share capital of the Company beneficially owned by the Chargor at the
date hereof, and such number of any and all other shares in the share
capital of the Company issued to and beneficially owned by the Chargor
subsequent to the date hereof consisting of, at any time all of the
ordinary shares in the Company issued to and beneficially owned by the
Chargor and, where the context permits, includes those rights, monies
and other property referred to in Clause 2.4.
1.2 Unless the context otherwise requires, words importing the singular
include the plural and vice versa and words importing a gender include
every gender; references to this Charge or the Agreements shall be
construed as references to such document as the same may be amended or
supplemented from time to time; unless stated otherwise, references to
clauses and schedule are to clauses and schedule of this Charge.
<PAGE> 54
2. COVENANT AND CHARGE
2.1 The Chargor covenants with FIL that it shall discharge the Obligations
when due to FIL pursuant to the terms of the Agreements (as may be
amended from time to time).
2.2 The Chargor as legal and beneficial owner of the Shares and as security
for the discharge to FIL of the Obligations charges by way of a first
fixed charge all of the Chargor's right, title and interest in and to
the Shares and all rights, monies and property whatsoever which may at
any time be derived from, accrue on or be offered in respect of the
Shares whether by way of redemption, exchange, conversion, rights,
bonus, capital reorganisation or otherwise, as specified in Clause 2.4.
2.3 The Chargor hereby undertakes forthwith to deposit or procure that
there will be deposited with FIL or, as the case may be, the Escrow
Agent (pursuant to the Escrow Agreement) the share certificate(s) in
respect of the Shares together with registrable instruments of transfer
and the sold notes in respect thereof duly executed by the Chargor in
blank to the intent that the Shares may be registered in the name of FIL
or its nominees as and in accordance with the terms of this Charge.
2.4 This Charge shall (subject as provided by Clause 6) extend to and
include all dividends or interest (if any) paid or payable after the
date hereof in respect of the Shares and all stocks, shares (and the
dividends or interest in respect thereof), rights, monies or other
property accruing or offered at any time in respect of the Shares
(including any sums paid upon or with respect to the Shares upon the
liquidation or dissolution of the Company and properties distributed
upon reduction of capital or other capital reorganisation of the
Company) and all allotments, accretions, offers, rights, benefits
(including all shares of the Company issued subsequent to the date
hereof) and advantages at any time accruing, made, offered or arising in
respect of any of the same. If the Chargor acquires any other stocks or
shares in the Company, it shall forthwith deliver or procure that there
be delivered to FIL the share certificate(s) in respect thereof together
with registrable instruments of transfer in respect thereof duly
executed by the Chargor in blank.
2.5 Without prejudice to anything else contained in this Charge, the
Chargor shall at any time at the request of FIL but at the cost of the
Chargor promptly sign seal execute deliver and do all deeds instruments
transfers renunciations proxies notices documents acts and things in
such form as FIL or the Escrow Agent may from time to time require for
perfecting or protecting the security over the Shares or any part of it
or for facilitating its realisation, including but not limited to
attending any board meeting and approving any transfer of the Shares
made in accordance with this Charge, the cancellation of the share
certificates representing the Shares held in the name of the Chargor and
the issue of the new share certificate(s) under the common seal of the
Company in accordance with its Articles of Association in the name of
FIL or its nominees or any third party purchasing the Shares.
3. CONTINUING SECURITY
This Charge shall be a continuing security, and shall remain in full
force and effect until the Obligations have been discharged in full
notwithstanding the bankruptcy, insolvency or liquidation of any person
or any intermediate settlement of account or other matter whatsoever.
4. REPRESENTATIONS AND WARRANTIES
The Chargor represents and warrants that:
2
<PAGE> 55
(a) the Chargor has good, unencumbered, marketable title to the
Shares and all the Shares are validly issued and fully
paid-up;
(b) no Encumbrance exists over all or any part of the Shares
(except as created by the Agreements and this Charge); and
(c) save for the Call Option, the Chargor has not granted or
resolved or agreed to grant in favour of any other person any
interest in or any option or other rights in respect of any of
the Shares.
5. ADDITIONAL UNDERTAKINGS
5.1 The Chargor further agrees from time to time to:
(a) pay to FIL, upon demand and upon receiving evidence in writing
in respect thereof, the amount of all expenses which it may
incur in, about or with a view to perfecting or enforcing this
Charge or otherwise in connection therewith together with
interest on the amount on any payments made by the Chargor
from the date of payment until the date of repayment before as
well as after judgement; and
(b) promptly pay all calls and other payments which may become due
in respect of the Shares and, in the event of default by the
Chargor, FIL may do so on the Chargor's behalf and paragraph
(a) above shall apply accordingly.
5.2 The Chargor undertakes throughout the continuance of this Charge that
the Chargor shall, unless FIL otherwise agrees in writing:
(a) not to dispose of or create or agree to dispose of or create
or permit to arise or exist any Encumbrance over all or any
part of the Shares (except as created by the Agreements and
this Charge) and any purported sale, transfer, disposal,
mortgage, charge or security interest created without FIL's
prior consent shall be absolutely void;
(b) not grant in favour of any other person any interest in or any
option or other rights in respect of any of the Shares; and
(c) at all times remain the beneficial owner of the Shares.
6. DIVIDENDS
FIL agrees with the Chargor that (subject to Clause 8.2) until the
Obligations are discharged in full, FIL shall hold all interest,
dividends and property paid on and received by FIL in respect of the
Shares on trust for the Chargor.
7. POWER OF ATTORNEY
The Chargor hereby irrevocably appoints FIL to be the attorney of the
Chargor with full power of substitution of its name and in its name and
on its behalf and as its act and deed to execute, seal and deliver and
otherwise perfect any deed, assurance, agreement, instrument or act it
may deem necessary for any of the purposes of this Charge and in
particular, but without limitation to do all or any of the following:
3
<PAGE> 56
(a) to effect any transfer of the Shares or any of them and to
register and/or procure the registration of the same whether
in the name of FIL or otherwise; and
(b) to call or to procure the calling of and to attend any
shareholders' meeting of the Company and to vote or to
instruct any proxy to vote at such meeting in such manner as
FIL may think fit.
The Chargor hereby ratifies and confirms and agrees to ratify and
confirm anything FIL shall lawfully and properly do or purport to do by
virtue of this Clause 7 and all money expended by FIL shall be deemed
to be expenses incurred by FIL under this Charge.
8. REMEDIES AND SALE BY FIL
8.1 If the Obligations are not discharged in full in the manner stipulated
in the Agreements and within the time limits set forth therein, the
security constituted herein shall become immediately enforceable and
FIL or its nominee, may without limitation to its other rights in law,
at its option do one or more of the following:
(a) sell or otherwise dispose of all or any title and interest in
the Shares upon such terms and in such manner and for such
consideration as FIL may in its sole and absolute discretion
think fit, and FIL may apply the proceeds of any such sale or
disposition in or towards the discharge of costs thereby
incurred (including sale and/or attorneys' fees), with any
surplus being retained by FIL but FIL shall not be liable for
any loss or damage occasioned by such sale or disposal, unless
caused by FIL's own wilful default;
(b) transfer the Shares to itself but without prejudice to any
other rights or remedies which FIL may have in law against the
Chargor; and
(c) complete and date the sold note(s), the instrument(s) of
transfer and any other documents delivered pursuant to Clause
2.3 and appoint additional and/or replacement directors to the
Board of the Company.
8.2 At any time after the power of sale has arisen, any interest, dividend
or other payments which have been or may be received or receivable by
FIL or any nominee of FIL in respect of any of the Shares (including
any or all of those interests set forth in Clause 2.4) may be applied
or retained by FIL as though they were proceeds of sale hereunder.
8.3 FIL is hereby authorized to give a good discharge for any monies
received by it pursuant to the exercise of its power of sale and a
purchaser shall not be bound to inquire whether the power of sale has
arisen as herein provided nor be concerned with the manner of
application of the proceeds of sale.
9. SECURITY
Neither the liability of the Chargor nor the validity or enforceability
of this Charge shall be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Chargor or any
other person;
(b) any variation or modification of the Agreements or any
documents referred to therein;
(c) any irregularity in the exercise of this Charge;
4
<PAGE> 57
(d) any other security document, charge, debenture, guarantee or
other security being or becoming held by or available to FIL
or by any of the same or any right or remedy of FIL against
the Company or the Chargor or any other person being or
becoming wholly or partly void, voidable or unenforceable or
by FIL at any time releasing, refraining from enforcing,
varying or in any other way dealing with any of the same or
any power, right or remedy FIL may now or hereafter have from
or against the Chargor or any other person;
(e) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Chargor or any
other person or any compromise arrangement or settlement with
any of the same; and
(f) any act, omission, event or circumstance which would or may
but for this provision operate to prejudice, affect or
discharge this Charge or the Agreements or the liability of
the Chargor hereunder or under the Agreements.
10. WAIVER AND SEVERABILITY
No failure or delay by FIL in exercising any right, power or remedy
hereunder shall impair such right, power or remedy or operate as a
waiver thereof nor shall any single or partial exercise of the same
preclude any further exercise thereof or the exercise of any other
right, power or remedy. The rights, powers and remedies herein provided
are cumulative and do not exclude any other rights, powers and remedies
provided by law. If at any time any provision of this Charge is or
becomes illegal, invalid or unenforceable in any respect under the law
of any jurisdiction, the legality, validity and enforceability of such
provision under the laws of any other jurisdiction, and of the
remaining provisions of this Charge, shall not be affected or impaired
thereby.
11. SUSPENSE ACCOUNT
Subject to Clause 8, FIL may place and keep any monies received by
virtue of this Charge (whether before or after the bankruptcy or
liquidation of the Chargor or any other person) to the credit of a
suspense account for so long as FIL may think fit in order to preserve
the rights of FIL to sue or prove for the whole amount of its claim
against the Chargor or any other person. Upon final settlement of all
amounts and payments due to FIL, the Chargor shall have the right to
verify any and all records of the suspense account pertaining to any
and all monies received by virtue of this Charge and to the application
and proceeds of the same.
12. PROTECTION OF THIRD PARTIES
No purchaser, mortgagee or other person dealing with FIL shall be
concerned to enquire whether any power which it is purporting to
exercise has become exercisable or whether any money is due under this
Charge or as to the application of any money paid raised or borrowed or
as to the propriety or regularity of any sale by or other dealing with
FIL.
13. NOTICE
All notices, consents, approvals, waivers and other communication under
this Charge shall be in writing and shall be deemed to have been duly
given when delivered by telecopier and confirmed by delivery in person
or by reputable air courier or certified or registered mail, return
receipt requested, with postage prepaid addressed as follows:
5
<PAGE> 58
(a) To FIL: Flextronics International Ltd
514 Chai Chee Lane, #04-13
Singapore 469029
Fax Number: (65) 449-9548
Attention: Mr Goh Chan Peng
(b) To the Chargor: Fico Forest Industrial Co. Limited
Unit 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number: (852) 2412-0791
Attention: Mr Law Sing Hong
or to such other telecopier number and/or address as the parties may
from time to time designate in writing.
14. GOVERNING LAW AND JURISDICTION
14.1 This Charge shall be governed by, and construed in accordance with, the
laws of Hong Kong.
14.2 Any dispute or difference arising out of or in connection with this
Charge, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 14.2 save to the extent that they are
inconsistent with the express terms of this Charge.
14.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by FIL, one of whom shall
be appointed by the Chargor, and the third (who shall act as Chairman
of the arbitral tribunal) to be appointed by the Chairman of SIAC or
HKIAC, as the case may be.
14.4 For the purpose of this Charge a dispute shall be deemed to arise when
one party serves on the other party a notice in writing (in this
Clause, a "NOTICE OF DISPUTE") stating the nature of the dispute.
14.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
14.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
6
<PAGE> 59
14.7 The prevailing party in the Arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
15. FEES AND EXPENSES
The Chargor shall pay all legal fees on a full indemnity basis and
other costs and disbursements incurred in connection with demanding and
enforcing payment of monies due hereunder or otherwise howsoever in
enforcing this security and/or any of the covenants, undertakings,
stipulations, terms and conditions or provisions of this Charge.
16. MISCELLANEOUS PROVISIONS
16.1 Neither this Charge nor any term hereof may be changed, waived,
discharged or terminated except by a written instrument expressly
referring to this Charge and to the provisions so modified or limited,
and executed by the parties hereto. This Charge and all obligations of
the Chargor shall be binding upon the successors and permitted assigns
of the Chargor and shall together with the rights and remedies of FIL
hereunder, inure to the benefit of FIL, its successors or assigns.
16.2 Nothing herein shall be deemed or construed to derogate from or
abrogate any of the covenants and obligations to be performed and
observed on the part of the Chargor contained in the Agreements.
16.3 The Chargor certifies that neither the execution of this Charge nor the
creation of the charges herein contained contravenes any of the
provisions of the Memorandum and Articles of Association of the Company
or of the Chargor or any agreement or transaction entered into by the
Chargor.
17. APPLICABILITY OF THE S&P AGREEMENT
In the event of any inconsistency or conflict between the provisions of
this Charge and the provisions of the S&P Agreement, the terms of this
Charge shall prevail.
18. COUNTERPARTS
This Charge may be executed in any number of counterparts, all of which
when taken together shall constitute one and the same instrument.
7
<PAGE> 60
IN WITNESS whereof this Charge has been executed the day and year first above
written.
FIL
The Common Seal of )
FLEXTRONICS INTERNATIONAL LTD )
has been affixed in the )
presence of: )
/s/ S.L. Tsui
-----------------------
Director
/s/ Goh Chan Peng
-----------------------
Authorised Signatory
Chargor
The Common Seal of )
FICO FOREST INDUSTRIAL )
CO. LIMITED has been affixed in the )
presence of: )
-----------------------
Director
-----------------------
Director/Secretary
8
<PAGE> 61
IN WITNESS whereof this Charge has been executed the day and year first above
written.
FIL
The Common Seal of )
FLEXTRONICS INTERNATIONAL LTD )
has been affixed in the )
presence of: )
____________________
Director
____________________
Director/Secretary
Chargor
The Common Seal of )
FICO FOREST INDUSTRIAL )
CO. LIMITED has been affixed in the )
presence of: )
/s/ Law Sing Hong
____________________
Director
/s/ Law Shun Hang
____________________
Director/Secretary
Christine C. Knight
Solicitor
Hong Kong
8
<PAGE> 62
SCHEDULE 4
EMPLOYMENT AGREEMENT
DATED THE 20TH DAY OF DECEMBER 1996
Between
FICO INVESTMENT HOLDING LIMITED
(as the Company)
and
LAW SING HONG
(as Employee)
----------------------
EMPLOYMENT AGREEMENT
----------------------
<PAGE> 63
THIS AGREEMENT is made on the 20th day of December 1996
BETWEEN:
(1) FICO INVESTMENT HOLDING LIMITED, a company incorporated in Hong Kong
and having its registered office at Rm 10, 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("COMPANY"); and
(2) LAW SING HONG of 9/17 Kelvin Tower, TMTL 196 Area 20, Tuen Mun, New
Territories,Hong Kong ("EMPLOYEE").
NOW IT IS HEREBY AGREED as follows:
1. The Company shall employ the Employee and the Employee shall serve the
Company in a senior executive capacity and in such capacity, for the
period and upon and subject to the terms and conditions hereinafter
contained.
2. As a senior executive of the Company, the Employee shall devote
substantially his time and attention and whole skill to the affairs of
the Company and in the discharge of his duties hereunder:
(a) in undertaking such duties and exercising such powers in
relation to the Company and its business as the board of
directors of the Company ("BOARD") shall from time to time
assign to or vest in him;
(b) in the discharge of such duties and in the exercise of such
powers conform to observe and comply with all resolutions
regulations and directions from time to time made or given by
the Board; and
(c) undertake to do such other and additional work as may
reasonably be requested of him and to perform such services
for the Company's subsidiaries or holding company as the Board
may from time to time reasonably require without further
remuneration unless otherwise agreed.
3. The Employee shall not (without the previous written consent of the
Board) during the continuance of this Agreement (either directly or
indirectly) be engaged or interested in any capacity in any trade
business profession or occupation whatsoever other than the business of
the Company. In this Clause 3, the expression "OCCUPATION"shall include
any other private work which in the opinion of the Board may hinder or
otherwise interfere with the performance by the Employee of his duties
under this Agreement.
4. The Employee shall at all times keep the Board promptly and fully
informed of his conduct of the business or affairs of the Company and
its subsidiaries and associated companies (where relevant) and provide
such explanations as the Board may require.
5. The Employee shall not, except as required by law, or authorised or
required by his duties reveal to any person, firm or company any trade
secrets, secret or confidential operations processes or dealings or any
information concerning the organization, business, finances,
transactions or affairs of the Company or any of its subsidiaries,
associated companies or holding company which may come to his knowledge
during his employment hereunder and shall keep with complete secrecy
all confidential information entrusted to him and shall not use or
attempt to use such information in any manner which may injure or cause
loss either directly or indirectly to the Company or its business or
may be likely so to do at any time. This restriction shall continue to
apply and be binding on him after the termination of this Agreement
without limit in point of time but shall cease to apply to information
or knowledge which may come into the public domain.
<PAGE> 64
6. (a) Any discovery or invention or secret process or improvement in
procedure made or discovered by the Employee while in the
service of the Company in connection with or in any way
affecting or relating to the business of the Company or of any
subsidiaries or capable of being used or adapted for use
therein or in connection therewith shall forthwith be
disclosed to the Company and shall belong to and be the
absolute property of the Company or such one of its subsidiary
companies as the Company may nominate for the purpose;
(b) The Employee if and whenever required so to do (whether during
or after the termination of his appointment) shall at the
expense of the Company or its nominee apply or join in
applying for letters patent or other protection in Hong Kong
or any other part of the world for any such discovery,
invention, process or improvements as aforesaid and execute
all instruments and do all things necessary for vesting the
said letters patent or other protection when obtained and all
rights and title to and interest in the same in the Company
(or its nominee) absolutely and as sole beneficial owner or in
such other person as the Company may require;
(c) The Employee hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute and do any
such instrument or thing and generally to use his name for the
purpose of giving to the Company (or its nominee) the full
benefit of the provisions of this clause and in favour of any
third party a certificate in writing signed by any director or
the secretary of the Company that any instrument or act falls
within the authority hereby conferred shall be conclusive
evidence that such is the case;
(d) The Employee shall take all reasonable precautions to
safe-guard his health and keep himself fit to perform his
duties under this Agreement and submit to such medical
examination and/or treatment as the Company's medical advisers
may from time to time consider necessary or advisable;
(e) The Employee shall not promote encourage or participate in any
public tumult or disorder nor do anything which might cause
public scandal or bring the Company or any of its subsidiaries
or associated companies or holding company into disrepute; and
(f) The Employee may not without the prior written consent of the
Board accept any gift and/or favour of whatever kind from any
customer, client or supplier of the Company or any prospective
customer, client or supplier of the Company.
7. This Agreement and all the provisions herein contained (either
expressly or by implication) shall come into force as from 1 January
1997 and shall continue for a term of 3 years, subject to earlier
termination as provided in Clause 11 hereof.
8. (a) Subject as hereinafter provided the Company shall pay to the
Employee during the continuance of his employment hereunder a
salary at the sum of US$85,000 per month which said salary is
inclusive of any sum receivable by the Employee as director's
fee, car allowance, housing allowance or other remuneration
from the Company (or such higher rate as may from time to time
be agreed between the parties or determined upon and notified
to the Employee by the Company). In the event of any increase
of salary being so agreed or notified such increase shall
thereafter have effect as if it were specifically provided for
as a term of this Agreement. The said salary (less any
deductions as shall be required by law to be made) shall be
payable in arrears on the last day of each month;
(b) In addition to his salary, the Employee shall participate in
the Company's profit sharing bonus scheme for key senior
officers authorised by the Board from time to time; and
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<PAGE> 65
(c) The Employee shall also participate in the employee stock
option scheme for all key employees of Flextronics
International Ltd.
9. The Company will reimburse the Employee for the following:
(a) all travelling and hotel expenses when the Employee is
required by the Company to travel to other countries in the
discharge of his duties; and
(b) all entertainment expenses incurred in the discharge of the
Employee's duties to the Company.
10. The Employee will be entitled to annual leave at the rate of fourteen
(14) working days per annum and such leave shall be taken only at a
time or times convenient to the Company.
11. Notwithstanding anything herein contained, this Agreement may be
determined:
(a) by either party hereto giving to the other not less than three
(3) calendar months' notice in writing; or
(b) by the Company summarily without notice or payment of
compensation whatsoever in any of the following events:
(i) if the Employee is guilty of dishonesty or grave
misconduct or commits any act or wilful neglect as in
the opinion of the Company is likely to bring the
Company or any of its subsidiaries or associated
companies or its holding company or any of its or
their officials or employees into disrepute whether
such dishonesty, misconduct, act or neglect is or is
not directly related to the affairs of the Company;
(ii) if the Employee becomes of unsound mind or becomes
permanently incapacitated by accident or ill-health
and is unable to perform his duties under this
Agreement;
(iii) if the Employee becomes bankrupt or makes any
arrangement or composition with his creditors;
(iv) if the Employee commits any material breach of any of
his duties or obligations under this Agreement;
(v) if the Employee is convicted of any criminal offence
other than an offence which in the reasonable opinion
of the Board does not affect his position as an
employee of the Company;
(vi) if the Employee is found to have made illegal
monetary profit or received any gratuities or other
rewards (whether in cash or kind) out of any of the
Company's affairs; or
(vii) if the Company is required or requested by any
authority (whether governmental or statutory) to
terminate the services of the Employee.
(c) Upon the termination of this Agreement for whatsoever reason
the Employee shall upon the request of the Company resign
without claim for compensation from office as a Employee of
the Company and from all offices held by him in subsidiary or
associated companies or the holding company of the Company and
in the event of his failure to do so the Company is hereby
irrevocably authorised to appoint such person in his name and
on his behalf to execute any documents and to do all things
requisite to give effect thereto.
3
<PAGE> 66
12. The exercise by the Company of its rights of summary dismissal under
the preceding clause hereof shall not debar it from exercising such
other rights or remedies as may be available to it by law or otherwise
by reason of any of the matters aforesaid.
13. The Employee undertakes that any question or matter relating to the
following shall be determined by the Board and in so far as the Call
Option (as defined in the Call Option Agreement) has not been
exercised, such matters shall be determined pursuant to Clause 9 of the
Shareholders' Agreement:
(i) any investment by the Company of $10,000 or more;
(ii) appointment of (and any subsequent change in) the auditors,
secretary and principal bankers and any subsequent change in
the financial year end and the registered office of the
Company;
(iii) entry by the Company or its subsidiaries into any transaction
of a financial nature including the incurring of any borrowing
under any existing or future banking and credit facilities and
granting of any guarantee, indemnity, performance bond, lien,
pledge, charge (including fixed and floating charge), mortgage
or other security and the incurring of any other form of
indebtedness in excess of US$50,000.00;
(iv) the incurring of any capital expenditure including the making
or disposal of any investment in excess of (a) US$1,000,000
for the period commencing from 1 January 1997 and ending on 31
December 1997; (b) US$1,500,000 for the period commencing from
1 January 1998 and ending on 31 December 1998 and (c)
US$1,875,000 for the period commencing from 1 January 1999 and
ending on 31 December 1999;
(v) the payment of any remuneration or Director's fees;
(vi) loans to Directors or to any corporation in which any Director
or the Directors cumulatively has or have a controlling
interest within the meaning of Section 157H of the Companies
Ordinance in the issued share capital of that corporation;
(vii) a substantial change in the primary business of the Company;
(viii) inter-company transactions with any company or businesses in
which the Company have a financial interest;
(ix) the declaration, recommendation, making and payment of any
distribution (whether in cash or in kind);
(x) sale transfer or disposal of the whole or a substantial part
of the Company's undertaking, assets or property or purchase,
sale, transfer, disposal, lease or licence of any real
property or any interest therein;
(xi) increase, reduction or other alteration to the authorised or
issued share capital;
(xii) commencement or carrying on of any type of business not being
ancillary or incidental to or extension of the scope of
operation or type of the Businesses;
(xiii) merger, consolidation or amalgamation with any company,
association, partnership or legal entity and acquisition of
any shares in any body corporate or participation in any
partnership or joint venture arrangement;
(xiv) amendment to the Memorandum and Articles of Association;
4
<PAGE> 67
(xv) sale, transfer or disposal of any asset or investment with a
value in excess of US$10,000.00;
(xvi) approval of the audited balance sheet and profit and loss
account of the Company and any report or statement
accompanying such balance sheet and profit and loss account;
(xvii) establishment of any special reserves, provisions or
retentions not in the ordinary course of business and
application or utilisation of the same;
(xviii) entry into any contract or arrangement with any Director or
the Company or any person connected with such person;
(xix) redemption purchase or cancellation of any shares or issue of
further shares or other dilution of the interest of the
shareholders of the Company or variation of any rights
attaching to any shares of the Company;
(xx) issue of partly-paid shares and making of any call upon moneys
unpaid in respect of any issued shares;
(xxi) subject to the provisions of this Agreement, the winding-up or
dissolution of the Company unless it shall have become
insolvent;
(xxii) any material change in the Company's accounting or reporting
practices;
(xxiii) lending of any moneys other than placing of deposits with
banks and financial institutions;
(xxiv) commencement or settlement of any litigation or arbitration
proceedings having a value or likely value in excess of
US$10,000.00;
(xxv) approval of the Company's annual operating budget and
strategic plans;
(xxvi) any change in the number of Directors of the Company;
(xxvii) save as is otherwise provided herein, any matter involving the
Company with any Director or with another firm, company or
corporation in which any Director is interested as a
proprietor, partner, director or other officer or creditor of
or a shareholder in, except as a shareholder of a public
company or a public corporation whose shares are listed on a
stock exchange;
(xxviii) any public issue of Shares of the Company or any of its
subsidiaries with a view to obtaining the listing of the
Company or such subsidiary on any other stock exchange;
(xxix) the authorised signatories of all and any banking or credit
facilities or accounts; and
(xxx) the appointment of any Managing Director, Executive Director,
General Manager, Financial Controller or similar senior
executive or officer of the Company.
14. The Employee hereby further covenants with and undertakes to the
Company that for a period of two (2) years from the date of the
termination of his employment with the Company, he shall not do any of
the following without first obtaining the written consent of the
Company:
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<PAGE> 68
(a) directly or indirectly carry on (whether alone or in
partnership or joint venture with anyone else) or otherwise be
concerned with or interested in (whether as trustee,
principal, agent, shareholder, unit holder or in any other
capacity) any business similar to or competitive with the
Business (as defined below) of the Company, its subsidiaries
or holding company for two (2) years after the date of
termination of this Agreement, in any country where the
Company, its subsidiaries or holding company currently carries
on the Business and/or sells its products, including, without
limitation, Europe, Hong Kong, Japan, Korea, Malaysia, Mexico,
the People's Republic of China, Singapore and the United
States of America;
(b) solicit or persuade any person or corporation which is a
customer or client of the Company, its subsidiaries or holding
company, or who is or was a customer or client of or in
respect of the Business, to cease doing business with the
Company, its subsidiaries or holding company or reduce the
amount of business which the customer or client would normally
do in respect of the Business for two (2) years after the date
of termination of this Agreement;
(c) accept from a customer or client referred to in Clause 14(b)
above any business of the kind ordinarily forming part of the
Business, of the Company, its subsidiaries or holding company
for two (2) years after the date of termination of this
Agreement;
(d) at any time use or disclose to any third party any trade
secrets, product information or confidential information of
the Business of the Company, its subsidiaries and holding
company which is not generally known or available in the
market place or which but for a breach of this Clause 14 would
not be generally known or available in the market place;
(e) at any time induce or attempt to induce any person who is at
the date of this Agreement or who later becomes an employee of
the Company, its subsidiaries or holding company in the
Business to terminate his or her employment with the Company,
its subsidiaries or holding company;
(f) for the purposes of this Clause 14, the expression "BUSINESS"
shall mean the sale and manufacture of plastic material
products and its by-products (including all associated
importation, exportation, marketing and related activities)
carried on by the Company, its subsidiaries, holding company
or related corporations, anywhere in the world;
(g) each and every obligation under this Clause 14 shall be
treated as a separate obligation and shall be severally
enforceable as such and in the event of any obligation or
obligations being or becoming unenforceable in whole or in
part such part or parts as are unenforceable shall be deleted
from this Clause 14 and any such deletion shall not affect the
enforceability of all such parts of this Clause 14 as remain
not so deleted; and
(h) while the restrictions contained in this Clause 14 are
considered by the parties to be reasonable in all the
circumstances it is recognised that restrictions of the nature
in question may fail for technical reasons unforeseen and
accordingly it is hereby agreed and declared that if any of
such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection
of the interests of the Company, its subsidiaries, holding
company and related corporations but would be valid if part of
the wording thereof were deleted or the periods thereof
reduced or the range of activities or area dealt with thereby
reduced in scope the said restriction shall apply with such
modifications as may be necessary to make it valid and
effective.
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<PAGE> 69
15. This Agreement is in substitution for all previous contracts of service
between the Company and the Employee which shall be deemed to have been
terminated by mutual consent as from the date on which this Agreement
commences.
16. In case any provision in this Agreement shall be, or at any time shall
become invalid, illegal or unenforceable in any respect under any law,
such invalidity, illegality or unenforceability shall not in any way
affect or impair any other provisions of this Agreement but this
Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
17. (a) This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong.
(b) Any dispute or difference arising out of or in connection with
this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and
finally resolved by arbitration in Hong Kong on or before 31
March 1997 and thereafter in Singapore. In respect of
arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the
SIAC Rules. The HKIAC Rules and the SIAC Rules are deemed to
be incorporated by reference into this Clause 17 save to the
extent that they are inconsistent with the express terms of
this Agreement.
(c) The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Company,
one of whom shall be appointed by the Employee, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC, as the case may
be.
(d) For the purpose of this Agreement a dispute shall be deemed to
arise when one party serves on the other party a notice in
writing (in this Clause, a ("NOTICE OF DISPUTE") stating the
nature of the dispute.
(e) The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
(f) The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time
as may be agreed between the parties or directed by the
Chairman of SIAC or HKIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of SIAC or HKIAC, as the case may
be, within fourteen (14) days after such time period. The
third arbitrator shall be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within twenty-eight (28) days of
the receipt of such Notice of Dispute.
(g) The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
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<PAGE> 70
AS WITNESS the hands of the parties hereto.
SIGNED BY LAW SHUN HANG )
& LAW SING HONG ) /s/ Law Shun Hang
for and on behalf of the ) /s/ Law Sing Hong
Company in the presence of: )
/s/ Christine C. Knight
Christine C. Knight
Solicitor
Hong Kong
SIGNED BY )
LAW SING HONG ) /s/ Law Sing Hong
in the presence of: )
/s/ Christine C. Knight
Christine C. Knight
Solicitor
Hong Kong
8
<PAGE> 71
DATED THE 20th DAY OF December 1996
Between
FICO INVESTMENT HOLDING LIMITED
(as the Company)
and
LAW SHUN HANG
(as Employee)
----------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
-----------------------------------------------------------------------------
<PAGE> 72
THIS AGREEMENT is made on the 20th day of December 1996
BETWEEN:
(1) FICO INVESTMENT HOLDING LIMITED, a company incorporated in Hong Kong
and having its registered office at Rm 10, 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("COMPANY"); and
(2) LAW SHUN HANG of Flat B, 5/F, Block 1, Faraday House, 6 Tsing Yung
Street, Tuen Mun, New Territories, Hong Kong ("EMPLOYEE").
NOW IT IS HEREBY AGREED as follows:
1. The Company shall employ the Employee and the Employee shall serve the
Company in a senior executive capacity and in such capacity, for the
period and upon and subject to the terms and conditions hereinafter
contained.
2. As a senior executive of the Company, the Employee shall devote
substantially his time and attention and whole skill to the affairs of
the Company and in the discharge of his duties hereunder:
(a) in undertaking such duties and exercising such powers in
relation to the Company and its business as the board of
directors of the Company ("BOARD") shall from time to time
assign to or vest in him;
(b) in the discharge of such duties and in the exercise of such
powers conform to observe and comply with all resolutions
regulations and directions from time to time made or given by
the Board; and
(c) undertake to do such other and additional work as may
reasonably be requested of him and to perform such services
for the Company's subsidiaries or holding company as the Board
may from time to time reasonably require without further
remuneration unless otherwise agreed.
3. The Employee shall not (without the previous written consent of the
Board) during the continuance of this Agreement (either directly or
indirectly) be engaged or interested in any capacity in any trade
business profession or occupation whatsoever other than the business of
the Company. In this Clause 3, the expression "OCCUPATION" shall
include any other private work which in the opinion of the Board may
hinder or otherwise interfere with the performance by the Employee of
his duties under this Agreement.
4. The Employee shall at all times keep the Board promptly and fully
informed of his conduct of the business or affairs of the Company and
its subsidiaries and associated companies (where relevant) and provide
such explanations as the Board may require.
5. The Employee shall not, except as required by law, or authorised or
required by his duties reveal to any person, firm or company any trade
secrets, secret or confidential operations processes or dealings or any
information concerning the organization, business, finances,
transactions or affairs of the Company or any of its subsidiaries,
associated companies or holding company which may come to his knowledge
during his employment hereunder and shall keep with complete secrecy
all confidential information entrusted to him and shall not use or
attempt to use such information in any manner which may injure or cause
loss either directly or indirectly to the Company or its business or
may be likely so to do at any time. This restriction shall continue to
apply and be binding on him after the termination of this Agreement
without limit in point of time but shall cease to apply to information
or knowledge which may come into the public domain.
<PAGE> 73
6. (a) Any discovery or invention or secret process or improvement in
procedure made or discovered by the Employee while in the
service of the Company in connection with or in any way
affecting or relating to the business of the Company or of any
subsidiaries or capable of being used or adapted for use
therein or in connection therewith shall forthwith be
disclosed to the Company and shall belong to and be the
absolute property of the Company or such one of its subsidiary
companies as the Company may nominate for the purpose;
(b) The Employee if and whenever required so to do (whether during
or after the termination of his appointment) shall at the
expense of the Company or its nominee apply or join in
applying for letters patent or other protection in Hong Kong
or any other part of the world for any such discovery,
invention, process or improvements as aforesaid and execute
all instruments and do all things necessary for vesting the
said letters patent or other protection when obtained and all
rights and title to and interest in the same in the Company
(or its nominee) absolutely and as sole beneficial owner or in
such other person as the Company may require;
(c) The Employee hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute and do any
such instrument or thing and generally to use his name for the
purpose of giving to the Company (or its nominee) the full
benefit of the provisions of this clause and in favour of any
third party a certificate in writing signed by any director or
the secretary of the Company that any instrument or act falls
within the authority hereby conferred shall be conclusive
evidence that such is the case;
(d) The Employee shall take all reasonable precautions to
safe-guard his health and keep himself fit to perform his
duties under this Agreement and submit to such medical
examination and/or treatment as the Company's medical advisers
may from time to time consider necessary or advisable;
(e) The Employee shall not promote encourage or participate in any
public tumult or disorder nor do anything which might cause
public scandal or bring the Company or any of its subsidiaries
or associated companies or holding company into disrepute; and
(f) The Employee may not without the prior written consent of the
Board accept any gift and/or favour of whatever kind from any
customer, client or supplier of the Company or any prospective
customer, client or supplier of the Company.
7. This Agreement and all the provisions herein contained (either
expressly or by implication) shall come into force as from 1 January
1997 and shall continue for a term of 3 years, subject to earlier
termination as provided in Clause 11 hereof.
8. (a) Subject as hereinafter provided the Company shall pay to the
Employee during the continuance of his employment hereunder a
salary at the sum of US$85,000 per month which said salary is
inclusive of any sum receivable by the Employee as director's
fee, car allowance, housing allowance or other remuneration
from the Company (or such higher rate as may from time to time
be agreed between the parties or determined upon and notified
to the Employee by the Company). In the event of any increase
of salary being so agreed or notified such increase shall
thereafter have effect as if it were specifically provided for
as a term of this Agreement. The said salary (less any
deductions as shall be required by law to be made) shall be
payable in arrears on the last day of each month;
(b) In addition to his salary, the Employee shall participate in
the Company's profit sharing bonus scheme for key senior
officers authorised by the Board from time to time; and
2
<PAGE> 74
(c) The Employee shall also participate in the employee stock
option scheme for all key employees of Flextronics
International Ltd.
9. The Company will reimburse the Employee for the following:
(a) all travelling and hotel expenses when the Employee is
required by the Company to travel to other countries in the
discharge of his duties; and
(b) all entertainment expenses incurred in the discharge of the
Employee's duties to the Company.
10. The Employee will be entitled to annual leave at the rate of fourteen
(14) working days per annum and such leave shall be taken only at a
time or times convenient to the Company.
11. Notwithstanding anything herein contained, this Agreement may be
determined:
(a) by either party hereto giving to the other not less than three
(3) calendar months' notice in writing; or
(b) by the Company summarily without notice or payment of
compensation whatsoever in any of the following events:
(i) if the Employee is guilty of dishonesty or grave
misconduct or commits any act or wilful neglect as in
the opinion of the Company is likely to bring the
Company or any of its subsidiaries or associated
companies or its holding company or any of its or
their officials or employees into disrepute whether
such dishonesty, misconduct, act or neglect is or is
not directly related to the affairs of the Company;
(ii) if the Employee becomes of unsound mind or becomes
permanently incapacitated by accident or ill-health
and is unable to perform his duties under this
Agreement;
(iii) if the Employee becomes bankrupt or makes any
arrangement or composition with his creditors;
(iv) if the Employee commits any material breach of any of
his duties or obligations under this Agreement;
(v) if the Employee is convicted of any criminal offence
other than an offence which in the reasonable opinion
of the Board does not affect his position as an
employee of the Company;
(vi) if the Employee is found to have made illegal
monetary profit or received any gratuities or other
rewards (whether in cash or kind) out of any of the
Company's affairs; or
(vii) if the Company is required or requested by any
authority (whether governmental or statutory) to
terminate the services of the Employee.
(c) Upon the termination of this Agreement for whatsoever reason
the Employee shall upon the request of the Company resign
without claim for compensation from office as a Employee of
the Company and from all offices held by him in subsidiary or
associated companies or the holding company of the Company and
in the event of his failure to do so the Company is hereby
irrevocably authorised to appoint such person in his name and
on his behalf to execute any documents and to do all things
requisite to give effect thereto.
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<PAGE> 75
12. The exercise by the Company of its rights of summary dismissal under
the preceding clause hereof shall not debar it from exercising such
other rights or remedies as may be available to it by law or otherwise
by reason of any of the matters aforesaid.
13. The Employee undertakes that any question or matter relating to the
following shall be determined by the Board and in so far as the Call
Option (as defined in the Call Option Agreement) has not been
exercised, such matters shall be determined pursuant to Clause 9 of the
Shareholders' Agreement:
(i) any investment by the Company of $10,000 or more;
(ii) appointment of (and any subsequent change in) the
auditors, secretary and principal bankers and any
subsequent change in the financial year end and the
registered office of the Company;
(iii) entry by the Company or its subsidiaries into any
transaction of a financial nature including the
incurring of any borrowing under any existing or
future banking and credit facilities and granting of
any guarantee, indemnity, performance bond, lien,
pledge, charge (including fixed and floating charge),
mortgage or other security and the incurring of any
other form of indebtedness in excess of US$50,000.00;
(iv) the incurring of any capital expenditure including
the making or disposal of any investment in excess of
(a) US$1,000,000 for the period commencing from 1
January 1997 and ending on 31 December 1997; (b)
US$1,500,000 for the period commencing from 1 January
1998 and ending on 31 December 1998 and (c)
US$1,875,000 for the period commencing from 1 January
1999 and ending on 31 December 1999;
(v) the payment of any remuneration or Director's fees;
(vi) loans to Directors or to any corporation in which any
Director or the Directors cumulatively has or have a
controlling interest within the meaning of Section
157H of the Companies Ordinance in the issued share
capital of that corporation;
(vii) a substantial change in the primary business of the
Company;
(viii) inter-company transactions with any company or
businesses in which the Company have a financial
interest;
(ix) the declaration, recommendation, making and payment
of any distribution (whether in cash or in kind);
(x) sale transfer or disposal of the whole or a
substantial part of the Company's undertaking, assets
or property or purchase, sale, transfer, disposal,
lease or licence of any real property or any interest
therein;
(xi) increase, reduction or other alteration to the
authorised or issued share capital;
(xii) commencement or carrying on of any type of business
not being ancillary or incidental to or extension of
the scope of operation or type of the Businesses;
(xiii) merger, consolidation or amalgamation with any
company, association, partnership or legal entity and
acquisition of any shares in any body corporate or
participation in any partnership or joint venture
arrangement;
(xiv) amendment to the Memorandum and Articles of
Association;
4
<PAGE> 76
(xv) sale, transfer or disposal of any asset or investment
with a value in excess of US$10,000.00;
(xvi) approval of the audited balance sheet and profit and
loss account of the Company and any report or
statement accompanying such balance sheet and profit
and loss account;
(xvii) establishment of any special reserves, provisions or
retentions not in the ordinary course of business and
application or utilisation of the same;
(xviii) entry into any contract or arrangement with any
Director or the Company or any person connected with
such person;
(xix) redemption purchase or cancellation of any shares or
issue of further shares or other dilution of the
interest of the shareholders of the Company or
variation of any rights attaching to any shares of
the Company;
(xx) issue of partly-paid shares and making of any call
upon moneys unpaid in respect of any issued shares;
(xxi) subject to the provisions of this Agreement, the
winding-up or dissolution of the Company unless it
shall have become insolvent;
(xxii) any material change in the Company's accounting or
reporting practices;
(xxiii) lending of any moneys other than placing of deposits
with banks and financial institutions;
(xxiv) commencement or settlement of any litigation or
arbitration proceedings having a value or likely
value in excess of US$10,000.00;
(xxv) approval of the Company's annual operating budget and
strategic plans;
(xxvi) any change in the number of Directors of the Company;
(xxvii) save as is otherwise provided herein, any matter
involving the Company with any Director or with
another firm, company or corporation in which any
Director is interested as a proprietor, partner,
director or other officer or creditor of or a
shareholder in, except as a shareholder of a public
company or a public corporation whose shares are
listed on a stock exchange;
(xxviii) any public issue of Shares of the Company or any of
its subsidiaries with a view to obtaining the listing
of the Company or such subsidiary on any other stock
exchange;
(xxix) the authorised signatories of all and any banking or
credit facilities or accounts; and
(xxx) the appointment of any Managing Director, Executive
Director, General Manager, Financial Controller or
similar senior executive or officer of the Company.
14. The Employee hereby further covenants with and undertakes to the
Company that for a period of two (2) years from the date of the
termination of his employment with the Company, he shall not do any of
the following without first obtaining the written consent of the
Company:
5
<PAGE> 77
(a) directly or indirectly carry on (whether alone or in
partnership or joint venture with anyone else) or otherwise be
concerned with or interested in (whether as trustee,
principal, agent, shareholder, unit holder or in any other
capacity) any business similar to or competitive with the
Business (as defined below) of the Company, its subsidiaries
or holding company for two (2) years after the date of
termination of this Agreement, in any country where the
Company, its subsidiaries or holding company currently carries
on the Business and/or sells its products, including, without
limitation, Europe, Hong Kong, Japan, Korea, Malaysia, Mexico,
the People's Republic of China, Singapore and the United
States of America;
(b) solicit or persuade any person or corporation which is a
customer or client of the Company, its subsidiaries or holding
company, or who is or was a customer or client of or in
respect of the Business, to cease doing business with the
Company, its subsidiaries or holding company or reduce the
amount of business which the customer or client would normally
do in respect of the Business for two (2) years after the date
of termination of this Agreement;
(c) accept from a customer or client referred to in Clause 14(b)
above any business of the kind ordinarily forming part of the
Business, of the Company, its subsidiaries or holding company
for two (2) years after the date of termination of this
Agreement;
(d) at any time use or disclose to any third party any trade
secrets, product information or confidential information of
the Business of the Company, its subsidiaries and holding
company which is not generally known or available in the
market place or which but for a breach of this Clause 14 would
not be generally known or available in the market place;
(e) at any time induce or attempt to induce any person who is at
the date of this Agreement or who later becomes an employee of
the Company, its subsidiaries or holding company in the
Business to terminate his or her employment with the Company,
its subsidiaries or holding company;
(f) for the purposes of this Clause 14, the expression "BUSINESS"
shall mean the sale and manufacture of plastic material
products and its by-products (including all associated
importation, exportation, marketing and related activities)
carried on by the Company, its subsidiaries, holding company
or related corporations, anywhere in the world;
(g) each and every obligation under this Clause 14 shall be
treated as a separate obligation and shall be severally
enforceable as such and in the event of any obligation or
obligations being or becoming unenforceable in whole or in
part such part or parts as are unenforceable shall be deleted
from this Clause 14 and any such deletion shall not affect the
enforceability of all such parts of this Clause 14 as remain
not so deleted; and
(h) while the restrictions contained in this Clause 14 are
considered by the parties to be reasonable in all the
circumstances it is recognised that restrictions of the nature
in question may fail for technical reasons unforeseen and
accordingly it is hereby agreed and declared that if any of
such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection
of the interests of the Company, its subsidiaries, holding
company and related corporations but would be valid if part of
the wording thereof were deleted or the periods thereof
reduced or the range of activities or area dealt with thereby
reduced in scope the said restriction shall apply with such
modifications as may be necessary to make it valid and
effective.
6
<PAGE> 78
15. This Agreement is in substitution for all previous contracts of service
between the Company and the Employee which shall be deemed to have been
terminated by mutual consent as from the date on which this Agreement
commences.
16. In case any provision in this Agreement shall be, or at any time shall
become invalid, illegal or unenforceable in any respect under any law,
such invalidity, illegality or unenforceability shall not in any way
affect or impair any other provisions of this Agreement but this
Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
17. (a) This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong.
(b) Any dispute or difference arising out of or in connection with
this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and
finally resolved by arbitration in Hong Kong on or before 31
March 1997 and thereafter in Singapore. In respect of
arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the
SIAC Rules. The HKIAC Rules and the SIAC Rules are deemed to
be incorporated by reference into this Clause 17 save to the
extent that they are inconsistent with the express terms of
this Agreement.
(c) The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Company,
one of whom shall be appointed by the Employee, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC, as the case may
be.
(d) For the purpose of this Agreement a dispute shall be deemed to
arise when one party serves on the other party a notice in
writing (in this Clause, a "NOTICE OF DISPUTE") stating the
nature of the dispute.
(e) The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
(f) The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time
as may be agreed between the parties or directed by the
Chairman of SIAC or HKIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of SIAC or HKIAC, as the case may
be, within fourteen (14) days after such time period. The
third arbitrator shall be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within twenty-eight (28) days of
the receipt of such Notice of Dispute.
(g) The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
7
<PAGE> 79
AS WITNESS the hands of the parties hereto.
SIGNED BY Law Sing ) /s/ LAW SING HONG
------------------
Hong & Law Shun Hang ) /s/ LAW SHUN HANG
------------------
for and on behalf of the )
Company in the presence of: )
/s/ CHRISTINE C. KNIGHT
- -------------------------
Christine C. Knight
Solicitor
Hong Kong
SIGNED BY )
LAW SHUN HANG ) /s/ LAW SHUN HANG
------------------
in the presence of: )
/s/ CHRISTINE C. KNIGHT
- -----------------------
Christine C. Knight
Solicitor
Hong Kong
<PAGE> 80
DATED THE 20TH DAY OF December 1996
Between
FICO INVESTMENT HOLDING LIMITED
(as the Company)
and
LAW KIN PING
(as Employee)
EMPLOYMENT AGREEMENT
<PAGE> 81
THIS AGREEMENT is made on the 20th day of December 1996 BETWEEN:
(1) FICO INVESTMENT HOLDING LIMITED, a company incorporated in Hong Kong
and having its registered office at Rm 10, 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("COMPANY"); and
(2) LAW KIN PING of Flat A, 10/F, Block 2, Faraday House, 6 Tsing Yung
Street, Tuen Mun, New Territories, Hong Kong ("EMPLOYEE").
NOW IT IS HEREBY AGREED as follows:
1. The Company shall employ the Employee and the Employee shall serve the
Company in a senior executive capacity and in such capacity, for the
period and upon and subject to the terms and conditions hereinafter
contained.
2. As a senior executive of the Company, the Employee shall devote
substantially her time and attention and whole skill to the affairs of
the Company and in the discharge of her duties hereunder:
(a) in undertaking such duties and exercising such powers in
relation to the Company and its business as the board of
directors of the Company ("BOARD") shall from time to time
assign to or vest in her;
(b) in the discharge of such duties and in the exercise of such
powers conform to observe and comply with all resolutions
regulations and directions from time to time made or given by
the Board; and
(c) undertake to do such other and additional work as may
reasonably be requested of her and to perform such services
for the Company's subsidiaries or holding company as the Board
may from time to time reasonably require without further
remuneration unless otherwise agreed.
3. The Employee shall not (without the previous written consent of the
Board) during the continuance of this Agreement (either directly or
indirectly) be engaged or interested in any capacity in any trade
business profession or occupation whatsoever other than the business of
the Company. In this Clause 3, the expression "OCCUPATION" shall
include any other private work which in the opinion of the Board may
hinder or otherwise interfere with the performance by the Employee of
her duties under this Agreement.
4. The Employee shall at all times keep the Board promptly and fully
informed of her conduct of the business or affairs of the Company and
its subsidiaries and associated companies (where relevant) and provide
such explanations as the Board may require.
5. The Employee shall not, except as required by law, or authorised or
required by her duties reveal to any person, firm or company any trade
secrets, secret or confidential operations processes or dealings or any
information concerning the organization, business, finances,
transactions or affairs of the Company or any of its subsidiaries,
associated companies or holding company which may come to her knowledge
during her employment hereunder and shall keep with complete secrecy
all confidential information entrusted to her and shall not use or
attempt to use such information in any manner which may injure or cause
loss either directly or indirectly to the Company or its business or
may be likely so to do at any time. This restriction shall continue to
apply and be binding on her after the termination of this Agreement
without limit in point of time but shall cease to apply to information
or knowledge which may come into the public domain.
<PAGE> 82
6. (a) Any discovery or invention or secret process or improvement in
procedure made or discovered by the Employee while in the
service of the Company in connection with or in any way
affecting or relating to the business of the Company or of any
subsidiaries or capable of being used or adapted for use
therein or in connection therewith shall forthwith be
disclosed to the Company and shall belong to and be the
absolute property of the Company or such one of its subsidiary
companies as the Company may nominate for the purpose;
(b) The Employee if and whenever required so to do (whether during
or after the termination of her appointment) shall at the
expense of the Company or its nominee apply or join in
applying for letters patent or other protection in Hong Kong
or any other part of the world for any such discovery,
invention, process or improvements as aforesaid and execute
all instruments and do all things necessary for vesting the
said letters patent or other protection when obtained and all
rights and title to and interest in the same in the Company
(or its nominee) absolutely and as sole beneficial owner or in
such other person as the Company may require;
(c) The Employee hereby irrevocably appoints the Company to be her
attorney in her name and on her behalf to execute and do any
such instrument or thing and generally to use her name for the
purpose of giving to the Company (or its nominee) the full
benefit of the provisions of this clause and in favour of any
third party a certificate in writing signed by any director or
the secretary of the Company that any instrument or act falls
within the authority hereby conferred shall be conclusive
evidence that such is the case;
(d) The Employee shall take all reasonable precautions to
safe-guard her health and keep herself fit to perform her
duties under this Agreement and submit to such medical
examination and/or treatment as the Company's medical advisers
may from time to time consider necessary or advisable;
(e) The Employee shall not promote encourage or participate in any
public tumult or disorder nor do anything which might cause
public scandal or bring the Company or any of its subsidiaries
or associated companies or holding company into disrepute; and
(f) The Employee may not without the prior written consent of the
Board accept any gift and/or favour of whatever kind from any
customer, client or supplier of the Company or any prospective
customer, client or supplier of the Company.
7. This Agreement and all the provisions herein contained (either
expressly or by implication) shall come into force as from 1 January
1997 and shall continue for a term of 3 years, subject to earlier
termination as provided in Clause 11 hereof.
8. (a) Subject as hereinafter provided the Company shall pay to the
Employee during the continuance of her employment hereunder a
salary at the sum of US$55,000 per month which said salary is
inclusive of any sum receivable by the Employee as director's
fee, car allowance, housing allowance or other remuneration
from the Company (or such higher rate as may from time to time
be agreed between the parties or determined upon and notified
to the Employee by the Company). In the event of any increase
of salary being so agreed or notified such increase shall
thereafter have effect as if it were specifically provided for
as a term of this Agreement. The said salary (less any
deductions as shall be required by law to be made) shall be
payable in arrears on the last day of each month;
(b) In addition to her salary, the Employee shall participate in
the Company's profit sharing bonus scheme for key senior
officers authorised by the Board from time to time; and
2
<PAGE> 83
(c) The Employee shall also participate in the employee stock
option scheme for all key employees of Flextronics
International Ltd.
9. The Company will reimburse the Employee for the following:
(a) all travelling and hotel expenses when the Employee is
required by the Company to travel to other countries in the
discharge of her duties; and
(b) all entertainment expenses incurred in the discharge of the
Employee's duties to the Company.
10. The Employee will be entitled to annual leave at the rate of fourteen
(14) working days per annum and such leave shall be taken only at a
time or times convenient to the Company.
11. Notwithstanding anything herein contained, this Agreement may be
determined:
(a) by either party hereto giving to the other not less than three
(3) calendar months' notice in writing; or
(b) by the Company summarily without notice or payment of
compensation whatsoever in any of the following events:
(i) if the Employee is guilty of dishonesty or grave
misconduct or commits any act or wilful neglect as in
the opinion of the Company is likely to bring the
Company or any of its subsidiaries or associated
companies or its holding company or any of its or
their officials or employees into disrepute whether
such dishonesty, misconduct, act or neglect is or is
not directly related to the affairs of the Company;
(ii) if the Employee becomes of unsound mind or becomes
permanently incapacitated by accident or ill-health
and is unable to perform her duties under this
Agreement;
(iii) if the Employee becomes bankrupt or makes any
arrangement or composition with her creditors;
(iv) if the Employee commits any material breach of any of
her duties or obligations under this Agreement;
(v) if the Employee is convicted of any criminal offence
other than an offence which in the reasonable opinion
of the Board does not affect her position as an
employee of the Company;
(vi) if the Employee is found to have made illegal
monetary profit or received any gratuities or other
rewards (whether in cash or kind) out of any of the
Company's affairs; or
(vii) if the Company is required or requested by any
authority (whether governmental or statutory) to
terminate the services of the Employee.
(c) Upon the termination of this Agreement for whatsoever reason
the Employee shall upon the request of the Company resign
without claim for compensation from office as a Employee of
the Company and from all offices held by her in subsidiary or
associated companies or the holding company of the Company and
in the event of her failure to do so the Company is hereby
irrevocably authorised to appoint such person in her name and
on her behalf to execute any documents and to do all things
requisite to give effect thereto.
3
<PAGE> 84
12. The exercise by the Company of its rights of summary dismissal under
the preceding clause hereof shall not debar it from exercising such
other rights or remedies as may be available to it by law or otherwise
by reason of any of the matters aforesaid.
13. The Employee undertakes that any question or matter relating to the
following shall be determined by the Board and in so far as the Call
Option (as defined in the Call Option Agreement) has not been exercised,
such matters shall be determined pursuant to Clause 9 of the
Shareholders' Agreement:
(i) any investment by the Company of $10,000 or more;
(ii) appointment of (and any subsequent change in) the auditors,
secretary and principal bankers and any subsequent change in the
financial year end and the registered office of the Company;
(iii) entry by the Company or its subsidiaries into any transaction
of a financial nature including the incurring of any borrowing
under any existing or future banking and credit facilities and
granting of any guarantee, indemnity, performance bond, lien,
pledge, charge (including fixed and floating charge), mortgage
or other security and the incurring of any other form of
indebtedness in excess of US$50,000.00;
(iv) the incurring of any capital expenditure including the making
or disposal of any investment in excess of (a) US$1,000,000 for
the period commencing from 1 January 1997 and ending on 31
December 1997; (b) US$1,500,000 for the period commencing from 1
January 1998 and ending on 31 December 1998 and (c) US$1,875,000
for the period commencing from 1 January 1999 and ending on 31
December 1999;
(v) the payment of any remuneration or Director's fees;
(vi) loans to Directors or to any corporation in which any Director
or the Directors cumulatively has or have a controlling interest
within the meaning of Section 157H of the Companies Ordinance in
the Issued share capital of that corporation;
(vii) a substantial change in the primary business of the Company;
(viii) inter-company transactions with any company or businesses in
which the Company have a financial interest;
(ix) the declaration, recommendation, making and payment of any
distribution (whether in cash or in kind);
(x) sale transfer or disposal of the whole or a substantial part of
the Company's undertaking, assets or property or purchase, sale,
transfer, disposal, lease or license of any real property or any
interest therein;
(xi) increase, reduction or other alteration to the authorised or
issued share capital;
(xii) commencement or carrying on of any type of business not being
ancillary or incidental to or extension of the scope of
operation or type of the Businesses;
(xiii) merger, consolidation or amalgamation with any company,
association, partnership or legal entity and acquisition of any
shares in any body corporate or participation in any partnership
or joint venture arrangement;
(xiv) amendment to the Memorandum and Articles of Association;
4
<PAGE> 85
(xv) sale, transfer or disposal of any asset or investment with a
value in excess of US$10,000.00;
(xvi) approval of the audited balance sheet and profit and loss
account of the Company and any report or statement accompanying
such balance sheet and profit and loss account;
(xvii) establishment of any special reserves, provisions or retentions
not in the ordinary course of business and application or
utilisation of the same;
(xviii) entry into any contract or arrangement with any Director of the
Company or any person connected with such person;
(xix) redemption purchase or cancellation of any shares or issue of
further shares or other dilution of the interest of the
shareholders of the Company or variation of any rights
attaching to any shares of the Company;
(xx) issue of partly-paid shares and making of any call upon moneys
unpaid in respect of any issued shares;
(xxi) subject to the provisions of this Agreement, the winding-up or
dissolution of the Company unless it shall have become
insolvent;
(xxii) any material change in the Company's accounting or reporting
practices;
(xxiii) lending of any moneys other than placing of deposits with
banks and financial institutions;
(xxiv) commencement or settlement of any litigation or arbitration
proceedings having a value or likely value in excess of
US$10,000.00;
(xxv) approval of the Company's annual operating budget and strategic
plans;
(xxvi) any change in the number of Directors of the Company;
(xxvii) save as is otherwise provided herein, any matter involving
the Company with any Director or with another firm, company or
corporation in which any Director is interested as a
proprietor, partner, director or other officer or creditor of
or a shareholder in, except as a shareholder of a public
company or a public corporation whose shares are listed on
a stock exchange;
(xxviii) any public issue of Shares of the Company or any of its
subsidiaries with a view to obtaining the listing of the
Company or such subsidiary on any other stock exchange;
(xxix) the authorised signatories of all and any banking or credit
facilities or accounts; and
(xxx) the appointment of any Managing Director, Executive Director,
General Manager, Financial Controller or similar senior
executive or officer of the Company.
14. The Employee hereby further covenants with and undertakes to the Company
that for a period of two (2) years from the date of the termination of
her employment with the Company, she shall not do any of the following
without first obtaining the written consent of the Company;
5
<PAGE> 86
(a) directly or indirectly carry on (whether alone or in
partnership or joint venture with anyone else) or otherwise be
concerned with or interested in (whether as trustee, principal,
agent, shareholder, unit holder or in any other capacity) any
business similar to or competitive with the Business (as defined
below) of the Company, its subsidiaries or holding company for
two (2) years after the date of termination of this Agreement,
in any country where the Company, its subsidiaries or holding
company currently carries on the Business and/or sells its
products, including, without limitation, Europe, Hong Kong,
Japan, Korea, Malaysia, Mexico, the People's Republic of China,
Singapore and the United States of America;
(b) solicit or persuade any person or corporation which is a
customer or client of the Company, its subsidiaries or holding
company, or who is or was a customer or client of or in respect
of the Business, to cease doing business with the Company, its
subsidiaries or holding company or reduce the amount of business
which the customer or client would normally do in respect of the
Business for two (2) years after the date of termination of this
Agreement;
(c) accept from a customer or client referred to in Class 14(b)
above any business of the kind ordinarily forming part of the
Business, of the Company, its subsidiaries or holding company
for two (2) years after the date of termination of this
Agreement;
(d) at any time use or disclose to any third party any trade
secrets, product information or confidential information of
the Business of the Company, its subsidiaries and holding
company which is not generally known or available in the market
place or which but for a breach of this Clause 14 would not be
generally known or available in the market place;
(e) at any time induce or attempt to induce any person who is at
the date of this Agreement or who later becomes an employee of
the Company, its subsidiaries or holding company in the Business
to terminate his or her employment with the Company, its
subsidiaries or holding company;
(f) for the purposes of this Clause 14, the expression "Business"
shall mean the sale and manufacture of plastic material products
and its by-products (including all associated importation,
exportation, marketing and related activities) carried on by the
Company, its subsidiaries, holding company or related
corporations, anywhere in the world;
(g) each and every obligation under this Clause 14 shall be treated
as a separate obligation and shall be severally enforceable as
such and in the event of any obligation or obligations being or
becoming unenforceable in whole or in part such part or parts as
are unenforceable shall be deleted from this Clause 14 and any
such deletion shall not affect the enforceability of all such
parts of this Clause 14 as remain not as deleted; and
(h) while the restrictions contained in this Clause 14 are
considered by the parties to be reasonable in all the
circumstances it is recognised that restrictions of the nature
in question may fail for technical reasons unforeseen and
accordingly it is hereby agreed and declared that if any of such
restrictions shall be adjudged to be void as going beyond what
is reasonable in all the circumstances for the protection of the
interests of the Company, its subsidiaries, holding company and
related corporations but would be valid if part of the wording
thereof were deleted or the periods thereof reduced or the range
of activities or area dealt with thereby reduced in scope the
said restriction shall apply with such modifications as may be
necessary to make it valid and effective.
6
<PAGE> 87
15. This Agreement is in substitution for all previous contracts of service
between the Company and the Employee which shall be deemed to have been
terminated by mutual consent as from the date on which this Agreement
commences.
16. In case any provision in this Agreement shall be, or at any time shall
become invalid, illegal or unenforceable in any respect under any law,
such invalidity, illegality or unenforceability shall not in any way
affect or impair any other provisions of this Agreement but this
Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
17. (a) This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong.
(b) Any dispute or difference arising out of or in connection with
this Agreement, including any question regarding its existence,
validity or termination, shall be referred to and finally
resolved by arbitration in Hong Kong on or before 31 March
1997 and thereafter in Singapore. In respect of arbitration in
Hong Kong, the arbitration shall be in accordance with HKIAC
Rules. In respect of arbitration in Singapore, the arbitration
shall be in accordance with the SIAC Rules. The HKIAC Rules and
the SIAC Rules are deemed to be incorporated by reference into
this Clause 17 save to the extent that they are inconsistent
with the express terms of this Agreement.
(c) The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Company,
one of whom shall be appointed by the Employee, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC, as the case may be.
(d) For the purpose of this Agreement a dispute shall be deemed to
arise when one party serves on the other party a notice in
writing (in this Clause, a "NOTICE OF DISPUTE") stating the
nature of the dispute.
(e) The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
(f) The party in receipt of any Notice of Dispute shall appoint
an arbitrator within twenty-eight (28) days or such longer
time as amy be agreed between the parties or directed by the
Chairman of SIAC or HKIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of SIAC or HKIAC, as the case may be,
within fourteen (14) days after such time period. The third
arbitrator shall be appointed by the Chairman of SIAC or HKIAC,
as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
(g) The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
7
<PAGE> 88
AS WITNESS the hands of the parties hereto.
SIGNED BY LAW SHUN HANG )
& LAW SING HONG ) /s/ Law Shun Hang /s/ Law Sing Hong
for and on behalf of the ) ----------------- -----------------
Company in the presence of: )
/s/ Christine C. Knight
- --------------------------
Christine C. Knight
Solicitor
Hong Kong
SIGNED BY )
LAW KIN PING ) /s/ Law Kin Ping
in the presence of: ) -----------------
/s/ Christine C. Knight
- --------------------------
Christine C. Knight
Solicitor
Hong Kong
8
<PAGE> 89
SCHEDULE 5
ESCROW AGREEMENT
DATED THE 20th DAY OF DECEMBER, 1996
Between
FLEXTRONICS INTERNATIONAL LTD
FICO FOREST INDUSTRIAL CO. LIMITED
And
ERNST & YOUNG
as Escrow Agent
ESCROW AGREEMENT
<PAGE> 90
TABLE OF CONTENTS
Clause Heading Paqe
- ------ ------- ----
1. DEFINITIONS AND INTERPRETATION ..................................... 1
2. ESCROW ............................................................. 1
3. APPOINTMENT OF ESCROW AGENT ........................................ 1
4. THE DOCUMENTS ...................................................... 2
5. POWER OF ATTORNEY .................................................. 2
6. FEES ............................................................... 2
7. THE ESCROW AGENT ................................................... 3
8. COMMUNICATIONS ..................................................... 3
9. FORCE MAJEURE ...................................................... 3
10. GOVERNING LAW AND DISPUTE RESOLUTION ............................... 3
11. COUNTERPARTS ....................................................... 4
APPENDIX NOTICE FROM FIL ............................................. 6
<PAGE> 91
THIS ESCROW AGREEMENT is made on the 20TH day of December, 1996 BETWEEN:
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in the Republic
of Singapore and having its registered office at 36 Robinson Road,
#18-01 City House, Singapore 068877 ("FIL")
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("FICO(HK)"); and
(3) ERNST & YOUNG, an international accounting firm in Hong Kong having its
place of business at 10/F Tower 2, The Gateway 25-27, Canton Road,
Kowloon, Hong Kong ("ESCROW Agent").
WHEREAS:
(A) FICO(HK) is the legal and beneficial owner of 6,000 ordinary shares of
HK$1.00 each ("SHARES") comprising sixty per cent. (60%) of all the
issued and paid-up share capital of Fico Investment Holding Limited.
("COMPANY")
(B) Pursuant to a Charge of even date entered into between FIL and
FICO(HK), FICO(HK) had agreed to deposit all the Documents (as defined
below) with the Escrow Agent pursuant to the terms of this Escrow
Agreement, and the Escrow Agent has consented to act as the escrow
agent upon the terms and conditions herein contained.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 Terms defined in the Charge shall, unless otherwise defined herein,
bear the same meaning when used in this Escrow Agreement.
1.2 References to Recitals, Clauses, Schedules and Appendices are to
recitals, clauses of and schedules and appendices to this Agreement.
2. ESCROW
The parties hereto have agreed that all the share certificate(s) in
respect of the Shares (including all right, title and interest in and
to the Shares and all rights, monies and property whatsoever which may
at any time be derived from, accrue on or be offered in respect of the
Shares whether by way of redemption, exchange, conversion, rights,
bonus, capital reorganisation or otherwise) together with registrable
instruments of transfer and sold notes in respect thereof duly executed
by FICO(HK) in blank ("DOCUMENTS") shall be delivered by FICO(HK) to
the Escrow Agent on the date of this Agreement and shall be held by the
Escrow Agent in accordance with the provisions of this Escrow
Agreement.
3. APPOINTMENT OF ESCROW AGENT
3.1 The Escrow Agent is hereby appointed as escrow agent upon the terms and
conditions of this Escrow Agreement.
<PAGE> 92
3.2 The sole duties of the Escrow Agent shall be to act in accordance with
the provisions of this Escrow Agreement, which the Escrow Agent is
hereby unconditionally and irrevocably authorised and instructed to do
by each of the parties hereto.
4. THE DOCUMENTS
4.1 The Escrow Agent will receive and hold the Documents until it receives
notice (upon which the Escrow Agent shall be entitled to rely without
further inquiry and notwithstanding any matter or thing of which the
Escrow Agent may otherwise be aware) from time to time from FIL to
release the Documents to such persons designated by FIL and the Escrow
Agent shall release the Documents in accordance with such instructions
set out in the notice which shall be in the form set out in the
Appendix hereto or such other form as may be determined by FIL in its
discretion and such notice shall be signed by any director of FIL for
and on behalf of FIL.
4.2 The Escrow Agent shall not release any of the Documents except in
accordance with the instructions or notifications referred to in Clause
4.1.
5. POWER OF ATTORNEY
5.1 FICO(HK) hereby irrevocably appoints the Escrow Agent and FIL jointly
and severally to be its attorneys with full power of substitution and
in its name and on its behalf and as its act and deed to execute, seal
and deliver and otherwise perfect any deed, assurance, agreement,
instrument or act the Escrow Agent or FIL may deem necessary and in
particular, but without limitation to do all or any of the following:
(a) to effect any transfer of the Shares or any of them and to
register and/or procure the registration of the same whether
in the name of FIL or otherwise; and
(b) to call or to procure the calling of and to attend any
shareholders meeting of the Company and to vote or to instruct
any proxy to vote at such meeting in such manner as it may
think fit,
Provided Always that the Escrow Agent is hereby authorised and shall
act in accordance with the wishes and directions of FIL.
5.2 FICO(HK) hereby ratifies and confirms and agrees to ratify and confirm
anything the Escrow Agent and/or FIL shall lawfully and properly do or
purport to do by virtue of Clause 5.1 and all money expended by either
of the Escrow Agent or FIL shall be payable by FICO(HK) upon demand.
6. FEES
6.1 For its services as Escrow Agent hereunder, the Escrow Agent shall be
paid, within seven (7) Business Days of the signing hereof, a fee to be
agreed to be borne as to fifty per cent. (50%) of such fee by FIL and
as to the remaining fifty per cent. (50%) by FICO(HK).
6.2 The parties hereto (other than the Escrow Agent) hereby agree to
indemnify, in equal proportions between FIL on the one hand and
FICO(HK) on the other hand, the Escrow Agent and keep the Escrow Agent
fully indemnified on demand in respect of the Escrow Agent's legal
costs and other expenses which have been or may be incurred by the
Escrow Agent in the performance of its duties hereunder.
2
<PAGE> 93
7. THE ESCROW AGENT
7.1 Neither the Escrow Agent nor any of the officers, employees, partners,
servants or agents thereof shall, by reason of any matter or thing
contained in this Escrow Agreement, be deemed to be a trustee for or
have any fiduciary relationship with any of the parties hereto or any
other person.
7.2 The Escrow Agent will be entitled to rely, for the purposes of
discharging its duties hereunder, on any original notice, letter or
other document received by it pursuant to the terms of this Escrow
Agreement without any obligation on its part to investigate whether any
statement contained in the original notice, letter or other document is
correct, whether the same has been validly authorised and issued,
whether the same has been properly dated, whether any notice, letter or
other document conforms with the original, or otherwise howsoever, and
the Escrow Agent shall not be under any liability in relying and acting
on any such original notice, letter or other document.
8. COMMUNICATIONS
All notices and other communications to the Escrow Agent hereunder
shall be given in writing delivered personally or sent by first class
post (airmail if overseas) or by facsimile transmission delivered or
addressed to the Escrow Agent at the address above written or such
other address as the Escrow Agent may notify to the other parties
hereto in writing from time to time, and addressed to such person as
the Escrow Agent may notify to the other parties from time to time. Any
such communication sent by post or facsimile transmission shall be
treated as being duly delivered on its actual receipt by the Escrow
Agent (in the case of a facsimile with all pages complete) and the
Escrow Agent's certificate as to the time of actual receipt shall, in
the absence of manifest error, be conclusive.
9. FORCE MAJEURE
No party shall be held responsible for any loss, damage or delay
suffered by the other parties owing to any Act of God which shall mean
earthquakes and other such natural calamities. Any party wishing to
rely on the provisions of this Clause 9 shall give notice to the other
parties stating the relevant cause ("FORCE MAJEURE NOTICE"). The party
serving such Force Majeure Notice shall promptly resume performance of
its obligations the moment such cause or causes cease to operate.
10. GOVERNING LAW AND DISPUTE RESOLUTION
10.1 This Agreement shall be governed by, and construed in accordance with,
the laws of Hong Kong.
10.2 Any dispute or difference arising out of or in connection with this
Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 10.2 save to the extent that they are
inconsistent with the express terms of this Agreement.
3
<PAGE> 94
10.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by FIL, one of whom shall
be appointed by FICO(HK), and the third (who shall act as Chairman of
the arbitral tribunal) to be appointed by the Chairman of SIAC or
HKIAC, as the case may be.
10.4 For the purpose of this Agreement a dispute shall be deemed to arise
when one party serves on the other party a notice in writing (in this
Clause, a "NOTICE OF DISPUTE") stating the nature of the dispute.
10.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
10.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
10.7 The prevailing party in the Arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
11. COUNTERPARTS
This Agreement may be signed in any number of counterparts, all of
which when taken together shall constitute one and the same instrument.
4
<PAGE> 95
IN WITNESS WHEREOF this Agreement has been entered into on the date appearing at
the head hereof.
FIL
SIGNED by )
S.L. Tsui )
for and on behalf of ) /s/ S.L. Tsui
FLEXTRONICS INTERNATIONAL LTD )
in the presence of)
/s/ Cosmas Wong Cin Tzieh
COSMAS WONG CIN TZIEH
Advocate & Solicitor
Singapore
FICO(HK)
SIGNED by )
for and on behalf of )
FICO FOREST INDUSTRIAL )
CO. LIMITED )
in the presence of) )
The Escrow Agent
SIGNED by )
for and on behalf of )
ERNST & YOUNG )
in the presence of) )
5
<PAGE> 96
IN WITNESS WHEREOF this Agreement has been entered into on the date appearing at
the head hereof.
FIL
SIGNED by )
)
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of:
FICO(HK)
SIGNED by LAW SING HONG & ) /s/ Law Sing Hong
LAW SHUN HANG ) /s/ Law Shun Hang
for and on behalf of )
FICO FOREST INDUSTRIAL )
CO. LIMITED )
in the presence of: )
/s/ Christine C. Knight
Christine C. Knight
Solicitor
Hong Kong
The Escrow Agent
SIGNED by Susan Lo, )
Director )
for and on behalf of ) /s/ Susan Lo
ERNST & YOUNG )
in the presence of: )
/s/ Christine C. Knight
Christine C. Knight
Solicitor
Hong Kong
5
<PAGE> 97
APPENDIX
NOTICE FROM FIL
To : ERNST & YOUNG
10/F Tower 2
The Gateway 25-27
Canton Road, Kowloon
Hong Kong
Attn : [ ]
Dear Sirs
ESCROW AGREEMENT DATED 1996 ("ESCROW AGREEMENT")
We refer to the Escrow Agreement entered into among (1) Flextronics
International Ltd; (2) Fico Forest Industrial Co. Limited; and (3) Ernst & Young
("ESCROW AGENT"). Save as otherwise stated herein, terms defined in the Escrow
Agreement bear the same meanings when used herein.
Pursuant to the Escrow Agreement, we, FIL, hereby instruct you to release the
following Documents referred to below to the following person(s)/party(s):
[ ]
Yours faithfully,
for and on behalf of
FLEXTRONICS INTERNATIONAL LTD
[Name]
[Designation]
6
<PAGE> 98
SCHEDULE 6
FICO CALL OPTION AGREEMENT
DATED THE 20TH DAY OF DECEMBER 1996
Between
FLEXTRONICS INTERNATIONAL LTD
And
FICO FOREST INDUSTRIAL CO. LIMITED
--------------------------------------------------------------------
FICO CALL OPTION AGREEMENT
relating to all the ordinary shares
in the share capital of
FICO INVESTMENT HOLDING LIMITED
held by
FLEXTRONICS INTERNATIONAL LTD
--------------------------------------------------------------------
<PAGE> 99
TABLE OF CONTENTS
CLAUSE HEADING PAGE
- ------ ------- ----
1. INTERPRETATION ...................................................... 1
2. FICO CALL OPTION .................................................... 2
3. FICO CALL OPTION COMPLETION ......................................... 3
4. DURATION OF OBLIGATIONS ............................................. 4
5. FIL'S WARRANTIES .................................................... 4
6. COMMUNICATIONS ...................................................... 4
7. GENERAL ............................................................. 5
8. GOVERNING LAW AND DISPUTE RESOLUTION ................................ 5
<PAGE> 100
THIS AGREEMENT is made on the 20th day of December 1996 BETWEEN:
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore and
having its registered office at 36 Robinson Road, City House, #18-01,
Singapore 068877 ("FIL");
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("FICO(HK)")
WHEREAS:
(A) Fico Investment Holdings Limited ("COMPANY") is a company limited by
shares incorporated in Hong Kong and has at the date hereof an
authorised share capital of 10,000 ordinary shares of HK$1.00 each, of
which 10,000 of the said ordinary shares have been issued and are fully
paid-up.
(B) FICO(HK) is the legal and beneficial owner of 6,000 ordinary shares of
HK$1.00 each in the Company consisting sixty per cent. (60%) of the
issued and paid-up capital of the Company.
(C) By a Call Option Agreement of even date, FICO(HK) had granted to FIL a
Call Option to purchase the remaining 6,000 ordinary shares of HK$1.00
each in the Company consisting sixty per cent. (60%) of the issued and
paid-up capital of the Company to be exercised by FIL in the event that
certain conditions are met.
(D) This Agreement is entered into pursuant to the Sale and Purchase
Agreement ("SALE AND PURCHASE AGREEMENT") dated 29 November 1996, and
made between (1) FICO(HK), as purchaser (2) FIL, as Vendor and (3) the
Company and the Call Option Agreement of even date, and made between
FIL and FICO(HK). FIL wishes to grant to FICO(HK) a call option in
respect of the Fico Call Option Shares (as defined below) for the
consideration and on the terms and conditions set out in this
Agreement.
NOW IT IS HEREBY AGREED as follows:
1 . INTERPRETATION
1.1 In this Agreement except to the extent that the context
otherwise requires:
"BANKER'S DRAFT" means a banker's draft drawn on a bank in
Hong Kong;
"EXERCISE DATE" means the date of service of a Fico Call
Option Notice under Clause 2.3;
"FICO CALL OPTION COMPLETION" means the performance by
FICO(HK) and FIL of the obligations assumed by them
respectively under Clause 3.2;
"FICO CALL OPTION COMPLETION DATE" means 1 1.00 a.m. on the
date falling fourteen (14) days from the Exercise Date;
"FICO CALL OPTION PERIOD" means the period commencing on the
date of this Agreement and expiring on the date falling on the
first anniversary of the end of the Second Financial Period
(as defined in the Call Option Agreement) (both dates
inclusive);
<PAGE> 101
"FICO CALL OPTION PRICE" means the aggregate of the Investment and
interest at the rate of FIL's cost of funds plus two per cent. (2%) per
annum (as may be certified any officer of FIL, such certification to be
final and conclusive in the absence of manifest error) from the date of
payment of the Investment (or parts thereof) under the Sale and
Purchase Agreement or the Call Option Agreement, as the case may be (or
such deferred date pursuant to Clause 3.3), such interest to be
calculated on the basis of a 360-day year and the actual number of days
elapsed;
"FICO CALL OPTION" shall have the meaning ascribed to it in Clause 2.1;
"FICO CALL OPTION NOTICE" means a notice exercising the Fico Call
Option given pursuant to Clause 2.3;
"FICO CALL OPTION SHARES" means all the Shares held by FIL in the
capital of the Company at the time the Fico Call Option is exercised;
"INVESTMENT" means the total equity investment made by FIL in the
Company and all monies paid to FICO (HK) pursuant to the Sale and
Purchase Agreement, including, without limitation, (i) the
Consideration (as defined in the Sale and Purchase Agreement) and (ii)
the Purchase Price (as defined in the Call Option Agreement);
"SHAREHOLDERS' AGREEMENT" means the shareholders' agreement of even
date and entered into between (1) FICO(HK), (2) FIL and (3) the
Company;
"SHARES" means ordinary shares of HK$1.00 each in the capital of the
Company;
"TRANSFER TERMS" means the entire legal and beneficial interest in all
the Fico Call Option Shares shall be sold and purchased free from any
Encumbrance and together with all rights attaching thereto as at the
Exercise Date or at any time thereafter and that the consideration for
the Fico Call Option Shares shall be the Fico Call Option Price; and
"US$" means the lawful currency of the United States of America.
1.2 All terms and references used in this Agreement and which are defined
or construed in the Sale and Purchase Agreement but are not defined or
construed in this Agreement shall have the same meaning and
construction in this Agreement. All references in this Agreement to the
Sale and Purchase Agreement are to the Sale and Purchase Agreement as
from time to time amended, modified or supplemented.
1.3 References to Recitals and Clauses are to recitals and clauses of this
Agreement. The headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement. Words importing
the singular number include the plural number and vice versa.
References to documents include variations and replacements thereof and
supplements thereto. References to a party include its permitted
assigns and transferees and its successors-in-title.
2. FICO CALL OPTION
2.1 In consideration of the sum of US$1.00 (receipt of which FIL hereby
acknowledges), FIL hereby grants to FICO(HK) the right, in the event
that (i) a court having jurisdiction in Singapore shall enter a decree
or order for relief in respect of FIL in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of FIL or for any
substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and such decree or order shall remain
unstayed and in effect for a period of sixty (60) consecutive days; or
(ii) FIL is unable to discharge its liabilities under
2
<PAGE> 102
the First Consideration Note or the Second Consideration Note pursuant
to Clauses 3.6 and 3.7 respectively of the Call Option Agreement; or
(iii) a notice of termination is served by FICO (HK) under Clause 12(B)
of the Shareholder's Agreement pursuant to Clause 12(C)(i) of the
Shareholders' Agreement (each of (i), (ii) and (iii) hereinafter
referred to as a "PRECONDITION EVENT"), to require the FIL to sell to
FICO(HK) all the Fico Call Option Shares on the terms and subject to
the conditions of this Agreement ("FICO CALL OPTION").
2.2 On the exercise of the Fico Call Option, the FICO(HK) will become bound
to purchase and FIL will become bound to complete the sale of the Fico
Call Option Shares on the Transfer Terms.
2.3 The Fico Call Option must be exercised by notice in writing by FICO(HK)
served only during the Fico Call Option Period and subject to the
fulfilment of a Precondition Event, failing which it will lapse and
cease to have any further effect.
2.4 For the purposes of this Clause, a certificate signed by a director of
FIL confirming the Fico Call Option Price shall, in the absence of
manifest error, be final and conclusive.
3. FICO CALL OPTION COMPLETION
3.1 Completion of the sale and purchase of the Fico Call Option Shares
shall take place in Hong Kong at the Hong Kong branch office of FIL (or
at such other place as may be agreed) on the Fico Call Option
Completion Date, provided that if such a day is not a Business Day then
the Fico Call Option Completion shall take place at 12 noon on the
first Business Day thereafter.
3.2 On Fico Call Option Completion:
(a) FIL shall deliver to the FICO(HK) duly executed transfers and
duly executed sold notes in favour of the FICO(HK) in respect
of the Fico Call Option Shares accompanied by the relative
share certificate(s) and shall do all things and execute such
documents as shall be necessary or as FICO(HK) may reasonably
request to give effect to the sale of the Fico Call Option
Shares pursuant to Clause 2 on the Transfer Terms;
(b) FIL shall procure the resignations of the existing Directors
of the Company, which said resignations shall take effect on
the Fico Call Option Completion; and
(c) the FICO(HK) shall pay the Fico Call Option Price to FIL by
way of telegraphic transfer to an account designated by FIL to
FICO(HK) not later than three (3) Business Days prior to the
Fico Call Option Completion Date or by way of a banker's
draft.
3.3 If any of the provisions of Clause 3.2 are not complied with on the
Fico Call Option Completion Date the party not in default may (without
prejudice to his other rights and remedies):
(a) defer Fico Call Option Completion to a date not more than
twenty eight (28) days after the Fico Call Option Completion
Date (and so that the provisions of this Clause 3 shall apply
to Fico Call Option Completion as so deferred); or
(b) proceed to Fico Call Option Completion so far as practicable
(without prejudice to his rights hereunder); or
(c) rescind the contract of sale arising by virtue of the exercise
of the Fico Call Option.
3
<PAGE> 103
4. DURATION OF OBLIGATIONS
4.1 This Agreement shall terminate on the date falling on the first
anniversary of the end of the Second Financial Period if no Fico Call
Option Notice shall have been served on or prior to such date.
4.2 If the Fico Call Option Notice shall have been served on or prior to
the date mentioned in Clause 4.1 this Agreement shall continue in force
after such date until the fulfilment of the parties' obligations
hereunder in relation to the Fico Call Option Notice whereupon it shall
terminate.
5. FIL'S WARRANTIES
5.1 FIL warrants to FICO(HK) that it is and will remain until the expiry of
the Fico Call Option Period or the Fico Call Option Completion Date,
whichever is the later, the sole legal and beneficial owner of the Fico
Call Option Shares, subject to the Fico Call Option and the Put Option
(as defined in the Put Option Agreement).
5.2 FIL shall not prior to the expiry of the Fico Call Option Period or the
Fico Call Option Completion Date, whichever is the later, transfer,
dispose of or permit any Encumbrance save for the Fico Call Option,
over its interest in any of the Fico Call Option Shares and the Fico
Call Option Shares shall upon Fico Call Option Completion be sold free
of any Encumbrance.
6. COMMUNICATIONS
6.1 Except as otherwise provided in the Agreement, all notices required or
permitted to be given hereunder shall be in writing and in the English
language and shall be sent by facsimile or in writing.
6.2 Any notice hereunder shall be addressed as follows:
In the case of FICO(HK): Fico Forest Industrial Co. Limited
Unit 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number: (852) 2412-0791
Attention: Mr Law Sing Hong
In the case of FIL: Flextronics International Ltd
514 Chai Chee Lane, #04-13
Singapore 469029
Fax Number: (65) 449-9548
Attention: Mr Goh Chan Peng
6.3 Any party may from time to time by notice hereunder change its address
or telefax number for notice. Notice given by facsimile shall be deemed
to have been served on the next Business Day in the place of address
following the day of transmission.
4
<PAGE> 104
7. GENERAL
7.1 This Agreement may be assigned in whole or in part by FIL.
Notwithstanding this, this Agreement shall not be assigned in whole or
in part by the FICO(HK). It is expressly agreed that this Agreement
shall be binding upon and shall enure for the benefit of the parties'
successors.
7.2 This Agreement supersedes any previous agreement between the parties
hereto in relation to the matters dealt with herein, represents
(together with any documents referred to herein) the entire agreement
between the parties herein in relation to such matters and no variation
hereof shall be effective unless made in writing.
7.3 The failure of any of the parties hereto at any time to require
performance by any other party or to claim a breach of any term of this
Agreement shall not be deemed to be a waiver of any right under this
Agreement.
7.4 The parties hereto shall, and shall use their respective reasonable
endeavours to procure that any necessary third parties shall, execute
and do all such further deeds, documents and things as either party may
reasonably require by notice in writing to the other party to carry the
provisions of this Agreement into full force and effect and (so far as
they are able) shall do anything necessary (including, without
limitation, exercising their powers as shareholders) to give effect to
the spirit and intent of this Agreement).
7.5 Any date or period mentioned in this Agreement may be extended by
agreement between the parties hereto (or such of the parties as may be
affected thereby), but as regards any date or period (whether or not
extended as aforesaid) time shall be of the essence of this Agreement.
7.6 Subject as specifically provided herein, each of the parties hereto
shall bear its own costs and expenses relating to this Agreement, save
that the FICO(HK) shall bear all stamp duty payable in respect of the
grant of the Fico Call Option and the purchase of the Fico Call Option
Shares.
7.7 The illegality, invalidity or unenforceability of any provision of this
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.
7.8 Notwithstanding the completion of the sale and purchase of the Fico
Call Option Shares herein, the terms and condition of this Agreement
shall not merge with the transfer or conveyance of the Fico Call Option
Shares and be extinguished but shall remain in full force and effect as
between FICO(HK) and FIL insofar as the same shall not have been
fulfilled.
8. GOVERNING LAW AND DISPUTE RESOLUTION
8.1 This Agreement shall be governed by, and construed in accordance with,
the laws of Hong Kong.
8.2 Any dispute or difference arising out of or in connection with this
Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 8.2 save to the extent that they are
inconsistent with the express terms of this Agreement.
5
<PAGE> 105
8.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by FICO(HK), one of whom
shall be appointed by FIL, and the third (who shall act as Chairman of
the arbitral tribunal) to be appointed by the Chairman of SIAC or
HKIAC, as the case may be.
8.4 For the purpose of this Agreement a dispute shall be deemed to arise
when one party serves on the other party a notice in writing (in this
Clause, a "NOTICE OF DISPUTE") stating the nature of the dispute.
8.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
8.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
8.7 The prevailing party in the arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
6
<PAGE> 106
IN WITNESS WHEREOF the parties set their hands this day and year first above
written.
FICO(HK)
Signed by )
)
/s/ LAW SING HONG & LAW SHIN TANG )
- -----------------------------------------)
Law Sing Hong & Law Shin Tang )
)
for and on behalf of )
FICO FOREST INDUSTRIAL )
CO. LIMITED )
in the presence of: )
/s/ CHRISTINE C. KNIGHT
- -----------------------------------
Christine C. Knight
Solicitor
Hong Kong
FIL
Signed by )
)
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of: )
7
<PAGE> 107
IN WITNESS WHEREOF the parties set their hands this day and year first above
written.
FICO(HK)
Signed by )
)
for and on behalf of )
FICO FOREST INDUSTRIAL )
CO. LIMITED )
in the presence of: )
FIL
Signed by )
)
/s/ S. L. TSUI )
- -------------------------------- )
S. L. Tsui )
)
for and on behalf of )
FLEXTRONICS INTERNATIONAL LTD )
in the presence of: )
/s/ COSMAS WONG CIN TZIEH
- --------------------------------
Cosmas Wong Cin Tzieh
Advocate and Solicitor
Singapore
7
<PAGE> 108
SCHEDULE 8
DEED OF INDEMNITY
Dated the 20th day of December 1996
Between
FICO FOREST INDUSTRIAL CO. LIMITED
And
FLEXTRONICS INTERNATIONAL LTD
FICO INVESTMENT HOLDING LIMITED
FOREST KEYBOARD MANUFACTURING (SHENZHEN) LTD.
---------------------------------------------------------------------------
DEED OF INDEMNITY
----------------------------------------------------------------------------
<PAGE> 109
THIS DEED OF INDEMNITY is made on the 20th day of December 1996
BETWEEN:
(1) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
with its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("FICO(HK)")
(2) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore with
its registered office at 36 Robinson Road, #18-01 City House, Singapore
068877 ("FIL");
(3) FICO INVESTMENT HOLDING LIMITED, a company incorporated in Hong Kong
with its registered office at Rm 10, 18/F, Blk B, Kong Nam Ind.
Building, 603 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong
("Company"); and
(4) FOREST KEYBOARD MANUFACTURING (SHENZHEN) LTD., a company registered and
validly existing in the People's Republic of China with its registered
office at Gong Ming Zhen, Chang Zhen Village Industrial Zone, China
("FICO(PRC)").
WHEREAS this Deed is entered into pursuant to the provisions of a Sale and
Purchase Agreement dated 29 November 1996 ("S&P Agreement") and made between (1)
FICO(HK) as Vendor, (2) FIL as Purchaser and (3) the Company, relating to the
purchase by FIL of 4,000 ordinary shares in the share capital of the Company
consisting of forty per cent. (40%) of the issued and paid-up share capital of
the Company.
NOW IT IS HEREBY AGREED as follows:
1. In this Deed:
(i) words and expressions defined in the S&P Agreement shall have
the same meaning wherever used herein and the provisions of
Clause 1 of the S&P Agreement shall be deemed to be
incorporated herein;
(ii) the following expressions bear the following meanings, namely:
"CLAIM" means any notice, demand, assessment, letter or other
document issued or action taken by any revenue or taxing
authority in Singapore, Hong Kong or the PRC or other
statutory or governmental authority, body or official
whosoever (whether of Singapore, Hong Kong or the PRC or
elsewhere in the world) whereby any of the Group Companies is
or may be placed or sought to be placed under a liability to
make a payment on any Taxes or deprived of any relief,
allowance, credit or repayment otherwise available;
"COMPLETION" means completion of the transfer of the Sale
Shares (as defined in the S&P Agreement) under the S&P
Agreement;
"GROUP COMPANY" means the Company and FICO(PRQ, and "GROUP
COMPANY" means any one of them;
"PRC" means the People's Republic of China;
<PAGE> 110
"TAXES" or "TAXATION" means all forms of taxation whether of
Singapore, Hong Kong or the PRC, including all state or local
taxation, past, present and deferred (including, without
limitation, income tax (including net income and gross
income), corporate, value added, occupation, real and personal
property, social security, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, occupation, premium or windfall
profit taxes, estate duty, stamp duty, customs and other
import or export duties, or charges of any kind whatsoever,
estimated and other taxes, together with any interest and
levies and all penalties, charges, costs and additions to tax,
payable by or due from any of the Group Companies, or any
additional amounts, duties and levies, imposts and all
penalties, charges, fees, costs and interest deductions or
withholding relating to any Claim imposed by any government,
governmental agency, statutory body or any revenue authority,
upon any Group Company; and
"TRANSACTION" includes any transaction, act, event or omission
of whatever nature.
(iii) where any person suffers a loss of or reduction in the amount
of any relief, allowance or credit or has a right to the
repayment of Taxation nullified or cancelled in whole or in
part and such relief, allowance, credit or right to repayment
related to a Transaction effected on or before Completion or
was granted by reference to any income, profits or gains
earned, accrued or received on or before Completion, then such
person shall be treated as having incurred a corresponding
depletion in or reduction in the value of its or his assets as
a result of a Claim for Taxation made in the circumstances
falling within Clause 2(A);
(iv) references to any Transaction effected on or before Completion
include the combined result of two or more Transactions, the
first of which shall have taken place (or be deemed to have
taken place) or the commencement of which shall have occurred
(or be deemed to have occurred) on or before Completion;
(v) references to income, profits or gains earned, accrued or
received include income, profits or gains deemed to have been
or treated as earned, accrued or received for Taxation
purposes;
(vi) references to Clauses and the Schedule are to Clauses of and
the Schedule to this Deed unless the subject or context
otherwise requires; and
(vii) words and expressions defined for the purposes of any relevant
taxing or other legislation shall herein bear the same
meaning.
2. (A) Subject as hereinafter provided, FICO(HK) hereby agrees with and
undertakes to FIL and each of the Group Companies to indemnify and
keep indemnified FIL and each of the Group Companies against any
depletion in or reduction in value of its or their assets or increase
in its or their liabilities in relation to the Group Companies as a
result or in consequence of any Claim for Taxation which has been made
or may hereafter be made:
(i) in respect of or arising from any Transaction effected or
deemed to have been effected on or before Completion; or
2
<PAGE> 111
(ii) by reference to any income, profits or gains earned,
accrued or received on or before Completion.
The indemnity in this Clause 2(A) shall include all reasonable
costs and expenses properly payable in connection with any
Claim or liability referred to herein.
(B) In the event of default by FICO(HK) in the payment on demand
of any sum due under this Deed determined by agreement or
pursuant to an order of a court or by the Purchaser's Auditors
hereunder, the liability of FICO(HK) shall be increased to
include interest on such sum from the date of payment of such
sum by the relevant Group Company toward satisfaction of any
Claim for Taxation referred to in Clause 2(A) above to the
date of actual payment by FICO(HK) (as well after as before
judgment) at a rate per annum being two per cent. (2%) above
the prime lending rate for Dollars as quoted by Citibank,
Singapore Branch from time to time. Interest determined in
accordance with this Clause 2(B) shall be calculated on the
basis of a 360-day year and the actual number of days elapsed
and shall accrue from day to day.
3. Any liability to FIL hereunder may in whole or in part be released,
compounded or compromised or time or indulgence given by FIL in its
absolute discretion without in any way prejudicing or affecting its
rights against FICO(HK).
4. In the event of FIL becoming aware of any Claim which could give rise
to a liability under this Deed, FIL shall procure that notice thereof
be given to FICO(HK) in manner hereinafter provided and as regards any
such Claim, FIL shall, or shall procure the relevant Group Company to,
take such action as it may reasonably request to avoid, dispute,
resist, appeal, compromise or defend the Claim and any adjudication in
respect thereof but subject to FIL and the relevant Group Company being
indemnified and secured to their satisfaction by FICO(HK) against all
losses (including additional Taxation), costs, damages and expenses
which may thereby be incurred.
5. (A) In the event of any dispute as to the liability hereunder of
FICO(HK) and/or any ofthe Group Companies, the matter shall be
determined by the Purchaser's Auditors.
(B) The Purchaser's Auditors shall be deemed to act as experts and
not as arbitrators in any determination made by them hereunder
and in the absence of manifest error, their determination
shall be conclusive and binding on all concerned. The proper
charges and disbursements of the Purchaser's Auditors shall be
paid and borne on each occasion by such of the parties
concerned and in such proportions as the Purchaser's Auditors
may in their absolute discretion consider fair and reasonable.
6. A notice, demand or other communication under this Deed shall be
delivered to the addresses given in Clause 17 of the S&P Agreement and
shall be given or made, and shall be deemed to have been received, in
accordance with the provisions of Clause 17 of the S&P Agreement.
7. This Deed shall come into force on the date stated at the beginning and
shall continue in force from such date.
8. This Deed shall be binding on and shall enure for the benefit of the
parties and their respective legal personal representatives, successors
and permitted assigns. Any reference in this Deed to any of the parties
shall be construed accordingly.
3
<PAGE> 112
9. If any term or provision in this Deed shall be held to be illegal or
unenforceable, in whole or in part, under any enactment or rule of
law, such term or provision or part shall to that extent be deemed not
to form part of this Deed but the enforceability of the remainder of
this Deed shall not be affected.
10. This Deed may be executed in any number of counterparts, all of which
taken together and when delivered to each party hereto shall
constitute one and the same instrument. Any party may enter into this
Deed by signing any such counterpart.
11. (A) This Deed shall be governed by, and construed in accordance
with, the laws of Hong Kong.
(B) Any dispute or difference arising out of or in connection with
this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and
finally resolved by arbitration in Hong Kong on or before 31
March 1997 and thereafter in Singapore. In respect of
arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the
SIAC Rules. The HKIAC Rules and the SIAC Rules are deemed to
be incorporated by reference into this Clause 11(B) save to
the extent that they are inconsistent with the express terms
of this Agreement.
(C) The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by the Purchaser,
one of whom shall be appointed by the Vendor, and the third
(who shall act as Chairman of the arbitral tribunal) to be
appointed by the Chairman of SIAC or HKIAC, as the case may
be.
(D) For the purpose of this Agreement a dispute shall be deemed to
arise when one party serves on the other party a notice in
writing (in this Clause, a "NOTICE OF DISPUTE") stating the
nature of the dispute.
(E) The party serving any Notice of Dispute shall appoint one
arbitrator in such Notice of Dispute.
(F) The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time
as may be agreed between the parties or directed by the
Chairman of SIAC or HKIAC, as the case may be. In default of
such appointment by any party that arbitrator shall also be
appointed by the Chairman of SIAC or HKIAC, as the case may
be, within fourteen (14) days after such time period. The
third arbitrator shall be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within twenty-eight (28) days of
the receipt of such Notice of Dispute.
(G) The prevailing party in the Arbitration shall be awarded the
costs and expenses (including legal fees and expenses)
reasonably incurred in connection with any such arbitration.
4
<PAGE> 113
IN WITNESS WHEREOF this Deed has been entered into the day and year first
abovewritten.
FICO(HK)
[SEAL}
The Common Seal of )
FICO FOREST INDUSTRIAL )
CO. LIMITED has been affixed )
in the presence of: )
----------------------------------
Director
----------------------------------
Director/Secretary
FIL
[SEAL]
The Common Seal of )
FLEXTRONICS INTERNATIONAL LTD )
has been affixed )
in the presence of: )
/s/ S.L. Tsui
----------------------------------
Director
/s/ Gon Chan Peng
----------------------------------
Authorised Signatory
5
<PAGE> 114
IN WITNESS WHEREOF this Deed has been entered into the day and year first
abovewritten.
FICO(HK)
[SEAL}
The Common Seal of )
FICO FOREST INDUSTRIAL )
CO. LIMITED has been affixed )
in the presence of: )
/s/ Christine C. Knight
------------------------------
Christine C. Knight /s/ Law Sing Hong
Solicitor ------------------------
Hong Kong Director
/s/ Law Shun Hang
------------------------
Director/Secretary
FIL
[SEAL]
The Common Seal of )
FLEXTRONICS INTERNATIONAL LTD )
has been affixed )
in the presence of: )
--------------------------
Director
--------------------------
Director/Secretary
5
<PAGE> 115
[SEAL}
The Company
The Common Seal of )
FICO INVESTMENT )
HOLDING LIMITED has been affixed )
in the presence of: )
/S/ Christine C. Knight
--------------------------
Christine C. Knight /s/ Law Shun Hang
Solicitor ------------------------
Hong Kong Director
/s/ Law Sing Hong
------------------------
Director/Secretary
FICO(PRC)
SIGNED BY LAW SHUN HANG )
)
as legal representative )
for and on behalf of ) /s/ Law Shun Hang
FOREST KEYBOARD ) ------------------------
MANUFACTURING (SHENZHEN) )
LTD. )
6
<PAGE> 116
SCHEDULE 11
PUT OPTION AGREEMENT
DATED THE 20TH DAY OF DECEMBER 1996
Between
FLEXTRONICS INTERNATIONAL LTD
And
FICO FOREST INDUSTRIAL CO. LIMITED
------------------------------------
PUT OPTION AGREEMENT
relating to 4,000 ordinary shares
consisting of
40% of all the ordinary shares
in the share capital of
FICO INVESTMENT HOLDING LIMITED
------------------------------------
<PAGE> 117
TABLE OF CONTENTS
Clause Heading Page
------ ------- ----
1. INTERPRETATION ................................................. 1
2. PUT OPTION ..................................................... 2
3. PUT OPTION COMPLETION .......................................... 3
4. DURATION OF OBLIGATIONS ........................................ 3
5. FIL'S WARRANTIES ............................................... 3
6. COMMUNICATIONS ................................................. 4
7. GENERAL ........................................................ 4
8. GOVERNING LAW AND DISPUTE RESOLUTION ........................... 5
<PAGE> 118
THIS AGREEMENT is made the 20th day of December 1996 BETWEEN:
(1) FLEXTRONICS INTERNATIONAL LTD, a company incorporated in Singapore and
having its registered office at 36 Robinson Road, City House, #18-01,
Singapore 068877 ("FIL");
(2) FICO FOREST INDUSTRIAL CO. LIMITED, a company incorporated in Hong Kong
and having its registered office at Unit 10, 5 & 4 18/F, Blk B, Kong
Nam Ind. Building, 603 Castle Peak Road, Tsuen Wan, New Territories,
Hong Kong ("GRANTOR")
WHEREAS:
(A) Fico Investment Holdings Limited ("COMPANY") is a company limited by
shares incorporated in Hong Kong and has at the date hereof an
authorised share capital of 10,000 ordinary shares of HK$ 1.00 each, of
which 10,000 of the said ordinary shares have been issued and are
fully paid-up.
(B) FIL is the legal and beneficial owner of 4,000 ordinary shares of
HK$1.00 each in the Company consisting forty per cent. (40%) of the
issued and paid-up capital of the Company.
(C) This Agreement is entered into pursuant to a Sale and Purchase
Agreement ("SALE AND PURCHASE AGREEMENT") dated 29 November 1996, made
between (1) FIL, as purchaser (2) the Grantor as Vendor and (3) the
Company. The Grantor wishes to grant to FIL a put option in respect of
the Put Option Shares (as defined below) for the consideration and on
the terms and conditions set out in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement except to the extent that the context otherwise
requires:
"BANKER'S DRAFT" means a banker's draft drawn on a bank in Hong Kong;
"EXERCISE DATE" means the date of service of a Put Option Notice under
Clause 2.3;
"PUT OPTION" shall have the meaning ascribed to it in Clause 2.1;
"PUT OPTION COMPLETION" means the performance by FIL and the Grantor of
the obligations assumed by them respectively under Clause 3.2;
"PUT OPTION COMPLETION DATE" means 11.00 a.m. on the date falling
thirty (30) days from the Exercise Date;
"PUT OPTION NOTICE" means a notice exercising the Put Option given
pursuant to Clause 2.3;
"PUT OPTION PERIOD" means the period commencing on the date of this
Agreement and expiring on the date falling on the first anniversary of
the end of the Financial Period (both dates inclusive);
"PUT OPTION SHARES" means 4,000 Shares consisting forty per cent. (40%)
of the issued and paid-up capital of the Company;
<PAGE> 119
"SALE PRICE" means the aggregate of the Consideration and interest
accrued thereon at the rate of eight per cent. (8%) from the date of
payment of the Consideration (or parts thereof) under the Sale and
Purchase Agreement to the Put Option Completion Date (or such deferred
date pursuant to Clause 3.3), such interest to be calculated on the
basis of a 360-day year and the actual number of days elapsed;
"SHARES" means ordinary shares of HK$1.00 each in the capital of the
Company;
"SHAREHOLDERS' AGREEMENT" means the shareholders' agreement of even
date entered into between (1) FIL, (2) the Grantor and (3) the Company;
"TRANSFER TERMS" means the entire legal and beneficial interest in all
the Put Option Shares shall be sold and purchased free from any
Encumbrance and together with all rights attaching thereto as at the
Exercise Date or at any time thereafter and that the consideration for
the Put Option Shares shall be the Sale Price; and
"US$" means the lawful currency of the United States of America.
1.2 All terms and references used in this Agreement and which are defined
or construed in the Sale and Purchase Agreement but are not defined or
construed in this Agreement shall have the same meaning and
construction in this Agreement. All references in this Agreement to the
Sale and Purchase Agreement are to the Sale and Purchase Agreement are
to the Sale and Purchase Agreement as from time to time amended,
modified or supplemented.
1.3 References to Recitals and Clauses are to recitals and clauses of this
Agreement. The headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement. Words importing
the singular number include the plural number and vice versa.
References to documents include variations and replacements thereof and
supplements thereto. References to a party include its permitted
assigns and transferees and its successors-in-title.
2. PUT OPTION
2.1 In consideration of the sum of US$1.00 (receipt of which the Grantor
hereby acknowledges), the Grantor hereby grants to FIL the right, in
the event that (i) it is determined pursuant to Clause 10 of the Sale
and Purchase Agreement that the Profit Target exceeded the Net Profit
After Taxation of the Company in respect of the Financial Period; (ii)
the Purchaser, at its sole and absolute discretion and determination,
is not satisfied with the state of affairs of the Company as reported
in the audited accounts of the Company for the financial year ending 31
December 1996 pursuant to Clause 4.2 of the Sale and Purchase
Agreement; (iii) a notice of termination is served under Clause 12(B)
of the Shareholders' Agreement pursuant to Clause 12(C)(ii) of the
Shareholders' Agreement; or (iv) the Balance Consideration is not paid
pursuant to Clause 4.2 of the Sale and Purchase Agreement (each of (i),
(ii) (iii) and (iv) hereinafter referred to as a "PRECONDITION EVENT"),
to require the Grantor to purchase from FIL all the Put Option Shares
on the terms and subject to the conditions of this Agreement ("PUT
OPTION").
2.2 On the exercise of the Put Option, the Grantor will become bound to
purchase and FIL will become bound to complete the sale of the Put
Option Shares on the Transfer Terms.
2.3 The Put Option must be exercised by notice in writing by FIL served
only during the Put Option Period and subject to the fulfilment of a
Precondition Event, failing which it will lapse and cease to have any
further effect.
2
<PAGE> 120
3. PUT OPTION COMPLETION
3.1 Put Option Completion of the sale and purchase of the Put Option Shares
shall take place in Hong Kong at the Hong Kong branch office of FIL (or
at such other place as may be agreed) on the Put Option Completion
Date, provided that if such a day is not a Business Day then Put Option
Completion shall take place at 12 noon on the first Business Day
thereafter.
3.2 On Put Option Completion:
(a) FIL shall deliver to the Grantor duly executed transfers and
duly executed sold notes in favour of the Grantor in respect
of the Put Option Shares accompanied by the relative share
certificate(s) and shall do all things and execute such
documents as shall be necessary or as the Grantor may
reasonably request to give effect to the sale of the Put
Option Shares pursuant to Clause 2 on the Transfer Terms;
(b) FIL shall procure the resignations of the existing Directors
of the Company nominated by them pursuant to Clause 4(B) of
the Shareholders' Agreement, which said resignations shall
take effect on Put Option Completion; and
(c) the Grantor shall pay the Sale Price to FIL by way of
telegraphic transfer to an account designated by FIL to the
Grantor not later than three (3) Business Days prior to the
Put Option Completion Date or by way of a banker's draft.
3.3 If any of the provisions of Clause 3.2 are not complied with on the Put
Option Completion Date the party not in default may (without prejudice
to his other rights and remedies):
(a) defer Put Option Completion to a date not more than
twenty-eight (28) days after the Put Option Completion Date
(and so that the provisions of this Clause 3 shall apply to
Put Option Completion as so deferred); or
(b) proceed to Put Option Completion so far as practicable
(without prejudice to his rights hereunder); or
(c) rescind the transaction arising by virtue of the exercise of
the Put Option.
4. DURATION OF OBLIGATIONS
4.1 This Agreement shall terminate on the date falling on the first
anniversary of the end of the Financial Period if no Put Option Notice
shall have been served on or prior to such date.
4.2 If the Put Option Notice shall have been served on or prior to the date
mentioned in Clause 4.1 this Agreement shall continue in force after
such date until the fulfilment of the parties' obligations hereunder in
relation to the Put Option Notice whereupon it shall terminate.
5. FIL'S WARRANTIES
5.1 FIL warrants to the Grantor that it is and will remain until the expiry
of the Put Option Period or the Put Option Completion Date, whichever
is the later, the sole legal and beneficial owner of the Option Shares,
subject only to the Put Option and the Fico Call Option (as defined in
the Fico Call Option Agreement).
3
<PAGE> 121
5.2 FIL shall not prior to the expiry of the Put Option Period or the Put
Completion Date, whichever is the later, transfer, dispose of or permit
an Encumbrance save for the Put Option and the Fico Call Option (as
defined in the Fico Call Option Agreement) over its interest in any of
the Put Option Shares and the Put Option Shares shall upon Put Option
Completion be sold free of any Encumbrance.
5.3 At the date of this Agreement the Put Option Shares represent forty per
cent. (40%) of the issued and paid-up share capital of the Company
issued or agreed to be issued and there is no option or right
outstanding in favour of any third party to subscribe for any share or
loan capital of the Company.
6. COMMUNICATIONS
6.1 Except as otherwise provided in the Agreement, all notices required or
permitted to be given hereunder shall be in writing and in the English
language and shall be sent by facsimile or in writing.
6.2 Any notice hereunder shall be addressed as follows:
In the case of FIL : Flextronics International Ltd
514 Chai Chee Lane, #04-13
Singapore 469029
Fax Number : (65) 449-9548
Attention : Mr Goh Chan Peng
In the case of the Grantor: Gico Forest Industrial Co. Limited
Unit 10, 18/F
Blk B, Kong Nam Ind. Building
603 Castle Peak Road, Tsuen Wan
New Territories
Hong Kong
Fax Number : (852) 2412-0791
Attention : Mr Law Sing Hong
6.3 Any party may from time to time by notice hereunder change its address
or telefax number for notice. Notice given by facsimile shall be deemed
to have been served on the next Business Day in the place of address
following the day of transmission.
7. GENERAL
7.1 This Agreement may be assigned in whole or in part by FIL.
Notwithstanding this, this Agreement shall not be assigned in whole or
in part by the Grantor. It is expressly agreed that this Agreement
shall be binding upon and shall enure for the benefit of the parties'
successors.
7.2 This Agreement supersedes any previous agreement between the parties
hereto in relation to the matters dealt with herein, represents
(together with any documents referred to herein) the entire agreement
between the parties herein in relation to such matters and no variation
hereof shall be effective unless made in writing.
4
<PAGE> 122
7.3 The failure of any of the parties hereto at any time to require
performance by any other party or to claim a breach of any term of this
Agreement shall not be deemed to be a waiver of any right under this
Agreement.
7.4 The parties hereto shall, and shall use their respective reasonable
endeavours to procure that any necessary third parties shall, execute
and do all such further deeds, documents and things as either party may
reasonably require by notice in writing to the other party to carry the
provisions of this Agreement into full force and effect and (so far as
they are able) shall do anything necessary (including, without
limitation, exercising their powers as shareholders) to give effect to
the spirit and intent of this Agreement.
7.5 Any date or period mentioned in this Agreement may be extended by
agreement between the parties hereto (or such of the parties as may be
affected thereby), but as regards any date or period (whether or not
extended as aforesaid) time shall be of the essence of this Agreement.
7.6 Subject as specifically provided herein, each of the parties hereto
shall bear its own costs and expenses relating to this Agreement, save
that the Grantor shall bear all stamp duty payable in respect of the
grant of the Put Option and the purchase of the Put Option Shares.
7.7 The illegality, invalidity or unenforceability of any provision of this
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.
7.8 Notwithstanding the completion of the sale and purchase of the Put
Option Shares herein, the terms and conditions of this Agreement shall
not merge with the transfer or conveyance of the Put Option Shares and
be extinguished but shall remain in full force and effect as between
FIL and the Grantor insofar as the same shall not have been fulfilled.
8. GOVERNING LAW AND DISPUTE RESOLUTION
8.1 This Agreement shall be governed by, and construed in accordance with,
the laws of Hong Kong.
8.2 Any dispute or difference arising out of or in connection with this
Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
in Hong Kong on or before 31 March 1997 and thereafter in Singapore. In
respect of arbitration in Hong Kong, the arbitration shall be in
accordance with the HKIAC Rules. In respect of arbitration in
Singapore, the arbitration shall be in accordance with the SIAC Rules.
The HKIAC Rules and the SIAC Rules are deemed to be incorporated by
reference into this Clause 8.2 save to the extent that they are
inconsistent with the express terms of this Agreement.
8.3 The arbitral tribunal shall consist of three (3) independent
arbitrators, one of whom shall be appointed by FIL, one of whom shall
be appointed by the Grantor, and the third (who shall act as Chairman
of the arbitral tribunal) to be appointed by the Chairman of SIAC or
HKIAC, as the case may be.
8.4 For the purpose of this Agreement a dispute shall be deemed to arise
when one party serves on the other party a notice in writing (in this
Clause, a "NOTICE OF DISPUTE") stating the nature of the dispute.
8.5 The party serving any Notice of Dispute shall appoint one arbitrator in
such Notice of Dispute.
5
<PAGE> 123
8.6 The party in receipt of any Notice of Dispute shall appoint an
arbitrator within twenty-eight (28) days or such longer time as may be
agreed between the parties or directed by the Chairman of SIAC or
HKIAC, as the case may be. In default of such appointment by any party
that arbitrator shall also be appointed by the Chairman of SIAC or
HKIAC, as the case may be, within fourteen (14) days after such time
period. The third arbitrator shall be appointed by the Chairman of SIAC
or HKIAC, as the case may be, within twenty-eight (28) days of the
receipt of such Notice of Dispute.
8.7 The prevailing party in the arbitration shall be awarded the costs and
expenses (including legal fees and expenses) reasonably incurred in
connection with any such arbitration.
6
<PAGE> 124
IN WITNESS WHEREOF the parties set their hands this day and year first
above written.
FIL
Signed by
/s/ S.L. Tsui
for and on behalf of
FLEXTRONICS INTERNATIONAL LTD
in the presence of:
/s/COSMAS WONG CIN TZIEH
Cosmas Wong Cin Tzieh
Advocate & Solicitor
Singapore
The Grantor
Signed by
for and on behalf of
FICO FOREST INDUSTRIAL CO. LIMITED
in the presence of:
7
<PAGE> 125
IN WITNESS WHEREOF the parties set their hands this day and year first
above written.
FIL
Signed by
for and on behalf of
FLEXTRONICS INTERNATIONAL LTD
in the presence of:
The Grantor
Signed by
/s/ Law Shun Hang &
/s/ Law Sing Hong
for and on behalf of
FICO FOREST INDUSTRIAL
CO. LIMITED
in the presence of:
/s/ Christine C. Knight
Christine C. Knight
Solicitor
Hong Kong
7
<PAGE> 1
Exhibit 10.3
PROMISSORY NOTE & SECURITY AGREEMENT
$650,000 San Jose, California
December 19, 1996
FOR VALUE RECEIVED, RICHARD DAVIS ("Borrower"), intending to be legally
bound hereby, promises to pay to FLEXTRONICS INTERNATIONAL USA, INC. a
California corporation ("Payee") at such place as Payee may direct, the
principal sum of Six Hundred Fifty Thousand United States Dollars ($650,000) no
later than February 28, 1997.
Interest shall accrue from the date hereof on the unpaid principal
amount of this Note at a rate of 7.0% compounded monthly.
As security for the payment and performance of this promissory note,
Borrower hereby grants to Payee, a security interest in all shares of
Flextronics International Ltd. Stock owned by the Borrower.
If Borrower shall fail to pay the full principal amount of this Note
and accrued interest thereon on the Payment Date, Payee shall be entitled to
exercise its remedies under this NOTE or otherwise available to it at law or in
equity. The remedies of Payee shall be cumulative and concurrent, and may be
pursued singly, successively or together at the sole discretion of Payee, and
may be exercised as often as occasion therefor shall occur, and the failure to
exercise any such right or remedy shall in no event be construed as a waiver or
release thereof.
In any action brought by Payee to enforce payment hereunder or to
enforce or defend any provision hereof, Borrower agrees to reimburse Payee for
all costs incurred in connection therewith, including attorneys' fees and
disbursements.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, Borrower intending to be legally bound hereby, has
caused this Note to be executed by a duly authorized officer and duly attested
as of the day and year first above written.
/s/ Richard Davis
---------------------------------
RICHARD DAVIS
For and behalf of
FLEXTRONICS INTERNATIONAL USA, INC.
/s/ Michael Marks
- -----------------------------
Michael Marks
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE
$135,900.00 San Jose, California
October 22, 1996
FOR VALUE RECEIVED, MICHAEL McNAMARA ("Borrower"), intending to be
legally bound hereby, promises to pay to FLEXTRONICS INTERNATIONAL USA, INC. a
California corporation ("Payee") at such place as Payee may from time to time
direct, the principal sum of One Hundred Thirty Five Thousand Nine Hundred
United States Dollars ($135,900.00) on October 22, 2001 (the "Maturity Date").
Interest shall accrue from the date hereof on the unpaid principal
amount of this Note at a rate equal to the lesser of: (i) 7.0% compounded
semi-annually or (ii) the maximum amount of interest permissible under
California law until all of said principal is paid in full.
Borrower shall have the right to prepay all or any portion of the
amount outstanding hereunder at any time without penalty.
If Borrower shall fail to pay the full principal amount of this Note
and accrued interest thereon on the Payment Date, Payee shall be entitled to
exercise its remedies under this NOTE or otherwise available to it at law or in
equity. The remedies of Payee shall be cumulative and concurrent, and may be
pursued singly, successively or together at the sole discretion of Payee, and
may be exercised as often as occasion therefor shall occur; and the failure to
exercise any such right or remedy shall in no event be construed as a waiver or
release thereof.
In any action brought by Payee to enforce payment hereunder or to
enforce or defend any provision hereof, Borrower agrees to reimburse Payee for
all costs incurred in connection therewith, including attorneys' fees and
disbursements.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, Borrower intending to be legally bound hereby, has
caused this Note to be executed by a duly authorized officer and duly attested
as of the day and year first above written.
/s/ Michael A. McNamara
------------------------------------
MICHAEL A. McNAMARA
For and behalf of
FLEXTRONICS INTERNATIONAL USA, INC.
/s/ Michael Marks
- --------------------------------
Michael Marks
<PAGE> 1
EXHIBIT 11.1
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Shares issued and outstanding (1) 13,420 12,852
Common Stock Equivalent
Stock Options (2) 1,050 850
------------ ------------
14,470 13,702
============ ============
Net income $ 68 $ 5,002
------------ ------------
Earnings per share:
Net Income $ 0.01 $ 0.37
============ ============
</TABLE>
(1) Shares issued and outstanding - based on the weighted average method.
(2) Stock options - based on the treasury stock method using average market
price.
<PAGE> 1
EXHIBIT 11.2
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Shares issued and outstanding (1) 13,335 12,343
Common Stock Equivalent
Stock Options (2) 1,042 787
------------ ------------
14,377 13,130
Net income $ 10,536 $ 11,626
------------ ------------
Earnings per share:
Net Income $ 0.73 $ 0.89
============ ============
</TABLE>
(1) Shares issued and outstanding - based on the weighted average method.
(2) Stock options - based on the treasury stock method using average market
price.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the quarter ended December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 13,578
<SECURITIES> 0
<RECEIVABLES> 71,453
<ALLOWANCES> (4,259)
<INVENTORY> 45,262
<CURRENT-ASSETS> 4,343
<PP&E> 110,716
<DEPRECIATION> 939,7150
<TOTAL-ASSETS> 217,934
<CURRENT-LIABILITIES> 104,172
<BONDS> 28,419
0
0
<COMMON> 94,739
<OTHER-SE> (11,137)
<TOTAL-LIABILITY-AND-EQUITY> 217,934
<SALES> 121,525
<TOTAL-REVENUES> 121,525
<CGS> 111,477
<TOTAL-COSTS> 111,477
<OTHER-EXPENSES> 6,922
<LOSS-PROVISION> 2,321
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 439
<INCOME-TAX> 371
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> .00
<EPS-DILUTED> .01
</TABLE>
