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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>/in/edgar/work/0000950144-00-014452/0000950144-00-014452.txt : 20001129
<SEC-HEADER>0000950144-00-014452.hdr.sgml : 20001129
ACCESSION NUMBER: 0000950144-00-014452
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20000831
FILED AS OF DATE: 20001128
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: JABIL CIRCUIT INC
CENTRAL INDEX KEY: 0000898293
STANDARD INDUSTRIAL CLASSIFICATION: [3672
] IRS NUMBER: 381886260
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0831
</COMPANY-DATA>
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-14063
FILM NUMBER: 777419
</FILING-VALUES>
BUSINESS ADDRESS:
STREET 1: 10560 NINTH ST NORTH
CITY: ST PETERSBURG
STATE: FL
ZIP: 33716
BUSINESS PHONE: 7275779749
</BUSINESS-ADDRESS>
MAIL ADDRESS:
STREET 1: 10560 NINTH STREET NORTH
CITY: ST PETERSBURG
STATE: FL
ZIP: 33716
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>g65591e10-k.txt
<DESCRIPTION>JABIL CIRCUIT, INC.
<TEXT>
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED AUGUST 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER: 0-21308
JABIL CIRCUIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 38-1886260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
10560 NINTH STREET NORTH,
ST. PETERSBURG, FLORIDA 33716
(Address of Principal Executive (Zip Code)
Offices)
</TABLE>
Registrant's telephone number, including area code: (727) 577-9749
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class Name of each exchange on which registered
COMMON STOCK, $0.001 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ ]
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant (based on the closing sale price of the Common
Stock as reported on the New York Stock Exchange on October 12, 2000) was
approximately $6.5 billion. For purposes of this determination, shares of Common
Stock held by each officer and director and by each person who owns 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. The number of
outstanding shares of the Registrant's Common Stock as of the close of business
on October 12, 2000, was 190,457,939. The Registrant does not have any
non-voting stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders to be held on January 18, 2001 is incorporated by reference in Part
III of this Annual Report on Form 10-K to the extent stated herein.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS
We make "forward-looking statements" within the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995 throughout this document
and in the documents we incorporate by reference into this Annual Report on Form
10-K. You can identify these statements by forward-looking words such as "may,"
"will," "expect," "anticipate," "believe," "estimate," "plan" and "continue" or
similar words. We have based these statements on our current expectations about
future events. Although we believe that our expectations reflected in or
suggested by our forward-looking statements are reasonable, we cannot assure you
that these expectations will be achieved. Our actual results may differ
materially from what we currently expect. Important factors which could cause
our actual results to differ materially from the forward-looking statements in
this document are set forth in the "Factors Affecting Future Results" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections and elsewhere in this document.
You should read this Annual Report on Form 10-K completely and with the
understanding that our actual future results may be materially different from
what we expect. We may not update these forward-looking statements, even in the
event that our situation changes in the future. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.
THE COMPANY
We are one of the leading worldwide independent providers of electronic
manufacturing services ("EMS"). We design and manufacture electronic circuit
board assemblies and systems for major original equipment manufacturers ("OEMs")
in the communications, computer peripherals, and personal computer, automotive
and consumer products industries. We serve our OEM customers with dedicated work
cell business units that combine high volume, highly automated continuous flow
manufacturing with advanced electronic design and design for manufacturability
technologies. Our customers currently include industry leaders such as Cisco
Systems, Inc., Dell Computer Corporation, Hewlett-Packard Company, Johnson
Controls, Inc. and Lucent Technologies. For the fiscal year ended August 31,
2000, we achieved net revenues of approximately $3.6 billion and net income of
$145.6 million.
The EMS industry has experienced rapid growth over the past several years
as an increasing number of OEMs have outsourced their manufacturing
requirements. OEMs are turning to outsourcing in order to reduce product cost,
achieve accelerated time-to-market and time-to-volume production, access
advanced design and manufacturing technologies, improve inventory management and
purchasing power, reduce their capital investment in manufacturing facilities,
and achieve parallel manufacturing of the same product throughout the world. We
believe further growth opportunities exist for EMS providers to penetrate the
worldwide electronics markets.
We offer our customers complete turnkey EMS solutions that are responsive
to their outsourcing needs. Our work cell business units are capable of
providing:
- integrated design and engineering services
- component selection, sourcing and procurement
- automated assembly
- design and implementation of product testing
- parallel global production
- systems assembly and direct order fulfillment services
- repair and warranty services
1
<PAGE> 3
We currently conduct our operations in facilities that are located in the
United States, Brazil, China, Hungary, Ireland, Italy, Malaysia, Mexico and
Scotland. Our parallel global production strategy provides our customers with
the benefits of improved supply-chain management, reduced inventory
obsolescence, lowered transportation costs and reduced product fulfillment time.
Our principal executive offices are located at 10560 Ninth Street North,
St. Petersburg, Florida 33716, and our telephone number is (727) 577-9749. Our
website is located at www.jabil.com. Information contained in our website is not
a part of this document or the documents incorporated by reference in this
document.
EMS INDUSTRY BACKGROUND
The EMS industry is composed of companies that provide a range of
manufacturing services for OEMs in the electronics industry. The EMS industry
has experienced rapid growth over the past several years as an increasing number
of OEMs have chosen an external manufacturing strategy. This growth has been
impacted by OEMs divesting of internal manufacturing capacity. Factors driving
OEMs to favor outsourcing to EMS providers include:
- Reduced Product Cost. EMS providers are able to manufacture products at
a reduced total cost to OEMs. These cost advantages result from higher
utilization of capacity because of diversified product demand and,
typically, a higher sensitivity to elements of cost.
- Accelerated Product Time-to-Market and Time-to-Volume. EMS providers are
able to deliver accelerated production start-ups and achieve high
efficiencies in transferring new products into production. EMS providers
are also able to rapidly scale production for changing markets and to
position themselves in global locations that serve the leading world
markets. With increasingly shorter product life cycles, these key
services allow new products to be sold in the marketplace in an
accelerated time frame.
- Access to Advanced Technologies. Customers of EMS providers gain access
to advanced technologies in manufacturing processes, as well as product
and production design. Product and production design services may offer
customers significant improvements in the performance, cost,
time-to-market and manufacturability of their products.
- Improved Inventory Management and Purchasing Power. EMS providers are
able to manage both procurement and inventory, and have demonstrated
proficiency in purchasing components at improved pricing due to the scale
of the operations and continuous interaction with the materials
marketplace.
- Reduced Capital Investment in Manufacturing. OEMs are increasingly
seeking to lower their investment in inventory, facilities and equipment
used in manufacturing in order to allocate capital to other activities
such as sales and marketing, and research and development. This shift in
capital deployment has placed a greater emphasis on outsourcing to
external manufacturing specialists.
OUR STRATEGY
We are focused on expanding our position as one of the leading global
providers of electronic manufacturing services to major OEMs. To achieve this
objective, we will continue implementing the following strategies:
- Establish and Maintain Long-Term Customer Relationships. Our core
strategy is to establish and maintain long-term relationships with
leading electronics companies in expanding industries with the size and
growth characteristics that can benefit from highly automated, continuous
flow and global manufacturing. Historically, we have derived a majority
of our growth from existing customers. We focus on maintaining long-term
relationships with our customers and seek to expand such relationships to
include additional product lines and services. In addition, we have a
focused effort to identify and develop relationships with new customers
who meet our profile.
- Utilize Work Cell Business Units. Each of our work cell business units
is dedicated to one customer and operates with a high level of autonomy,
utilizing dedicated production equipment, production
2
<PAGE> 4
workers, supervisors, buyers, planners and engineers. We believe our work
cell business units promote increased responsiveness to our customers'
needs, particularly as a customer relationship grows to multiple
production locations.
- Expand Parallel Global Production. Our ability to produce the same
product on a global scale is a significant requirement of our customers.
We believe that parallel global production is a key strategy to reduce
obsolescence risk and secure the lowest landed costs while simultaneously
supplying products of equivalent or comparable quality throughout the
world. Consistent with this strategy, we have constructed facilities in
Chihuahua, Mexico and Tiszaujvaros, Hungary, and acquired facilities in
Brazil, China and Mexico.
- Offer Systems Assembly and Direct Order Fulfillment. Our systems
assembly and direct order fulfillment services allow our customers to
reduce product cost and risk of product obsolescence by reducing total
work-in-process and finished goods inventory. We offer these services at
all of our manufacturing locations.
- Pursue Selective Acquisition Opportunities. An increasing number of OEMs
are divesting internal manufacturing operations to EMS providers. In many
of these situations, the OEM enters into a customer relationship with the
EMS provider. Our acquisition strategy is focused on obtaining OEM
manufacturing operations with consistent growth, experienced management
teams, and opportunities for long-term outsourcing relationships.
OUR APPROACH TO MANUFACTURING
In order to achieve high levels of manufacturing performance, we have
adopted the following approach:
- Work Cell Business Units. Each of our work cell business units is
dedicated to one customer and is empowered to formulate strategies
tailored to its customer's needs. Each work cell business unit has
dedicated production lines consisting of equipment, production workers,
supervisors and engineers. Work cell business units have direct
responsibility for manufacturing results and time-to-volume production,
promoting a sense of individual commitment and ownership. The work cell
business unit approach enables us to grow incrementally without
disrupting the operations of other work cell business units.
- Business Unit Management. Our Business Unit Managers coordinate all
financial, manufacturing and engineering commitments for each of our
customers at a particular manufacturing facility. Our Business Unit
Directors oversee local Business Unit Managers and coordinate on a
worldwide basis all financial, manufacturing and engineering commitments
for each of our customers that have both domestic and global production
requirements. Jabil's Business Unit Management has the authority to
develop customer relationships, make design strategy decisions and
production commitments, establish pricing and implement production and
electronic design changes. Business Unit Managers and Directors are also
responsible for assisting customers with strategic planning for future
products, including developing cost and technology goals. These Managers
and Directors operate autonomously, with responsibility for the
development of customer relationships and direct profit and loss
accountability for work cell business unit performance.
- Continuous Flow. We use a highly automated, "continuous flow" approach
where different pieces of equipment are joined directly or by conveyor to
create an in-line assembly process. This process is in contrast to a
"batch" approach, where individual pieces of assembly equipment are
operated as freestanding work-centers. The elimination of waiting time
prior to sequential operations results in faster manufacturing which
improves production efficiencies and quality control, and reduces
inventory work-in-process. Continuous flow manufacturing provides
significant cost reduction and quality improvement when applied to volume
manufacturing.
- Computer Integration. We support all aspects of our manufacturing
activities with advanced computerized control and monitoring systems.
Component inspection and vendor qualities are monitored electronically in
real-time. Materials planning, purchasing, stockroom and shop floor
control
3
<PAGE> 5
systems are supported through a computerized Manufacturing Resource
Planning system, providing customers with a continuous ability to monitor
material availability and track work-in-process on a real-time basis.
Manufacturing processes are supported by a real-time, computerized
statistical process control system, whereby customers can remotely access
our computer systems to monitor real-time yields, inventory positions,
work-in-process status and vendor quality data. See "-- Technology."
- Supply Chain Management. We utilize an electronic commerce
system/electronic data interchange ("EDI") and web based tools with our
customers and suppliers to implement a variety of supply chain management
programs. Our customers utilize these tools to share demand and product
forecasts and deliver purchase orders. We use these tools with our
suppliers for just-in-time delivery, supplier-managed inventory and
consigned supplier-managed inventory.
OUR DESIGN SERVICES
We offer a full spectrum of value-added design services for products that
we manufacture for our customers. We provide these services to enhance our
relationships with current customers and to help develop relationships with new
customers. During fiscal year 2000, approximately one-half of our customers
shipped product incorporating Jabil design. We offer the following design
services:
Electronic Design. Our electronic design team provides electronic
circuit design services including application specific integrated circuit
design and firmware development. These services have been used to develop a
variety of circuit designs for cellular telephone accessories, notebook and
personal computers, radio frequency products, video set-top boxes, and
automotive and consumer appliance controls.
Production Design. Our production design team provides printed
circuit board ("PCB") design and other related services. These services
include PCB design services using advanced CAD/CAE tools, PCB design
testing and verification services, and other consulting services, which
include generation of a bill of materials, approved vendor list and
assembly equipment configuration for a particular PCB design. We believe
that our production design services result in PCB designs that are
optimized for manufacturability and cost and accelerate product
time-to-market and time-to-volume production.
Industrial/Mechanical and Other Design Services. Our industrial and
mechanical design team often work with our customers to assist in designing
the "look and feel" of the plastic and metal enclosures that house printed
circuit board assemblies. In addition, from time to time we will procure
additional design services from third parties to meet our customers' needs.
OUR SYSTEMS ASSEMBLY, TEST AND DIRECT ORDER FULFILLMENT SERVICES
We offer systems assembly, test and direct order fulfillment services to
our customers. Our systems assembly services extend our range of assembly
activities to include assembly of higher level sub-systems and systems
incorporating multiple printed circuit boards. We maintain significant systems
assembly capacity to meet the increasing demands of our customers. In addition,
we provide testing services, based on quality assurance programs developed with
our customers, of the printed circuit boards, sub-systems and systems products
that we manufacture. Our quality assurance programs include circuit testing
under various environmental conditions to ensure that our products meet or
exceed required customer specifications. We also offer direct order fulfillment
services for delivery of final products we assemble for our customers.
OUR REPAIR AND WARRANTY SERVICES
As an extension of our manufacturing model and an enhancement to our total
global solution, we offer repair and warranty services to our customers from
strategic logistics hub locations. We have the ability to service our OEM
partners product following completion of the traditional manufacturing and
fulfillment process.
4
<PAGE> 6
TECHNOLOGY
We believe that our manufacturing and testing technologies are among the
most advanced in the industry. Through our research and development efforts, we
intend to continue to offer our customers among the most advanced high volume,
continuous flow manufacturing process technologies. These technologies include
surface mount technology, tape automated bonding, ball grid array, chip scale
packages, flip chip/direct chip attach, thin substrate processes, reflow solder
of mixed technology circuit boards and other testing and emerging interconnect
technologies. In addition to our research and development activities, we are
continuously making refinements to our existing manufacturing processes in
connection with providing manufacturing services to our customers.
RESEARCH AND DEVELOPMENT
To meet our customers' increasingly sophisticated needs, we continually
engage in research and development activities. The development and refinement of
new manufacturing processes are performed primarily at our advanced engineering
facility in San Jose, California. From time to time, we perform research and
development related to new products on a project-by-project basis. Our research
and development consists of design of the circuit board assembly, mechanical
design and the related production design necessary to manufacture the circuit
board assembly in the most cost-effective and reliable manner.
For fiscal years 2000, 1999 and 1998, we expended $4.8 million, $5.9
million and $5.4 million, respectively, on research and development activities.
To date, substantially all of our research and development expenditures have
related to internal research and development activities.
In conjunction with the acquisition of the operations of the LaserJet
Formatter Manufacturing Organization from Hewlett-Packard Company in August
1998, (the "HP Acquisition"), we recorded a charge of $6.5 million related to
the write-off of in-process research and development. See Note 10 to the
Consolidated Financial Statements.
CUSTOMERS AND MARKETING
Our core strategy is to establish and maintain long-term relationships with
leading electronics companies in expanding industries with the size and growth
characteristics that benefit from highly automated continuous flow and global
manufacturing. A small number of customers and significant industries have
historically comprised a major portion of our net revenue. The table below sets
forth the respective portion of net revenue for the applicable period
attributable to our customers who individually accounted for approximately 10%
or more of our net revenue in any respective period:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Cisco Systems, Inc.......................................... 20% 18% 18%
Dell Computer Corporation................................... 16 * *
Hewlett-Packard Company..................................... 14 22 *
Lucent Technologies......................................... 10 * *
3Com Corporation............................................ * * 16
</TABLE>
- ---------------
* less than 10% of net revenues
5
<PAGE> 7
Jabil's revenue was distributed over the following significant industries
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Communications.............................................. 44% 39% 48%
Computer Peripherals........................................ 21 37 19
Personal Computers.......................................... 21 10 12
Automotive and other........................................ 14 14 21
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
In fiscal year 2000, 30 customers accounted for more than 95% of our net
revenue. We expect to continue to depend upon a relatively small number of
customers for a significant percentage of our net revenue. As illustrated in the
two tables above, the historic percentages of net revenue we have received from
specific customers or significant industries have varied substantially from year
to year. Accordingly, these historic percentages are not necessarily indicative
of the percentage of net revenue that we may receive from any customer or
industry in the future. In the past, some of our customers have terminated their
manufacturing arrangements with us or have significantly reduced or delayed the
volume of manufacturing services ordered from us. We cannot assure you that
present or future customers will not terminate their manufacturing arrangements
with us or significantly change, reduce or delay the amount of manufacturing
services ordered from us. If they do, it could have a material adverse effect on
our results of operations. See "Factors Affecting Future Results -- We Depend on
a Limited Number of Customers" and Note 7 to the Consolidated Financial
Statements.
Our principal source of new business is the expansion of existing customer
relationships to include additional product lines and services, referrals and
direct sales through our Business Unit Managers and Directors and executive
staff. Our Business Unit Managers and Directors, supported by the executive
staff, identify and attempt to develop relationships with new customers who meet
our profile. This profile includes financial stability, need for
technology-driven turnkey manufacturing, anticipated unit volume and long-term
relationship stability. Unlike traditional sales managers, our Business Unit
Managers and Directors are responsible for ongoing management of production for
their customers.
INTERNATIONAL OPERATIONS
A key element in our strategy is to provide localized production of global
products produced for OEMs in the major consuming regions of North America,
Europe and Asia. Consistent with this strategy, we have established or acquired
manufacturing facilities in Brazil, China, Hungary, Ireland, Italy, Malaysia,
Mexico and Scotland.
Our European facilities target existing European customers, North American
customers having significant sales in Europe and potential European customers
who meet our customer profile.
Our Asian facilities, located in China and Malaysia, enable us to provide
local manufacturing services to the Asian market in order to reduce costs,
freight and duties, to provide a more competitive cost structure for these
markets and to serve as a low cost manufacturing source for new and existing
customers.
See "Factors Affecting Future Results -- Our International Operations May
Be Subject to Certain Risks" and "Management's Discussion and Analysis of
Financial Analysis of Financial Condition and Results of Operations."
COMPETITION
The EMS industry is highly competitive. We compete against numerous
domestic and foreign manufacturers, including SCI Systems, Inc., Solectron
Corporation, Celestica, Inc., and Flextronics International. In addition, we may
in the future encounter competition from other large electronic manufacturers
that are selling, or may begin to sell, electronic manufacturing services. Most
of our competitors have international operations and some have substantially
greater manufacturing, financial, research and development and
6
<PAGE> 8
marketing resources than Jabil. We also face potential competition from the
manufacturing operations of our current and potential customers, who are
continually evaluating the merits of manufacturing products internally versus
the advantages of outsourcing to us.
We believe that the primary basis of competition in our targeted markets
are capability, price, manufacturing quality, advanced manufacturing technology,
design expertise, time-to-volume production, reliable delivery and regionally
dispersed manufacturing. Management believes we currently compete favorably with
respect to these factors. See "Factors Affecting Future Results -- We are in a
Highly Competitive Industry."
BACKLOG
Our order backlog at August 31, 2000 was approximately $1.2 billion,
compared to backlog of $688 million at August 31, 1999. Although our backlog
consists of firm purchase orders, the level of backlog at any particular time is
not necessarily indicative of future sales. Given the nature of our
relationships with our customers, we frequently allow our customers to cancel or
reschedule deliveries, and therefore, backlog is not a meaningful indicator of
future financial results. Although we may seek to negotiate fees to cover the
costs of such cancellations or rescheduling, we may not be successful in doing
so. See "Factors Affecting Future Results -- The Volume and Timing of Customer
Sales May Vary."
COMPONENTS PROCUREMENT
We procure components from a broad group of suppliers, determined on an
assembly-by-assembly basis. Almost all of the products we manufacture require
one or more components that are ordered from only one source, and most
assemblies require components that are available from only a single source. Some
of these components are allocated in response to supply shortages. We attempt to
ensure continuity of supply of these components. In cases where unanticipated
customer demand or supply shortages occur, we attempt to arrange for alternative
sources of supply, where available, or defer planned production to meet the
anticipated availability of the critical component. In some cases, supply
shortages will substantially curtail production of all assemblies using a
particular component. In addition, at various times there have been industry
wide shortages of electronic components, particularly of memory and logic
devices. We cannot assure you that such shortfalls will not have a material
adverse effect on our results of operations in the future. See "Factors
Affecting Future Results -- The Availability of the Manufacturing Components We
Need May be Limited."
PROPRIETARY RIGHTS
We regard our manufacturing processes and electronic designs as proprietary
trade secrets and confidential information. To protect our proprietary rights,
we rely largely upon a combination of trade secret laws; non-disclosure
agreements with our customers, employees, and suppliers; our internal security
systems; confidentiality procedures and employee confidentiality agreements.
Although we take steps to protect our trade secrets, misappropriation may still
occur.
We currently have various patents. However, we believe that the rapid pace
of technological change makes patent protection less significant than such
factors as the knowledge and experience of management and personnel and our
ability to develop, enhance and market manufacturing services.
We license some technology from third parties that we use in providing
manufacturing services to our customers. We believe that such licenses are
generally available on commercial terms from a number of licensors. Generally,
the agreements governing such technology grant us non-exclusive, worldwide
licenses with respect to the subject technology and terminate upon a material
breach by us.
We believe that our electronic designs and manufacturing processes do not
infringe on the proprietary rights of third parties. However, if third parties
assert valid infringement claims against us with respect to past, current or
future designs or processes, we could be required to enter into an expensive
royalty arrangement, develop non-infringing designs or processes, or engage in
costly litigation.
7
<PAGE> 9
EMPLOYEES
As of August 31, 2000, we had 19,115 full-time employees, compared to
11,694 full-time employees at August 31, 1999 (including employees of GET
Manufacturing, Inc.). In total, approximately 6,700 employees have joined us as
a result of acquisitions or mergers completed in fiscal year 2000. We believe
our employee relations are good.
GEOGRAPHIC INFORMATION
The information regarding revenue, operating profit, identifiable assets
and export sales set forth in Note 7 to the Consolidated Financial Statements,
set forth elsewhere herein, is hereby incorporated by reference into this Part
I, Item 1.
ENVIRONMENTAL
We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. Although we
believe that we are currently in substantial compliance with all material
environmental regulations, any failure to comply with present and future
regulations could subject us to future liabilities or the suspension of
production. In addition, such regulations could restrict our ability to expand
our facilities or could require us to acquire costly equipment or to incur other
significant expense to comply with environmental regulations.
ITEM 2. PROPERTIES
We have manufacturing and support facilities located in the United States,
Brazil, China, Hungary, Ireland, Italy, Malaysia, Mexico and Scotland. A summary
of building locations is as follows:
CURRENT FACILITIES
<TABLE>
<CAPTION>
YEAR APPROXIMATE
LOCATION COMMENCED OWNED / LEASED SQUARE FOOTAGE DESCRIPTION(1)
-------- --------- -------------- -------------- -----------------------
<S> <C> <C> <C> <C>
St. Petersburg, 1984 Owned 110,000 High volume mfg.
Florida..............
St. Petersburg, 1997 Owned 125,000 High volume mfg.
Florida..............
St. Petersburg, 1997 Leased 91,000 Systems assembly
Florida..............
St. Petersburg, 1997 Leased 27,000 Operations
Florida..............
St. Petersburg, 1998 Leased 27,000 Office
Florida..............
St. Petersburg, 1999 Owned 64,000 Corporate office
Florida..............
St. Petersburg, 1999 Leased 129,800 High volume mfg.
Florida..............
St. Petersburg, 2000 Leased 44,000 High volume mfg.
Florida..............
St. Petersburg, 2000 Owned 167,000 High volume mfg.
Florida..............
Auburn Hills, 1997 Leased 54,000 High volume mfg.
Michigan.............
Auburn Hills, 1993 Owned 125,000 High volume mfg.
Michigan.............
Auburn Hills, 1993 Leased 30,000 Warehouse
Michigan.............
Auburn Hills, 1999 Leased 18,000 Design/warehouse
Michigan.............
San Jose, California... 1998 Leased 181,000 Volume & prototype
mfg., design
San Jose, California... 2000 Leased 100,000 High volume mfg.
Boise, Idaho........... 2000 Owned 170,000 Office/high volume mfg.
Boise, Idaho........... 2000 Leased 25,000 High volume mfg.
Billerica, 1999 Leased 244,000 High volume mfg.
Massachusetts........
Penang, Malaysia....... 1997 Owned 150,000 High volume mfg.
Guadalajara, Mexico.... 1997 Owned 247,000 High volume mfg.
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
YEAR APPROXIMATE
LOCATION COMMENCED OWNED / LEASED SQUARE FOOTAGE DESCRIPTION(1)
-------- --------- -------------- -------------- -----------------------
<S> <C> <C> <C> <C>
Livingston, Scotland... 1997 Owned 130,000 High volume mfg.
Livingston, Scotland... 1999 Leased 100,000 Systems assembly
Bergamo, Italy......... 1998 Leased 102,000 High volume mfg.
Panyu, China........... 1999 Owned 210,000 High volume mfg.
Shenzhen, China(2)..... 1999 Leased 435,000 High volume mfg.
Dan Shui, China(2)..... 1999 Leased 129,000 High volume mfg.
Tijuana, Mexico........ 1999 Leased 63,000 High volume mfg.
Sheung Shui, Hong
Kong................. 1999 Owned 95,000 Office, warehouse
Oldsmar, Florida....... 1999 Leased 45,000 Repair services
Louisville, Kentucky... 1999 Leased 40,000 Repair services
Memphis, Tennessee..... 1999 Leased 80,000 Repair services
Memphis, Tennessee..... 1999 Leased 75,000 Repair services
Dublin, Ireland........ 2000 Leased 42,000 Repair services
Chihuahua, Mexico...... 2000 Leased 82,000 High volume mfg.
Tiszaujvaros,
Hungary.............. 2000 Owned 243,000 High volume mfg.
Contagem, Brazil....... 2000 Leased 74,000 High volume mfg.
</TABLE>
- ---------------
(1) Our manufacturing facilities in Brazil, California, China, Florida, Idaho,
Italy, Malaysia, Guadalajara, Scotland and Tijuana are ISO-9002 certified.
Our manufacturing facilities in Michigan and Scotland are QS-9000 while
Michigan and Florida are ISO-9001 certified. Michigan and Malaysia are also
ISO-14001 certified.
(2) Our manufacturing facilities in China are leased from joint venture
partners.
We are currently constructing high volume manufacturing facilities in
Penang, Malaysia, Chihuahua, Mexico and Auburn Hills, Michigan.
ITEM 3. LEGAL PROCEEDINGS
We are party to certain lawsuits in the ordinary course of business. We do
not believe that these proceedings, individually or in the aggregate, will have
a material adverse effect on our financial position, results of operations and
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our stockholders during the fourth
quarter covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the New York Stock Exchange under the symbol
"JBL." The following table sets forth the high and low closing sales prices per
share for our common stock as reported on the New York Stock Exchange for the
fiscal periods indicated. The table has been adjusted to reflect two two-for-one
9
<PAGE> 11
stock splits in the form of a 100% stock dividend to stockholders that were paid
on February 17, 1999 and March 30, 2000.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED AUGUST 31, 2000
First Quarter (September 1, 1999 -- November 30, 1999)...... $35.75 $22.00
Second Quarter (December 1, 1999 -- February 29, 2000)...... 38.59 31.22
Third Quarter (March 1, 2000 -- May 31, 2000)............... 44.63 31.81
Fourth Quarter (June 1, 2000 -- August 31, 2000)............ 62.34 36.50
YEAR ENDED AUGUST 31, 1999
First Quarter (September 1, 1998 -- November 30, 1998)...... 14.63 6.30
Second Quarter (December 1, 1998 -- February 28, 1999)...... 19.35 14.88
Third Quarter (March 1, 1999 -- May 31, 1999)............... 24.13 15.97
Fourth Quarter (June 1, 1999 -- August 31, 1999)............ 26.78 18.32
</TABLE>
As of October 12, 2000, there were approximately 2,511 holders of record of
our common stock.
We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information set forth below is not necessarily indicative of the
results of future operations and should be read in conjunction with the
consolidated financial statements and notes thereto incorporated into Item 8 of
this report. The historical information set forth below has been restated to
reflect the September 1999 merger with GET which was accounted for as a pooling
of interests.
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF EARNINGS
DATA:
Net revenue......................... $3,558,321 $2,238,391 $1,484,245 $1,178,644 $1,050,624
Cost of revenue................... 3,199,972 1,992,803 1,307,692 1,040,214 959,495
---------- ---------- ---------- ---------- ----------
Gross profit........................ 358,349 245,588 176,553 138,430 91,129
Selling, general and
administrative.................. 132,717 92,015 60,116 45,086 34,404
Research and development.......... 4,839 5,863 5,355 4,593 4,205
Amortization of intangibles....... 2,724 1,225 -- -- --
Acquisition and merger-related
charge.......................... 5,153(1) 7,030(2) 20,825(3) -- --
Goodwill write-off................ -- 3,578(2) 3,578(3) -- --
---------- ---------- ---------- ---------- ----------
Operating income.................... 212,916(1) 135,877(2) 86,679(3) 88,751 52,520
Income from joint ventures........ -- -- -- (1,287) (316)
Interest income................... (7,385) (4,536) (238) (3,697) (1,369)
Interest expense.................. 7,605 7,110 3,876 5,811 9,510
---------- ---------- ---------- ---------- ----------
Income before income taxes.......... 212,696 133,303 83,041 87,924 44,695
Income taxes...................... 67,048 48,484 25,572 28,611 14,311
---------- ---------- ---------- ---------- ----------
Net income................. $ 145,648(1) $ 84,819(2) $ 57,469(3) $ 59,313 $ 30,384
========== ========== ========== ========== ==========
Earnings per share(4):
Basic............................. $ 0.81 $ 0.51 $ 0.36 $ 0.38 $ 0.21
Diluted........................... $ 0.78(1) $ 0.49(2) $ 0.35(3) $ 0.36 $ 0.20
Common shares used in the
calculations of earnings per
share(4):
Basic............................. 179,032 166,754 158,589 155,181 147,815
Diluted........................... 187,448 174,334 164,934 163,890 155,558
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
AUGUST 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................... $ 695,295 $ 248,833 $102,394 $103,253 $119,321
Total assets............................. 2,018,192 1,035,421 625,173 484,133 370,025
Current installments of long-term
obligations and other short-term
debt................................... 8,333 32,490 28,302 9,173 9,342
Notes payable and long-term obligations,
excluding current installments......... 25,000 33,333 83,582 53,540 63,499
Net stockholders' equity................. 1,270,183 577,811 285,118 216,913 152,864
</TABLE>
- ---------------
(1) During 2000, we recorded additional merger-related charges of $5.2 million
($4.7 million after-tax) in connection with the merger with GET
Manufacturing ("GET Merger"). Operating income excluding this charge was
$218.1 million. Net income excluding this charge was $150.3 million and
diluted earnings per share was $0.80.
(2) During 1999, we recorded a merger-related charge of $7.0 million ($6.5
million after-tax) in connection with the GET Merger. During March 1999, we
also recorded the write-off of impaired goodwill of a GET subsidiary of $3.6
million ($3.3 million after-tax). As a result of the overlapping period
created when GET's fiscal year was conformed to an August 31 year end, the
write-off falls into the results of operations for both years ended August
31, 1999 and 1998. Stockholders' equity was adjusted so that the duplicate
amount is reflected only once in retained earnings. Operating income
excluding these charges was $146.5 million for the year ended August 31,
1999. Net income excluding these charges was $94.6 million and diluted
earnings per share was $0.54.
(3) In connection with the acquisition of certain assets of the LaserJet
Formatter Manufacturing Organization of the Hewlett-Packard Company, (the
"HP Acquisition"), we recorded an acquisition-related charge of $20.8
million ($12.9 million after-tax). During March 1999, we also recorded the
write-off of impaired goodwill of a GET subsidiary of $3.6 million ($3.3
million after-tax). As a result of the overlapping period created when GET
Manufacturing's fiscal year was conformed to an August 31 year end, this
charge is included in the operating results of the year ended August 31,
1998. Operating income excluding these charges was $111.1 million. Net
income excluding this charge was $73.7 million and diluted earnings per
share was $0.45.
(4) Gives effect to two-for-one stock splits in the form of 100% stock dividends
to stockholders of record on March 23, 2000 and on February 5, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We make "forward-looking statements" within the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995 throughout this Annual
Report on Form 10-K and in the documents we incorporate by reference herein. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "estimate," "plan" and "continue" or similar
words. We have based these statements on our current expectations about future
events. Although we believe that our expectations reflected in or suggested by
our forward-looking statements are reasonable, we cannot assure you that these
expectations will be achieved. Our actual results may differ materially from
what we currently expect. Important factors which could cause our actual results
to differ materially from the forward-looking statements in this document are
set forth in the following "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Factors Affecting Future Results"
sections and elsewhere in this document.
You should read this document and the documents that we incorporate by
reference into this Annual Report on Form 10-K completely and with the
understanding that our actual future results may be materially different from
what we expect. We may not update these forward-looking statements, even though
our
11
<PAGE> 13
situation will change in the future. All forward-looking statements attributable
to us are expressly qualified by these cautionary statements.
Jabil is one of the leading worldwide independent providers of turnkey
manufacturing services to electronics OEMs in the communications, computer
peripherals, personal computer, automotive and consumer products industries.
During the past several years, Jabil has experienced substantial growth in net
revenue, operating income and net income. This growth, as well as the growth of
the overall EMS industry, has been driven by the increasing number of
electronics OEMs who are outsourcing their manufacturing requirements. We
anticipate that this industry trend will continue during the next several years.
We derive most of our net revenue under purchase orders from OEM customers.
We recognize revenue, net of product return and warranty costs, typically at the
time of product shipment. The volume and timing of orders placed by our
customers vary due to several factors, including: variation in demand for our
customers' products; our customers' inventory management; new product
introductions and manufacturing strategy changes; and consolidations among our
customers. Demand for our customers' products depends on, among other things,
product life cycles, competitive conditions and general economic conditions.
Our cost of revenue includes the cost of electronic components and other
materials that comprise the products we manufacture, the cost of labor and
manufacturing overhead, and provisions for excess and obsolete inventory
adjustments. As a provider of turnkey manufacturing services, we are responsible
for procuring components and other materials. This requires us to commit
significant working capital to our operations and to manage the purchasing,
receiving, inspection and stocking of materials. Although we bear the risk of
fluctuations in the cost of materials, excess scrap and inventory obsolescence,
we periodically negotiate cost of materials adjustments with our customers.
Net revenue from each product that we manufacture consists of a component
based on the costs of materials in that product and a component based on the
labor and manufacturing overhead allocation to that product. We refer to the
portion of the sales price of a product that is based on labor and manufacturing
overhead costs as "manufacturing-based revenue," and to the portion of the sales
price of a product that is based on materials costs as "material-based revenue."
Our gross margin for any product depends on the mix between the cost of
materials in the product and the cost of labor and manufacturing overhead
allocated to the product. We typically realize higher gross margins on
manufacturing-based revenue than we do on materials-based revenue. As we gain
experience in manufacturing a product, we usually achieve increased
efficiencies, which result in lower labor costs and manufacturing overhead for
that product.
Our operating results are impacted by the level of capacity utilization of
manufacturing facilities, indirect labor and selling, general and administrative
expenses. Gross margins and operating income margins have generally improved
during periods of high volume and high capacity utilization. During periods of
low volume production, we generally have idle capacity and reduced operating
margins. As our capacity has grown during recent years, both through the
construction of new greenfield facilities and the expansion of existing
facilities, our selling, general and administrative expenses have increased to
support this growth.
We have consistently utilized advanced circuit design, production design
and manufacturing technologies to meet the needs of our customers. To support
this effort, our engineering staff focuses on developing and refining design and
manufacturing technologies to meet specific needs of specific customers. Most of
the expenses associated with these customer-specific efforts are reflected in
our cost of revenue. In addition, our engineers engage in research and
development of new technologies that apply generally to our operations. The
expense of these research and development activities are reflected in the
"Research and Development" line item in our Consolidated Financial Statements.
An important element of our strategy is the expansion of our global
production facilities. Substantially all of our revenue and materials costs
worldwide are denominated in U.S. dollars, while our labor and utility costs in
plants outside the United States are denominated in local currencies. We
typically hedge these local currency costs through the purchase of foreign
exchange contracts, the amount and cost of which have not been material.
12
<PAGE> 14
We continue to depend upon a relatively small number of customers for a
significant percentage of our net revenue. Significant reductions in sales to
any of our large customers would have a material adverse effect on our results
of operations. In the past, some of our customers have terminated their
manufacturing arrangements with us, and other customers have significantly
reduced or delayed the volume of manufacturing services ordered from us. There
can be no assurance that present or future customers will not terminate their
manufacturing arrangements with us or significantly change, reduce or delay the
amount of manufacturing services ordered from us. Any such termination of a
manufacturing relationship or change, reduction or delay in orders could have an
adverse effect on our results of operations or financial condition. See Note 7
to the Consolidated Financial Statements.
ACQUISITIONS AND EXPANSION
On August 3, 1998, we acquired certain assets (primarily raw material
inventory and property, plant and equipment) relating to the LaserJet Formatter
Manufacturing Organization of Hewlett-Packard Company located in Bergamo, Italy
and Boise, Idaho. The HP Acquisition price was approximately $80.0 million and
was accounted for under the purchase method of accounting. The acquisition
resulted in goodwill and other intangible assets of approximately $11.2 million,
which are being amortized on a straight-line basis over ten years. The acquired
assets were used by the Hewlett-Packard Company to manufacture printed
circuit-board assemblies for the LaserJet printer division of Hewlett-Packard
Company. Simultaneously with the HP Acquisition, we entered into a manufacturing
agreement to continue to produce the printed circuit board assemblies being
produced by the Hewlett-Packard Company operations in Bergamo and Boise.
On September 1, 1999 we acquired, through our Jabil Global Services
subsidiary, the net assets of EFTC Services, Inc., an electronic product service
and repair business. Jabil Global Services, Inc. continues to offer repair and
warranty services for existing and future customers from its hub-based
operations in Memphis, Tennessee; Louisville, Kentucky; and Tampa, Florida. The
purchase price of approximately $28 million was paid in cash. The acquisition
was accounted for as a purchase and resulted in approximately $19 million of
goodwill, which is being amortized, on a straight-line basis over a period of 15
years. The consolidated financial statements include the operating results of
the acquired business from the date of acquisition.
On September 13, 1999 we issued approximately 10.2 million shares of our
common stock for all the outstanding common stock of GET Manufacturing, Inc., a
China-based electronics manufacturing services provider. The business
combination was accounted for as a pooling-of-interests and, accordingly, our
historical consolidated financial statements presented herein have been restated
to include the accounts and results of operations of GET Manufacturing, Inc. In
connection with the merger, we recorded acquisition-related charges of $7.0
million ($6.5 million after-tax) and $5.2 million ($4.7 million after-tax) in
the fourth quarter of fiscal year 1999 and the first quarter of fiscal year
2000, respectively consisting of key employee severance and legal and
professional fees associated with the merger.
On February 1, 2000, we acquired the net assets of Bull Information
Technology, an electronic manufacturing service provider. The business operates
in the city of Contagem, State of Minas Gerais, in the Belo Horizonte region
Brazil. The purchase price of approximately $6 million was paid in cash. The
acquisition was accounted for as a purchase and resulted in approximately $5
million of goodwill, which is being amortized, on a straight-line basis over a
period of 10 years. The consolidated financial statements include the operating
results of the acquired business from the date of the acquisition. Pro forma
results of operations have not been presented because the effect of the
acquisition was not material.
On July 20, 2000 we acquired the share capital of Telenor Technology
Services Limited, a repair and logistics services division of Telenor Mobile
Communications AS, a Norwegian provider of telecommunication, data and media
communication services. The purchase price of approximately $4 million was paid
in cash. The acquisition was accounted for as a purchase and resulted in
approximately $2 million of goodwill, which is being amortized, on a
straight-line basis over a period of 15 years. The acquired operations allow
Jabil Global Services to offer circuit board repair and warranty services for
European customers from Dublin, Ireland. The consolidated financial statements
include the operating results of the acquired business from the
13
<PAGE> 15
date of acquisition. Pro forma results of operations have not been presented
because the effect of the acquisition was not material.
During this fiscal year, we announced greenfield expansions in
Tiszaujvaros, Hungary and Chihuahua, Mexico. The Hungarian facility is
approximately 250,000 square feet and is scheduled to begin production in the
fall of 2000. In Chihuahua, two 250,000 square-foot facilities will be
constructed to add capacity in Mexico. We have also announced expansions of
existing sites in North America.
The EMS industry has experienced rapid growth over the past several years
as an increasing number of OEMs have outsourced their manufacturing
requirements. OEMs are turning to outsourcing in order to reduce product cost,
achieve accelerated time-to-market and time-to-volume production, access
advanced design and manufacturing technologies, improve inventory management and
purchasing power, reduce their capital investment in manufacturing facilities,
and achieve parallel manufacturing of the same product throughout the world. We
believe that further growth opportunities exist for EMS providers to penetrate
the worldwide electronics markets.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating data as a percentage of net revenue:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-----------------------
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Net revenue............................................... 100.0% 100.0% 100.0%
Cost of revenue........................................... 89.9 89.0 88.1
----- ----- -----
Gross margin.............................................. 10.1 11.0 11.9
Selling, general and administrative....................... 3.7 4.1 4.1
Research and development.................................. 0.1 0.3 0.4
Amortization of intangibles............................... 0.1 -- --
Acquisition and merger-related charge..................... 0.2 0.3 1.4
Goodwill write-off........................................ -- 0.2 0.2
----- ----- -----
Operating income.......................................... 6.0 6.1 5.8
Interest income........................................... (0.2) (0.2) --
Interest expense.......................................... 0.2 0.3 0.2
----- ----- -----
Income before income taxes................................ 6.0 6.0 5.6
Income taxes.............................................. 1.9 2.2 1.7
----- ----- -----
Net income................................................ 4.1% 3.8% 3.9%
===== ===== =====
</TABLE>
Fiscal Year Ended August 31, 2000 Compared to Fiscal Year Ended August 31,
1999
Net Revenue. Our net revenue increased 59.0% to $3.6 billion for fiscal
year 2000, up from $2.2 billion in fiscal year 1999. The increase was primarily
due to increased production of communications products. Foreign source revenue
represented 43.5% of our net revenue for fiscal year 2000 and 40.5% of net
revenue for fiscal year 1999. The increase in foreign source revenue was
attributable to increased production in our international locations.
Gross Profit. Gross margin decreased to 10.1% in fiscal year 2000 from
11.0% in fiscal year 1999, reflecting a higher content of material-based revenue
and under-utilization of assets in certain international factories.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $132.7 million (3.7% of net revenue) in fiscal year 2000
from $92.0 million (4.1% of net revenue) in fiscal year 1999. This increase was
primarily due to continued increases in staffing and related departmental
expenses at all of our locations along with increases in information systems
staff to support the expansion of our business.
14
<PAGE> 16
Research and Development. Research and development expenses in fiscal year
2000 decreased to $4.8 million (0.1% of net revenue) from $5.9 million (0.3% of
net revenue) in fiscal year 1999 as a result of an increase in the rate of
recovery of these costs from our customers.
Amortization of Intangibles. We recorded $2.7 million of amortization of
intangibles in fiscal year 2000 as compared to $1.2 million in fiscal year 1999.
This increase is attributable to the amortization of the goodwill arising from
the EFTC Services, Inc. and Bull Technology, Inc. acquisitions.
Acquisition and Merger-Related Charge. During the first quarter of fiscal
year 2000, we incurred $5.2 million in merger-related charges consisting of key
employee severance and legal and professional fees associated with the GET
merger. See Note 10 to the Consolidated Financial Statements.
Interest Income. Interest income increased to $7.4 million in fiscal year
2000 from $4.5 million in fiscal year 1999 reflecting increased income on
greater cash balances resulting from an equity offering completed in the fourth
quarter. See Note 6 to the Consolidated Financial Statements of fiscal year
2000.
Interest Expense. Interest expense increased to $7.6 million in fiscal
year 2000, from $7.1 million in fiscal year 1999, primarily reflecting slightly
increased short-term borrowings to support plant expansions and working capital
needs.
Income Taxes. In fiscal year 2000, our effective tax rate decreased to
31.5% from 36.4% in fiscal year 1999. The effective tax rate is predominantly a
function of the mix of domestic versus international income from operations. See
Note 5 to the Consolidated Financial Statements.
Fiscal Year Ended August 31, 1999 Compared to Fiscal Year Ended August 31,
1998
Net Revenue. Our net revenue increased 50.8% to $2.2 billion for fiscal
year 1999, up from $1.5 billion in fiscal year 1998. The increase was primarily
due to incremental revenue resulting from the HP Acquisition as well as
increased production of communication products. Foreign source revenue
represented 40.5% of our net revenue for fiscal year 1999 and 41.0% of net
revenue for fiscal year 1998.
Gross Profit. Gross margin decreased to 11.0% in fiscal year 1999 from
11.9% in fiscal year 1998, reflecting a higher content of material-based revenue
from the HP Acquisition and under-utilization of assets in certain international
factories.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $92.0 million (4.1% of net revenue) in fiscal year 1999
from $60.1 million (4.1% of net revenue) in fiscal year 1998. This increase was
primarily due to continued increases in staffing and related departmental
expenses at all of our locations, including the sites acquired in the HP
Acquisition, along with increases in information systems staff to support the
expansion of our business.
Research and Development. Research and development expenses in fiscal year
1999 increased to $5.9 million (0.3% of net revenue) from $5.4 million (0.4% of
net revenue) in fiscal year 1998 due to the expansion of electronic design
activities.
Amortization of Intangibles. Amortization of Intangibles of $1.2 million
was recorded in fiscal year 1999 as a result of the HP Acquisition. See Note 10
to the Consolidated Financial Statements.
Acquisition and Merger-Related Charges. During the fourth quarter of
fiscal year 1999, we incurred $7.0 million in merger-related charges consisting
of professional fees and other merger-related charges as part of the GET merger.
See Note 10 to the Consolidated Financial Statements.
Goodwill Write-Off. During March 1999, we recorded a write-off of impaired
goodwill related to a subsidiary of GET. As a result of the overlapping period
created when GET's fiscal year was conformed to an August 31 year end, the
write-off falls into the results of operations for both years ended August 31,
1999 and 1998. Stockholders' equity was adjusted to eliminate the duplicate
amount from retained earnings. See Note 1 to the Consolidated Financial
Statements.
15
<PAGE> 17
Interest Income. Interest income increased to $4.5 million in fiscal year
1999 from $238,000 in fiscal year 1998, as a result of increased income on cash
balances and short-term investments.
Interest Expense. Interest expense increased to $7.1 million in fiscal
year 1999, from $3.9 million in fiscal year 1998, primarily reflecting increased
borrowings to support the HP Acquisition and working capital needs.
Income Taxes. In fiscal year 1999, the effective tax rate increased to
36.4% from 30.8% in fiscal year 1998. The effective tax rate is predominantly a
function of the mix of domestic versus international income from operations. See
Note 5 to the Consolidated Financial Statements.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for the 2000 and 1999 fiscal years. In the opinion of management,
this information has been presented on the same basis as the audited
consolidated financial statements appearing elsewhere, and all necessary
adjustments (consisting of normal recurring adjustments and an acquisition and
merger-related charges which are discussed in Note 10 to the Consolidated
Financial Statements) have been included in the amounts stated below to present
fairly the unaudited quarterly results when read in conjunction with the audited
consolidated financial statements and related notes thereto. The operating
results for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
------------------------------------------- ---------------------------------------------
AUG. 31, MAY 31, FEB. 29, NOV. 30, AUG. 31, MAY 31, FEB. 28, NOV. 30,
2000 2000 2000 1999 1999 1999 1999 1998
---------- -------- -------- -------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue.................. $1,065,088 $965,849 $837,562 $689,822 $602,335 $ 582,238 $558,703 $495,115
Cost of revenue............ 958,751 871,307 753,479 616,435 535,365 518,417 498,601 440,420
---------- -------- -------- -------- -------- ---------- -------- --------
Gross profit................. 106,337 94,542 84,083 73,387 66,970 63,821 60,102 54,695
Selling, general and
administrative............. 39,727 34,327 31,612 27,051 25,836 22,902 22,452 20,825
Research and development... 1,312 1,142 1,203 1,182 1,587 1,387 1,432 1,457
Amortization of
intangibles................ 765 716 644 599 287 287 294 357
Acquisition and
merger-related
charges(1)(2).............. -- -- -- 5,153(1) 7,030(2) -- -- --
Goodwill write-off(2)........ -- -- -- -- -- 3,578(2) -- --
---------- -------- -------- -------- -------- ---------- -------- --------
Operating income (loss)...... 64,533 58,357 50,624 39,402(1) 32,230(2) 35,667(2) 35,924 32,056
Interest income.............. (5,354) (827) (32) (1,180) (2,307) (1,507) (400) (322)
Interest expense............. 1,707 3,867 1,474 565 1,413 1,482 2,292 1,923
---------- -------- -------- -------- -------- ---------- -------- --------
Income (loss) before income
taxes...................... 68,180 55,317 49,182 40,017 33,124 35,692 34,032 30,455
Income tax expense
(benefit)................ 21,129 17,144 15,246 13,529 12,956 13,310 11,778 10,440
---------- -------- -------- -------- -------- ---------- -------- --------
Net income........... $ 47,051 $ 38,173 $ 33,936 $ 26,488(1) $ 20,168(2) $ 22,382(2) $ 22,254 $ 20,015
========== ======== ======== ======== ======== ========== ======== ========
Earnings per share:
Basic...................... $ 0.25 $ 0.22 $ 0.19 $ 0.15 $ 0.12 $ 0.13 $ 0.14 $ 0.13
========== ======== ======== ======== ======== ========== ======== ========
Diluted.................... $ 0.24 $ 0.21 $ 0.18 $ 0.15(1) $ 0.11(2) $ 0.12(2) $ 0.13 $ 0.12
========== ======== ======== ======== ======== ========== ======== ========
Common shares used in the
calculations of earnings
per share(3):
Basic...................... 188,918 176,674 175,715 174,820 174,562 173,130 159,944 159,378
========== ======== ======== ======== ======== ========== ======== ========
Diluted.................... 197,536 184,960 184,518 182,778 182,586 181,328 167,436 165,986
========== ======== ======== ======== ======== ========== ======== ========
</TABLE>
16
<PAGE> 18
The following table sets forth, for the periods indicated, certain
financial information stated as a percentage of net revenue:
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
---------------------------------------- ------------------------------------------
AUG. 31, MAY 31, FEB. 29, NOV. 30, AUG. 31, MAY 31, FEB. 28, NOV. 30,
2000 2000 2000 1999 1999 1999 1999 1998
-------- ------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........................... 90.0 90.2 90.0 89.4 88.9 89.0 89.2 89.0
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.............................. 10.0 9.8 10.0 10.6 11.1 11.0 10.8 11.0
Selling, general and administrative....... 3.7 3.6 3.8 3.9 4.3 3.9 4.0 4.2
Research and development.................. 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3
Amortization of intangibles............... 0.1 0.1 0.1 0.1 -- 0.1 0.1 0.1
Acquisition and merger-related
charges(1)(2)........................... -- -- -- 0.7 1.2(2) -- -- --
Goodwill write-off(1)(2).................. -- -- -- -- -- 0.6(2) -- --
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)................... 6.1 6.0 6.0 5.7 5.4(2) 6.2(2) 6.4 6.4
Interest income........................... (0.5) (0.1) -- (0.2) (0.3) (0.2) (0.1) (0.1)
Interest expense.......................... 0.2 0.4 0.1 0.1 0.2 0.3 0.4 0.4
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes......... 6.4 5.7 5.9 5.8 5.5 6.1 6.1 6.1
Income tax expense (benefit).............. 2.0 1.8 1.8 2.0 2.1 2.3 2.1 2.1
----- ----- ----- ----- ----- ----- ----- -----
Net income................................ 4.4% 3.9% 4.1% 3.8% 3.4%(2) 3.8%(2) 4.0% 4.0%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) In connection with the GET Merger, we recorded merger-related charges of
$5.2 million ($4.7 million after-tax) in the quarter ended November 30,
1999. Operating income excluding these charges was $44.6 million (6.5% of
net revenue). Net income excluding this charge was $31.1 million (4.5% of
net revenue), and diluted earnings per share was $0.17.
(2) In connection with the GET Merger, we recorded merger-related charges of
$7.0 million ($6.5 million after-tax) in the quarter ended August 31, 1999.
During the quarter ended May 31, 1999, we recorded the write-off of impaired
goodwill of a GET subsidiary of $3.6 million ($3.3 million after-tax).
Operating income excluding these charges was $39.3 million (6.5% of net
revenue) and $39.2 million (6.7% of net revenue) for the quarters ended
August 31, 1999 and May 31, 1999, respectively. Net income excluding this
charge was $26.6 million (4.4% of net revenue) and $26.0 million (4.5% of
net revenue) and diluted earnings per share was $0.15 and $0.14 for the
quarters ended August 31, 1999 and May 31, 1999, respectively.
(3) Gives effect to a two-for-one stock split in the form of a 100% stock
dividend to stockholders of record on March 23, 2000 and on February 5,
1999.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations from the proceeds of public equity offerings,
private placement debt, borrowings on a revolving credit facility and cash
generated from operations. In June 2000, we sold 13.0 million shares of our
common stock, which generated net proceeds to us of approximately $525.4
million. Also, in March 1999, we sold 13.8 million shares of our common stock,
which generated net proceeds of approximately $199 million to us.
At August 31, 2000 our principal source of liquidity consisted of cash and
short-term investments of $337.6 million and available borrowings under our
credit facility and asset securitization program. See Note 4 to the Consolidated
Financial Statements.
Net cash provided by operating activities for the year ended August 31,
2000 was $35.4 million. This consisted primarily of $145.6 million of net
income, $99.3 million of depreciation and amortization, $307.3 million of
increases in accounts payable and accrued expenses, offset by $257.8 million of
increases in accounts receivable and $255.6 million increases in inventories.
The increases in inventory, accounts receivable and accounts payable were due to
commensurate increases in levels of business.
Net cash used in investing activities of $336.3 million for the year ended
August 31, 2000 consisted of our capital expenditures of $333.1 million for
construction and equipment worldwide in order to support increased activities
and cash paid of $36.7 million in the acquisition of EFTC Services, Inc., Bull
Information
17
<PAGE> 19
Technology and Telenor Technology Services Limited, net of $27.2 million of
proceeds from the sale of short-term investments.
Net cash provided by financing activities of $512.6 million for the year
ended August 31, 2000 resulted primarily from $525.4 million in proceeds from
our common stock offering, offset in part by the repayment of borrowings on our
revolving credit facility and an installment of principal on our private
placement debt. See Notes 4 and 6 to the Consolidated Financial Statements.
Over the past several years, we have experienced significant growth. As a
result, we have used cash to finance increases in our inventory and accounts
receivable. In the event that we experience similar growth in the future, we may
need to finance such growth and any corresponding working capital needs with
additional borrowings under our revolving credit facility, as well as additional
public and private offerings of our debt and equity. During the quarter ended
November 30, 1999, we filed a "shelf" registration statement registering the
potential sale of debt and equity securities in the future from time-to-time to
augment our liquidity and capital resources. Our June 2000 offering of 13
million shares of our common stock was made pursuant to that registration
statement. In August 2000, we effectively increased the amount of unissued
securities under our shelf registration statement to $1.5 billion. In August
2000, we established a $225 million account receivables securitization program
with a syndicate of banks which expires in August 2001. To date, we have not
accessed any funds through that program. Should we do so, we would effectively
pay interest on such funds at designated commercial paper rates plus agreed-upon
margins.
We believe that during fiscal year 2001, our capital expenditures will
exceed $400 million, principally for machinery, equipment, facilities and
related expenses. We believe that our level of resources, which include cash on
hand, available borrowings, and funds provided by operations, will be more than
adequate to fund these capital expenditure and working capital requirements for
fiscal 2001.
18
<PAGE> 20
FACTORS AFFECTING FUTURE RESULTS
OUR OPERATING RESULTS MAY FLUCTUATE
Our annual and quarterly operating results are affected by a number of
factors, including:
- the level and timing of customer orders
- the composition of the costs of sales between materials and labor and
manufacturing overhead
- price competition
- our level of experience in manufacturing a particular product
- the degree of automation used in our assembly process
- the efficiencies achieved by us in managing inventories and fixed assets
- fluctuations in materials costs and availability of materials
- the timing of expenditures in anticipation of increased sales, customer
product delivery requirements and shortages of components or labor.
The volume and timing of orders placed by our customers vary due to variation in
demand for our customers' products, our customers' inventory management, new
product introductions and manufacturing strategy changes, and consolidations
among our customers. In the past, changes in customer orders have had a
significant effect on our results of operations due to corresponding changes in
the level of overhead absorption. Any one or a combination of these factors
could adversely affect our annual and quarterly results of operations in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results."
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS
For the fiscal year ended August 31, 2000, our four largest customers
accounted for approximately 60% of our net revenue and approximately 30
customers accounted for over 95% of our net revenue. For the fiscal year ended
August 31, 2000, Cisco Systems, Inc., Dell Computer Corporation, Hewlett-Packard
Company and Lucent Technologies accounted for approximately 20%, 16%, 14% and
10% of our net revenue, respectively. We are dependent upon the continued
growth, viability and financial stability of our customers whose industries have
experienced rapid technological change, short product life cycles,
consolidation, and pricing and margin pressures. We expect to continue to depend
upon a relatively small number of customers for a significant percentage of our
net revenue. A significant reduction in sales to any of our customers or a
customer exerting significant pricing and margin pressures on us, would have a
material adverse effect on our results of operations. In the past, some of our
customers have terminated their manufacturing arrangements with us or have
significantly reduced or delayed the volume of manufacturing services ordered
from us. We cannot assure you that present or future customers will not
terminate their manufacturing arrangements with us or significantly change,
reduce or delay the amount of manufacturing services ordered from us. If they
do, it could have a material adverse effect on our results of operations. In
addition, we generate significant account receivables in connection with
providing manufacturing services to our customers. If one or more of our
customers were to become insolvent or otherwise were unable to pay for the
manufacturing services provided by us, our operating results and financial
condition would be adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Customers and
Marketing."
THE VOLUME AND TIMING OF CUSTOMER SALES MAY VARY
The volume and timing of sales to our customers may vary due to:
- variation in demand for our customers' products
- our customers' attempts to manage their inventory
19
<PAGE> 21
- electronic design changes
- changes in our customers' manufacturing strategy
- acquisitions of or consolidations among customers
Due in part to these factors, most of our customers do not commit to firm
production schedules for more than one quarter in advance. Our inability to
forecast the level of customer orders with certainty makes it difficult to
schedule production and maximize utilization of manufacturing capacity. In the
past, we have been required to increase staffing and other expenses in order to
meet the anticipated demand of our customers. Anticipated orders from many of
our customers have, in the past, failed to materialize or delivery schedules
have been deferred as a result of changes in our customers' business needs,
thereby adversely affecting our results of operations. On other occasions, our
customers have required rapid increases in production, which have placed an
excessive burden on our resources. Such customer order fluctuations and
deferrals have had a material adverse effect on us in the past, and we may
experience such effects in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Backlog."
WE ARE IN A HIGHLY COMPETITIVE INDUSTRY
The electronic manufacturing services business is highly competitive. We
compete against numerous domestic and foreign manufacturers, including SCI
Systems, Inc., Solectron Corporation, Celestica, Inc. and Flextronics
International. In addition, we may in the future encounter competition from
other large electronic manufacturers that are selling, or may begin to sell,
electronic manufacturing services. Most of our competitors have international
operations and some have substantially greater manufacturing, financial,
research and development, and marketing resources than us. We also face
potential competition from the manufacturing operations of our current and
potential customers, who are continually evaluating the merits of manufacturing
products internally versus the advantages of outsourcing. See
"Business -- Competition."
OUR RAPID GROWTH MAY BE DIFFICULT TO MANAGE
We have grown rapidly. Our ability to manage growth effectively will
require us to continue to implement and improve our operational, financial and
management information systems; continue to develop the management skills of our
managers and supervisors; and continue to train, motivate and manage our
employees. Our failure to effectively manage growth could have a material
adverse effect on our results of operations. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
WE MAY EXPERIENCE RISKS RELATING TO OUR COMPUTER INTEGRATION
We have completed the installation of an Enterprise Resource Planning
system in six of our locations. We are in the process of installing this system
in our remaining plants which will replace the current Manufacturing Resource
Planning system and financial information systems. Any delay in the
implementation of these new information systems could result in material adverse
consequences, including disruption of operations, loss of information and
unanticipated increases in cost.
20
<PAGE> 22
WE MAY ENCOUNTER DIFFICULTIES WITH ACQUISITIONS
We cannot assure you that we will be able to successfully integrate the
operations and management of our recent acquisitions. Similarly, we cannot
assure you that we will be able to consummate or, if consummated, successfully
integrate the operations and management of future acquisitions. Acquisitions
involve significant risks, which could have a material adverse effect on us,
including:
- Financial risks, such as (1) potential liabilities of the acquired
businesses; (2) the dilutive effect of the issuance of additional equity
securities; (3) the incurrence of additional debt; (4) the financial
impact of amortizing goodwill and other intangible assets involved in any
acquisitions that are accounted for using the purchase method of
accounting; and (5) possible adverse tax and accounting effects.
- Operating risks, such as (1) the diversion of management's attention to
the assimilation of the businesses to be acquired; (2) the risk that the
acquired businesses will fail to maintain the quality of services that we
have historically provided; (3) the need to implement financial and other
systems and add management resources; (4) the risk that key employees of
the acquired businesses will leave after the acquisition; and (5)
unforeseen difficulties in the acquired operations.
THE AVAILABILITY OF THE MANUFACTURING COMPONENTS WE NEED MAY BE LIMITED
Substantially all of our net revenue is derived from turnkey manufacturing
in which we provide materials procurement. While most of our significant
long-term customer contracts permit quarterly or other periodic adjustments to
pricing based on decreases and increases in component prices and other factors,
we typically bear the risk of component price increases that occur between any
such re-pricings or, if such re-pricing is not permitted, during the balance of
the term of the particular customer contract. Accordingly, certain component
price increases could adversely affect our gross profit margins. Almost all of
the products we manufacture require one or more components that are available
from only a single source. Some of these components are allocated from time to
time in response to supply shortages. In some cases, supply shortages will
substantially curtail production of all assemblies using a particular component.
In addition, at various times industry wide shortages of electronic components
have occurred, particularly of memory and logic devices. Such circumstances have
produced significant levels of short-term interruption of our operations, and
may have a material adverse effect on our results of operations in the future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Components Procurement."
OUR INTERNATIONAL OPERATIONS MAY BE SUBJECT TO CERTAIN RISKS
We derived 43% of our revenues from international operations in fiscal year
2000. We currently operate outside the United States in Contagem, Brazil; Dan
Shui, Panyu, and Shenzhen, China; Sheung Shui, Hong Kong; Tiszaujvaros, Hungary;
Dublin, Ireland; Bergamo, Italy; Penang, Malaysia; Chihuahua, Guadalajara and
Tijuana, Mexico; and Livingston, Scotland. We continually consider additional
opportunities to make foreign acquisitions and construct new foreign facilities.
Our international operations may be subject to a number of risks, including:
- difficulties in staffing and managing foreign operations
- political and economic instability
- unexpected changes in regulatory requirements and laws
- longer customer payment cycles and difficulty collecting accounts
receivable export duties, import controls and trade barriers (including
quotas)
- governmental restrictions on the transfer of funds to us from our
operations outside the United States
- burdens of complying with a wide variety of foreign laws and labor
practices
- fluctuations in currency exchange rates, which could affect local
payroll, utility and other expenses
21
<PAGE> 23
- inability to utilize net operating losses incurred by our foreign
operations to reduce our U.S. income taxes
In our experience, entry into new international markets requires
considerable management time as well as start-up expenses for market
development, hiring and establishing office facilities before any significant
revenues are generated. As a result, initial operations in a new market may
operate at low margins or may be unprofitable. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations -- Liquidity and
Capital Resources."
WE DEPEND ON KEY PERSONNEL
Our continued success depends largely on the efforts and skills of our key
managerial and technical employees. The loss of the services of certain of these
key employees or an inability to attract or retain qualified employees could
have a material adverse effect on us. We do not have employment agreements or
non-competition agreements with our key employees.
WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE
The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs,
maintain technological leadership, and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. We cannot assure you that our process development efforts will be
successful. See "Business -- Technology" and "-- Research and Development."
WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAW COMPLIANCE RESPONSIBILITIES
We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. If we fail to
comply with any present and future regulations, we could be subject to future
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment, or to incur other significant expenses to comply with
environmental regulations.
CERTAIN EXISTING STOCKHOLDERS HAVE SIGNIFICANT CONTROL
Our executive officers, directors and principal stockholders and their
affiliates collectively beneficially own 22.4% of our outstanding common stock,
of which William D. Morean beneficially owns 18.6%. As a result, our executive
officers, directors, principal stockholders and their affiliates have
significant influence over (1) the election of our Board of Directors, (2) the
approval or disapproval of any other matters requiring stockholder approval, and
(3) the affairs and policies of Jabil.
OUR STOCK PRICE MAY BE VOLATILE
Our common stock is traded on the New York Stock Exchange. The market price
of our common stock has fluctuated substantially in the past and could fluctuate
substantially in the future, based on a variety of factors, including future
announcements covering us or our key customers or competitors, government
regulations, litigation, changes in earnings estimates by analysts, fluctuations
in quarterly operating results, or general conditions in the contract
manufacturing, communications, computer peripherals, personal computer,
automotive or consumer products industries. Furthermore, stock prices for many
companies, and high technology companies in particular, fluctuate widely for
reasons that may be unrelated to their operating results. Those fluctuations and
general economic, political and market conditions, such as recessions or
international currency fluctuations and demand for our services, may adversely
affect the market price of our common stock.
22
<PAGE> 24
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW MAY HAVE CERTAIN
ANTI-TAKEOVER EFFECTS
The Corporation Law of the State of Delaware and our certificate of
incorporation and bylaws each contain certain provisions that may, in effect,
discourage, delay or prevent a change of control of Jabil or unsolicited
acquisition proposals from taking place.
WE ARE SENSITIVE TO CHANGES IN INTEREST RATES
We pay interest on outstanding borrowings under our $500 million revolving
credit facility at interest rates that fluctuate based upon changes in various
base interest rates. As of August 31, 2000, we did not have outstanding
borrowings under our revolving credit facility. We also have funding costs
associated with the asset backed securitization. Costs are in part based on
commercial paper rates. As of August 31, 2000, we did not have any outstanding
borrowings under the asset backed securitization. An adverse change in the base
rates upon which our interest rate is determined could have a material adverse
effect on our financial position, results of operations and cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk sensitive financial instruments are entered into
for purposes other than trading. Financial instruments include cash equivalents
which are available for immediate withdrawal. Long-term debt instruments are
subject to a fixed interest rate and maturity schedule. Short-term interest rate
changes can impact interest expense on our variable rate credit facility and
asset-backed securitization, however, no amounts were outstanding on either of
the facilities as August 31, 2000.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations: Factors Affecting Future Results -- The Availability of
the Manufacturing Components We Need May be Limited," "-- Our International
Operations May be Subject to Certain Risks", and "-- We Are Sensitive to Changes
in Interest Rates." See Notes 1, 4 and 8 to the Consolidated Financial
Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Certain information required by this item is included in Item 7 of Part II
of this Report under the heading "Quarterly Results" and is incorporated into
this item by reference. All other information required by this item is included
in Item 14 of Part IV of this Report and is incorporated into this item by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding our directors is incorporated by reference to the
information set forth under the caption "Proposal No. 1: Election of Directors"
in our Proxy Statement for the Annual Meeting of Stockholders to be filed with
the Securities and Exchange Commission (the "Commission") within 120 days after
the end of our fiscal year ended August 31, 2000.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, is hereby incorporated herein by reference
from the section entitled "Other Information -- Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement for the Annual Meeting of
Stockholders to be filed with the Commission within 120 days after the end of
our fiscal year ended August 31, 2000.
23
<PAGE> 25
OUR EXECUTIVE OFFICERS
Officers are appointed by the Board of Directors and serve at the
discretion of the Board. Each executive officer is a full-time employee of
Jabil. There are no family relationships among our officers and directors.
William D. Morean (age 45) has served as Chairman of the Board since 1988
and as a director since 1978. Morean joined us in 1977 and assumed management of
day-to-day operations the following year. He served as Chief Executive Officer
until September 2000, and has previously served as President and Vice President
and held various operating positions. Morean attended Western Michigan
University, where he studied aviation.
Thomas A. Sansone (age 51) was elected Vice Chairman in January 1999. He
has served as a director since 1983. Sansone joined us in 1983 as Vice President
was promoted to President in 1988. Prior to joining Jabil, Sansone was a
practicing attorney. He holds a B.A. in Business Administration from Hillsdale
College, a J.D. from Detroit College of Law and an LL.M. in taxation from New
York University.
Timothy L. Main (age 43) has served as Chief Executive Officer of Jabil
since September 2000, as President since January 1999 and as a director since
October 1999. He joined Jabil in April 1987 as a Production Control Manager, was
promoted to Operations Manager in September 1987, to Project Manager in July
1989, to Vice President Business Development in May 1991, and to Senior Vice
President, Business Development in August 1996. Prior to joining us, Main was a
commercial lending officer, international division for the National Bank of
Detroit. Main has earned a B.S. from Michigan State University and an MIM from
the American Graduate School of International Management (Thunderbird).
Ronald J. Rapp (age 47) was named Chief Operating Officer in November 2000.
He served as Senior Vice President, Operational Development from January 1999 to
November 2000 and as a director from September 1988 to October 1999. Rapp joined
us in 1983 as Controller, was promoted in 1984 to Treasurer, to CFO in 1988 and
to Executive Vice President, Operations in 1996. Prior to joining Jabil, Rapp
was the Corporate Controller for Van Pelt Corporation, a wholesale distributor
of steel tubing products. Before joining Van Pelt, Rapp was a certified public
accountant with the accounting firm of Ernst & Ernst. Rapp holds a B.A. in
accounting from Ferris State University.
Chris Lewis (age 40) joined Jabil as Treasurer in June 1995 and was
promoted to Chief Financial Officer in August 1996. From July 1989 to May 1995,
Lewis was U.S. Controller of Peek PLC, a high technology manufacturing group.
Prior to July 1989, Lewis was a CPA with the accounting firm of KPMG Peat
Marwick. Lewis holds a B.A. in Business Administration from Wittenberg
University in Springfield, Ohio.
Robert L. Paver (age 44) joined Jabil Circuit as General Counsel and
Corporate Secretary in 1997. Prior to working for Jabil, Paver was a practicing
attorney with the law firm of Holland & Knight in St. Petersburg, Fla. He has
served as an adjunct professor of law at Stetson University College of Law since
1985. Paver holds a B.A. from the University of Florida and a J.D. from Stetson
University College of Law.
Mark Mondello (age 36) was promoted to Senior Vice President, Business
Development in January 1999. He joined Jabil Circuit in 1992 as Production Line
Supervisor, was promoted to Project Manager in 1993 and to Vice President,
Business Development in 1997. Prior to Jabil, Mondello served as project manager
on commercial and defense-related aerospace programs for Moog, Inc. Mondello
holds a B.S. in Mechanical Engineering from the University of South Florida.
Wesley "Butch" Edwards (age 48) was named Senior Vice President,
Operational Development in November 2000. He was promoted to Senior Vice
President, Operations in August 1996 after serving as Vice President, Operations
since May 1994. Edwards joined us as Manufacturing Manager of its Michigan
facility in July 1988 and was promoted to Operations Manager of the Florida
facility in July 1989. He holds an M.B.A. from the University of Florida.
Paul Bittner (age 55) has been Vice President, Advanced Engineering since
January 1992. Bittner joined us in 1986 as Manufacturing Engineering Manager,
was promoted to Director of Manufacturing Engineering in April 1987, and was
promoted to Vice President, Manufacturing Engineering, in June 1988. Prior to
joining Jabil, Bittner held various positions with United Technologies
Automotive Electronics Group.
24
<PAGE> 26
Randon Haight (age 50) has served as Vice President, Business Development
since May 1992. Haight joined us as a Project Manager in July 1989. Prior to
joining Jabil, Haight was the President of Cardinal Automotive, an automobile
customizer from 1987 to July 1989. Before joining Cardinal Automotive, Haight
was a Group Manager at Terry Barr Sales, Inc., a manufacturers' representative
to the automotive industry. He holds a B.A. in Liberal Arts from Hillsdale
College and an M.A. from Eastern Michigan University.
Beth A. Walters (age 40) was named Vice President, Communications in
November 1998. She joined Jabil in 1992 as Marketing Communications Manager and
was promoted to Director of Communications in 1994. Prior to joining Jabil,
Walters owned a marketing communications firm and served in a variety of public
relations positions with advertising and public relations agencies. She holds a
B.S. in Political Science from American University in Washington, DC and an M.A.
in Political Science from the University of Hawaii.
Scott D. Brown (age 38) was named Senior Vice President Strategic Planning
in November 2000. He joined Jabil as a Project Manager in November 1988 and was
promoted to Vice President, Corporate Development in September 1997. Prior to
joining Jabil, Brown was a financial consultant with Merrill Lynch & Co., Inc.
in Bloomfield Hills, Michigan. Brown holds a B.S. in Economics from the
University of Michigan.
Jeffrey J. Lumetta (age 37) was named Vice President of Jabil Technology
Services in November 2000. He served as Vice President, Design Services from
November 1996 to November 2000. Lumetta joined us in 1986 as a Design Engineer,
and was promoted to Manager, Design Engineering at the Florida facility in 1994.
Lumetta holds a B.S. in Electrical Engineering from Michigan Technological
University.
John P. Lovato (age 40) was promoted from General Manager of the company's
California facility to Vice President, Global Business Units in 1999. Lovato
began his career at Jabil in 1990 as a Business Unit Manager in the Michigan
facility. In 1994, he was promoted Business Unit Director and became General
Manager of the California facility in 1998. Before joining Jabil, Lovato held
several positions at Texas Instruments. He holds a Bachelor's degree in
Electronics Engineering from McMaster University in Ontario, Canada.
Michael F. Ward (age 49) joined Jabil Circuit in 1993 as plant operations
manager and helped establish Jabil's first international greenfield site in
Livingston, Scotland. Ward was named Vice President, Supply Chain and
Information in October 2000 after serving as Vice President, Information
Technology since May 1998. Prior to Jabil, Ward held various positions at
Seagate Technology, Honeywell and Burroughs Machines. Ward earned degrees in
Electronic and Electrical Engineering and Mechanical Engineering from Bell
College of Technology Hamilton, Scotland.
William E. Peters (age 37) was named Senior Vice President, Operations in
November 2000. He served as Vice President, Operations from January 1999 to
November 2000. Peters was hired by Jabil in 1990 as a buyer and was promoted to
Purchasing Manager soon after. In 1993, he was promoted to Operations Manager
for the Michigan facility. Prior to joining Jabil, Peters was a Financial
Analyst for Electronic Data Systems. Peters earned a B.A. in Economics from
Michigan State University.
Frank Krajcirovic (age 52) has been Vice President, Quality Control since
June 1988. Krajcirovic joined us in 1982 as a Quality Engineer. He was promoted
to Manager of Quality in 1983 and to Director of Quality in September 1987.
Prior to joining Jabil, Krajcirovic held various reliability engineering
positions with Massey Ferguson, Inc., a farm equipment manufacturer and
Fundimensions, Inc., Lionel Division, a toy manufacturer. He holds a B.S. in
Electrical Engineering from the City of Brno College, Czechoslovakia.
Roddy A. MacPhee (age 40) was named Vice President/European Business
Development in October 2000. MacPhee joined Jabil in February 1993 as Quality
Engineering Manager. He played a key role in establishing Jabil's first overseas
operation in Livingston, Scotland. MacPhee moved into Business Management in
1995 and has held positions as Business Unit Manager, Business Unit Director,
Director of Business Development for Europe and most recently Senior Director of
Business Development for Europe. Prior to joining Jabil, MacPhee held a variety
of technical, commercial and senior managerial positions in Compaq Computer
Inc., Polaroid Inc., Pilikington Defence Electronics and JB Gas Turbines.
MacPhee holds Higher National Certificates in both Mechanical and Production
Engineering and has an MBA from the University of Strathclyde.
25
<PAGE> 27
Joseph McGee (age 38) was named Vice President, Global Business Units in
October 2000. He joined Jabil in 1993 as a Business Unit Manager at Jabil
Scotland and has held several positions during his tenure, including Director of
Business Development, Jabil Malaysia. Most recently, McGee was General Manager,
Jabil California. Prior to joining Jabil, he held positions with Sun
Microsystems and Philips. McGee earned a PhD in Thermodynamics and Fluid
Mechanics and a Bachelor of Science degree in Mechanical Engineering from the
University of Strathclyde and holds an MBA from the University of Glasgow.
Brian Althaver (age 44) was named Vice President, Jabil Automotive Group in
October 2000. This newly created position is charged with the expansion and
globalization of Jabil's automotive business unit. Althaver joined us in
September 1999 as Director of Corporate Development and brings with him more
than 15 years of international management experience in both automotive and
electronics manufacturing. He holds a Bachelor of Science Degree in Labor and
Industrial Relations from Michigan State University and a Master's Degree in
International Management from the American Graduate School of International
Management.
David S. Emerson (age 43) was named Vice President, Sales and Marketing for
the Americas in October 2000. Emerson previously has run various Business Units
for Jabil and has most recently lead sales efforts throughout the United States.
Prior to joining Jabil, Emerson held positions with SCI Systems, General Signal
and Schlumberger. He holds a B.A. in Business from Pacific University.
Forbes I.J. Alexander (age 40) was named Treasurer in November 1996.
Alexander joined us in 1993 as Controller of our Scottish operation and was
promoted to Assistant Treasurer in April 1996. Prior to joining Jabil, Alexander
was Financial Controller of Tandy Electronics European Manufacturing Operations
in Scotland and has held various financial positions with Hewlett Packard and
Apollo Computer. Alexander is a Chartered Management Accountant. He holds a B.A.
in Accounting from Dundee College, Scotland.
J. Patrick Redmond (age 40) was promoted to Controller of Jabil in July
1999. Redmond joined us in May 1995 as Plant Controller for the Florida campus
and later became Plant Controller for the Scotland facility. Prior to joining
Jabil, Redmond was Plant Controller for Loral Data Systems and has held a
variety of financial and business management positions at Loral and previously,
at Schlumberger. Redmond obtained a B.A. in Accounting from the University of
South Florida.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by reference
to the information set forth under the captions "Proposal No. 1: Election of
Directors -- Compensation of Directors" and "Executive Officer Compensation" in
our Proxy Statement for the 2000 Annual Meeting of Stockholders to be filed with
the Commission within 120 days after the end of our fiscal year ended August 31,
2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is incorporated by reference to the information set forth under the
caption "Other Information -- Share Ownership by Principal Stockholders and
Management" in our Proxy Statement for the 2000 Annual Meeting of Stockholders
to be filed with the Commission within 120 days after the end of our fiscal year
ended August 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated by reference to the information set forth under the caption
"Certain Transactions" in our Proxy Statement for the 2000 Annual Meeting of
Stockholders to be filed with the Commission within 120 days after the end of
our fiscal year ended August 31, 2000.
26
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. Our consolidated financial statements, and
related notes thereto, with independent auditors' report thereon are included in
Part IV of this report on the pages indicated by the Index to Consolidated
Financial Statements and Schedule as presented on page 28 of this report.
2. Financial Statement Schedule. Our financial statement schedule is
included in Part IV of this report on the page indicated by the Index to
Consolidated Financial Statements and Schedule as presented on page 28 of this
report. This financial statement schedule should be read in conjunction with our
consolidated financial statements, and related notes thereto.
Schedules not listed in the Index to Consolidated Financial Statements and
Schedule have been omitted because they are not applicable, not required, or the
information required to be set forth therein is included in the consolidated
financial statements or notes thereto.
3. Exhibits. See Item 14(c) below.
(b) Reports on Form 8-K. We filed the following Current Reports on Form 8-K
during the last quarter of the fiscal year ended August 31, 2000.
(1) On August 21, 2000 we filed a Current Report on Form 8-K regarding
greenfield construction in Chihuahua, Mexico.
(2) On July 5, 2000 we filed a Current Report on Form 8-K regarding the
acquisition of Telenor Technology Services Limited.
(3) On June 15, 2000 we filed a Current Report on Form 8-K reporting
financial results for the third quarter and the first nine months of fiscal 2000
and the expansion of our Boise, Idaho facility.
(4) On June 6, 2000 we filed a Current Report on Form 8-K reporting a
public stock offering of 13,000,000 shares of Common Stock.
(c) Exhibits. The exhibits listed on the Exhibits Index are filed as part of,
or incorporated by reference into, this Report.
(d) Financial Statement Schedules. See Item 14(a) above.
27
<PAGE> 29
JABIL CIRCUIT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 29
Consolidated Financial Statements:
Consolidated Balance Sheets -- August 31, 2000 and 1999... 32
Consolidated Statements of Earnings -- Years ended August
31, 2000, 1999, and 1998............................... 33
Consolidated Statements of Stockholders' Equity -- Years
ended
August 31, 2000, 1999, and 1998........................ 34
Consolidated Statements of Cash Flows -- Years ended
August 31, 2000, 1999, and 1998........................ 35
Notes to Consolidated Financial Statements................ 36
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts.......... 54
</TABLE>
28
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jabil Circuit, Inc:
We have audited the accompanying consolidated financial statements of Jabil
Circuit, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the accompanying financial statement schedule as listed in the
accompanying schedule. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits. We did not
audit the consolidated balance sheet of GET Manufacturing, Inc. as of August 31,
1999 and the related consolidated statements of income, shareholders' equity,
and cash flows for the years ended August 31, 1999 and March 31, 1999, which
statements reflect total assets constituting 11.1% as of August 31, 1999, and
total revenues constituting 10.6% and 13.9% for the years ended August 31, 1999
and March 31, 1999, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for GET
Manufacturing, Inc., is based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Jabil Circuit, Inc. and
subsidiaries as of August 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the years in the three-year period ended August
31, 2000, in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, which is based on our audits and
the reports of other auditors, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
St. Petersburg, Florida
September 19, 2000
29
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
of GET Manufacturing, Inc.
We have audited the consolidated balance sheet of GET Manufacturing, Inc.
and subsidiaries as of August 31, 1999 (not presented separately herein), and
the related consolidated statements of income, shareholders' equity, and cash
flows for the twelve months ended August 31, 1999 (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
GET Manufacturing, Inc. and subsidiaries as of August 31, 1999, and the
consolidated results of their operations and their cash flows for the twelve
months ended August 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
Ernst & Young
Hong Kong
November 3, 1999
30
<PAGE> 32
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
of GET Manufacturing, Inc.
We have audited the consolidated balance sheet of GET Manufacturing, Inc.
and subsidiaries as of March 31, 1999 and 1998 (not presented separately
herein), and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended March 31,
1999 (not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
GET Manufacturing, Inc. and subsidiaries at March 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.
Ernst & Young
Hong Kong
6 August, 1999
31
<PAGE> 33
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 337,602 $ 125,949
Short term investments (Note 1)........................... -- 27,176
Accounts receivable, less allowance for doubtful accounts
of $5,008 in 2000 and $4,639 in 1999 (Note 7).......... 523,096 261,078
Inventories (Note 2)...................................... 477,548 217,840
Prepaid expenses and other current assets................. 30,984 15,174
Deferred income taxes (Note 5)............................ 18,040 13,896
---------- ----------
Total current assets.............................. 1,387,270 661,113
Property, plant and equipment, net (Note 3)................. 587,494 353,522
Other assets................................................ 43,428 20,786
---------- ----------
$2,018,192 $1,035,421
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (Note 4)........... $ 8,333 $ 10,989
Short-term debt........................................... -- 21,501
Accounts payable.......................................... 594,111 300,093
Accrued compensation and employee benefits................ 36,611 28,866
Other accrued expenses.................................... 35,650 30,320
Income taxes payable...................................... 17,270 20,511
---------- ----------
Total current liabilities......................... 691,975 412,280
Note payable and long-term debt, less current installments
(Note 4).................................................. 25,000 33,333
Deferred income taxes (Note 5).............................. 28,112 10,199
Deferred grant revenue...................................... 2,922 1,798
---------- ----------
Total liabilities................................. 748,009 457,610
---------- ----------
Stockholders' equity (Notes 1 and 6):
Preferred stock, $.001 par value, authorized 1,000,000
shares; no shares issued and outstanding............... -- --
Common stock, $.001 par value, authorized 250,000,000
shares; issued and outstanding, 190,250,685 shares in
2000, and 174,703,179 in 1999.......................... 190 175
Additional paid-in capital................................ 843,784 296,688
Retained earnings......................................... 426,814 281,166
Accumulated other comprehensive income.................... (605) (218)
---------- ----------
Total stockholders' equity........................ 1,270,183 577,811
---------- ----------
Commitments and contingencies (Note 9)
$2,018,192 $1,035,421
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 34
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net revenue (Note 7)....................................... $3,558,321 $2,238,391 $1,484,245
Cost of revenue............................................ 3,199,972 1,992,803 1,307,692
---------- ---------- ----------
Gross profit............................................... 358,349 245,588 176,553
Operating expenses:
Selling, general and administrative...................... 132,717 92,015 60,116
Research and development................................. 4,839 5,863 5,355
Amortization of intangibles.............................. 2,724 1,225 --
Acquisition-related charge (Note 10)..................... 5,153 7,030 20,825
Goodwill write-off (Note 1 (p)).......................... -- 3,578 3,578
---------- ---------- ----------
Operating income........................................... 212,916 135,877 86,679
Interest income............................................ (7,385) (4,536) (238)
Interest expense........................................... 7,605 7,110 3,876
---------- ---------- ----------
Income before income taxes................................. 212,696 133,303 83,041
Income taxes (Note 5)...................................... 67,048 48,484 25,572
---------- ---------- ----------
Net income....................................... $ 145,648 $ 84,819 $ 57,469
========== ========== ==========
Earnings per share:
Basic.................................................... $ 0.81 $ 0.51 $ 0.36
========== ========== ==========
Diluted.................................................. $ 0.78 $ 0.49 $ 0.35
========== ========== ==========
Common shares used in the calculations of earnings per
share:
Basic.................................................... 179,032 166,754 158,589
========== ========== ==========
Diluted.................................................. 187,448 174,334 164,934
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 35
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
------------------- ADDITIONAL COMPREHENSIVE NET
SHARES PAR PAID-IN RETAINED INCOME STOCKHOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS (LOSS) EQUITY
----------- ----- ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1997..... 157,983,364 $158 $ 79,536 $137,762 $(539) $ 216,917
Exercise of stock options...... 878,004 1 976 -- -- 977
Shares issued under Employee
Stock Purchase Plan.......... 303,772 -- 2,320 -- -- 2,320
Tax benefit of options
exercised.................... -- -- 7,114 -- -- 7,114
Comprehensive income........... -- -- -- 57,469 321 57,790
----------- ---- -------- -------- ----- ----------
Balance at August 31, 1998..... 159,165,140 159 89,946 195,231 (218) 285,118
Exercise of stock options...... 1,263,531 1 2,882 -- -- 2,883
Shares issued under Employee
Stock Purchase Plan.......... 474,508 1 4,610 -- -- 4,611
Tax benefit of options
exercised.................... -- -- 657 -- -- 657
Secondary Public Offering, net
of expenses.................. 13,800,000 14 198,593 -- -- 198,607
Elimination of duplicate equity
resulting from non-conforming
fiscal years (Note 1)........ -- -- -- 1,116 -- 1,116
Comprehensive income........... -- -- -- 84,819 -- 84,819
----------- ---- -------- -------- ----- ----------
Balance at August 31, 1999..... 174,703,179 175 296,688 281,166 (218) 577,811
Exercise of stock options...... 2,268,203 2 10,192 -- -- 10,194
Shares issued under employee
stock purchase plan.......... 279,303 -- 6,812 -- -- 6,812
Tax benefit of options
exercised.................... -- -- 4,294 -- -- 4,294
Public offering, net of
expenses..................... 13,000,000 13 525,798 -- -- 525,811
Comprehensive income........... -- -- -- 145,648 (387) 145,261
----------- ---- -------- -------- ----- ----------
Balance at August 31, 2000..... 190,250,685 $190 $843,784 $426,814 $(605) $1,270,183
=========== ==== ======== ======== ===== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 36
JABIL CIRCUIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 145,648 $ 84,819 $ 57,469
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 99,337 63,417 42,333
Goodwill write-off..................................... -- 3,578 3,578
Recognition of grant revenue........................... (1,127) (825) (827)
Deferred income taxes.................................. 13,769 4,641 (5,269)
Loss on sale of property............................... 2,467 2,749 121
Acquisition related in-process research and development
charge............................................... -- -- 6,500
Elimination of duplicate equity resulting from
nonconforming fiscal years........................... -- 1,116 --
Change in operating assets and liabilities, exclusive
of net assets acquired:
Accounts receivable.................................. (257,752) (111,324) (24,578)
Inventories.......................................... (255,615) (77,490) 8,956
Prepaid expenses and other current assets............ (15,648) (12,606) 2,109
Other assets......................................... 308 (8,050) (2,676)
Accounts payable and accrued expenses................ 307,316 145,779 14,805
Income taxes payable................................. (3,287) 14,661 (1,202)
--------- --------- ---------
Net cash provided by operating activities......... 35,416 110,465 101,319
--------- --------- ---------
Cash flows from investing activities:
Net cash paid for net assets acquired..................... (36,716) -- (64,990)
Proceeds from sale of short-term investments.............. 27,176 -- --
Purchases of investments.................................. -- (27,176) --
Acquisition of property, plant and equipment.............. (333,139) (168,674) (111,269)
Proceeds from sale of property and equipment.............. 6,339 3,135 2,767
Other investing activities................................ -- -- (1,706)
--------- --------- ---------
Net cash used in investing activities............. (336,340) (192,715) (175,198)
--------- --------- ---------
Cash flows from financing activities:
Increase in/repayment of note payable to bank............. -- 21,501 18,691
Payments of long-term debt................................ (32,490) (53,473) 30,387
Net proceeds from issuance of common stock................ 542,816 206,753 3,301
Proceeds from Scottish grant.............................. 2,251 395 949
--------- --------- ---------
Net cash provided by (used in) financing
activities...................................... 512,577 175,176 53,328
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 211,653 92,926 (20,551)
Cash and cash equivalents at beginning of period............ 125,949 33,023 53,754
--------- --------- ---------
Cash and cash equivalents at end of period.................. $ 337,602 $ 125,949 $ 33,023
========= ========= =========
Supplemental disclosure information:
Interest paid............................................. $ 8,004 $ 6,572 $ 5,909
========= ========= =========
Income taxes paid, net of refunds received................ $ 38,173 $ 29,930 $ 31,422
========= ========= =========
Tax benefit of options exercised.......................... $ 4,294 $ 657 $ 7,114
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 37
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Jabil Circuit, Inc. (together with its subsidiaries, herein referred to as
the "Company") is an independent supplier of custom manufacturing services for
circuit board assemblies, subsystems and systems to major original equipment
manufacturers ("OEMs") in the communications, personal computer, peripherals,
consumer and automotive industries. The Company's manufacturing services combine
a high volume, highly automated manufacturing approach with advanced design and
manufacturing technologies. The Company is headquartered in St. Petersburg,
Florida and has manufacturing operations in Asia, Europe, North America and
South America.
On September 13, 1999 the Company issued approximately 10.2 million shares
of its common stock for all the outstanding common stock of GET Manufacturing,
Inc. ("GET"), a China-based electronics manufacturing services provider to
original equipment manufacturers serving the consumer electronics,
telecommunications, medical and computer peripheral industries. The transaction
was accounted for as a pooling of interests and, accordingly, the Company's
historical consolidated financial statements for all periods presented have been
restated to reflect the merger with GET. Because Jabil and GET had differing
fiscal periods prior to the merger, GET's financial statements for the fiscal
year ended March 31, 1999 and March 31, 1998 were combined with Jabil's
financial statements for the years ended August 31, 1998 and August 31, 1997,
respectively. GET's 1999 financial statements were conformed to the twelve
months ending August 31 for purposes of consolidating with Jabil's financial
statements for its year ended August 31, 1999. As a result of the overlapping
period created when GET's fiscal year was conformed to an August 31 fiscal year,
$1,116 of net loss (for the period September 1998 through March 1999) was
included in consolidated net income for both fiscal years ended August 31, 1998
and 1999. Stockholders' equity was adjusted so that the duplicate amount is
eliminated from retained earnings. There were no material transactions between
Jabil and GET prior to the merger. The effects of conforming GET's accounting
policies to those of Jabil were not material.
Significant accounting policies followed by the Company are as follows:
a. Consolidation
The consolidated financial statements include the accounts and operations
of Jabil Circuit, Inc. and its subsidiaries, all of which are wholly-owned. All
significant inter-company balances and transactions have been eliminated in
preparing the consolidated financial statements.
As discussed in Note 10, in September, 1999 the Company completed a merger
with GET Manufacturing, Inc. which was accounted for as a pooling of interests
in fiscal 2000. The accompanying historical consolidated financial statements
have been restated to reflect the impact of this transaction.
b. Revenue Recognition
The Company typically recognizes revenue at the time of product shipment.
Such revenue is recorded net of estimated product return and warranty costs.
In connection with the August 1998 acquisition of the net assets of
Hewlett-Packard Company ("HP") laser printer operations, the Company entered
into an agreement with HP to produce laser printer component products. During
the first year of the agreement, the Company received compensation for available
capacity, as well as compensation for the raw material content of actual units
produced. The available capacity compensation was recorded on a units produced
basis. The agreement for compensation for available capacity expired in August
1999 and has been replaced with a unit pricing agreement similar to the
Company's other contracts.
36
<PAGE> 38
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
c. Accounting Estimates
Management is required to make estimates and assumptions during the
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles. These estimates and assumptions affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the consolidated financial statements.
They also affect the reported amounts of net income. Actual results could differ
materially from these estimates and assumptions.
d. Inventories
Inventories are stated at the lower of cost (first in, first out (FIFO)
method) or market.
e. Property, Plant and Equipment
Property, plant and equipment is stated at cost and depreciated and
amortized on the straight-line method over the estimated useful lives of the
respective assets, primarily thirty-five years for buildings and three to five
years for other assets. Maintenance and repairs are charged to expense as
incurred.
f. Cash, Cash Equivalents and Other Financial Instruments
The Company considers all highly liquid instruments with original
maturities of 90 days or less to be cash equivalents for consolidated financial
statement purposes. Cash equivalents consist of investments in money market
funds and commercial paper with original maturities of 90 days or less. At
August 31, 2000 and 1999 cash equivalents totaled approximately $178.2 and $67.2
million, respectively. Management considers the carrying value of cash and cash
equivalents to be a reasonable approximation of market value after the short-
term nature of these financial instruments. Short term investments include
corporate and governmental debt securities which are classified as
available-for-sale and are reported at fair market value in accordance with
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. As of August 31, 2000, the Company
held no short-term investments.
g. Grant Revenue
The Company has been awarded grants related to the development of its
Scottish operations. Grant funds are earned as certain milestones are met, and
are being amortized over two to five-year periods.
h. Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in the tax rate is recognized in income in
the period that includes the enactment date of the rate change.
i. Profit Sharing and 401(k) Plan
The Company contributes to a profit sharing plan for all employees who have
completed a 12-month period of service in which the employee has worked at least
1,000 hours. In addition, the Company provides retirement benefits to its
domestic employees who have completed a 90 day period of service, through a
401(k) plan that provides a Company matching contribution. The Company also has
defined contribution benefit plans for certain of its international employees
primarily dictated by the custom of the region in which it operates. Company
contributions are at the discretion of the Company's Board of Directors. The
Company
37
<PAGE> 39
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contributed approximately $14.9 million, $11.2 million and $6.3 million for the
years ended August 31, 2000, 1999 and 1998, respectively.
j. Foreign Currency Transactions
For the Company's foreign subsidiaries which use the local currency as
their functional currency, assets and liabilities are translated at exchange
rates in effect at the balance sheet date, and revenues and expenses are
translated at the weighted average exchange rate for the period. The effects of
these translation adjustments are reported in comprehensive income. Gains and
losses arising from foreign currency transactions denominated in a currency
other than the functional currency of the entity involved and remeasurement
adjustments for foreign operations where the U.S. dollar is the functional
currency are included in income. To date, the effect of such amounts on net
income has not been material.
k. Net Income Per Share
The Company presents two earnings per share (EPS) amounts. Basic EPS is
calculated based on net earnings available to common shareholders and the
weighted-average number of shares outstanding during the reported period.
Diluted EPS includes additional dilution from potential common stock, such as
stock issuable pursuant to the exercise of stock options outstanding.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Net income................................................ $145,648 $ 84,819 $ 57,469
======== ======== ========
Denominator:
Weighted average shares outstanding -- Basic.............. 179,032 166,754 158,589
Employee stock options.................................... 8,416 7,580 6,345
-------- -------- --------
Weighted average shares outstanding -- Diluted............ 187,448 174,334 164,934
======== ======== ========
Earnings per common share:
Basic..................................................... $ 0.81 $ 0.51 $ 0.36
======== ======== ========
Diluted................................................... $ 0.78 $ 0.49 $ 0.35
======== ======== ========
</TABLE>
For the years ended August 31, 2000, 1999 and 1998, options to purchase
138,732, 6,218 and 160,000 shares of common stock were outstanding during the
period but were not included in the computation of diluted earnings per share
because the options' exercise prices were greater than the average market price
of the common shares, and therefore, the effect would be anti-dilutive.
l. Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income. Statement 130 establishes standards for
reporting comprehensive income. The Statement defines comprehensive income as
the changes in equity of an enterprise except those resulting from shareholder
transactions. The Company's balance of other comprehensive income is composed
exclusively of the cumulative foreign currency translation adjustment. For the
years ended August 31, 2000, 1999 and 1998, the Company recorded cumulative
foreign currency translation adjustments of approximately $(387,000), $0, and
$321,000 respectively.
38
<PAGE> 40
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
m. Stock Based Compensation
Prior to September 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of granting of stock
options only if the current market price of the underlying stock exceeded the
exercise price. Effective September 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation
(Statement 123), which permits entities to recognize as expense over the vesting
period the fair value of all stock based awards on the date of the grant.
Alternatively, Statement 123 allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income and pro forma net income
per share disclosures for employee stock options granted in fiscal 1996 and
subsequent years as if the fair value based method defined in Statement 123 had
been applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure required by Statement 123.
n. Stock Split
On March 23, 2000 and January 28, 1999, the Company's Board of Directors
approved a two-for-one stock split of the Company's common stock. Per share
information in the accompanying consolidated financial statements and notes has
been adjusted to reflect the impact of the common stock splits for all periods
presented.
o. Intangible Assets
Intangible assets are composed of goodwill and other intellectual property.
Intangible assets, aggregating approximately $34.4 million and $10.0 million,
net of $2.7 million and $1.2 million of amortization, as of August 31, 2000 and
August 31, 1999, respectively, are classified as a component of other assets in
the accompanying consolidated balance sheets. Such amounts are amortized on a
straight-line basis over 10 to 15 years.
p. Impairment of Long-Lived Assets
The Company reviews property and equipment for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of property and equipment is measured by
comparison of its carrying amount, including the unamortized portion of goodwill
allocated to the property and equipment, to future net cash flows the property
and equipment are expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property and equipment, including the allocated goodwill,
if any, exceeds its fair market value. The Company assesses the recoverability
of goodwill by determining whether the unamortized goodwill balance can be
recovered through undiscounted future cash flows of the acquired operation. The
amount of goodwill impairment, if any, is measured based on projected discounted
future cash flows using a discount rate reflecting the Company's average cost of
funds. During 1999, the Company determined that the portion of goodwill related
to GET's 1997 acquisition of Able Electronics Corporation ("Able") was impaired.
As a result of the overlapping period created when GET's fiscal year was
conformed to an August 31 fiscal year, the write off of the unamortized goodwill
of $3,578,000 is included in the results of operations for both fiscal years
ended August 31, 1998 and 1999. Stockholders' equity was adjusted to eliminate
the duplicate effect on retained earnings. See Note 1 to the Consolidated
Financial Statements.
39
<PAGE> 41
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Raw materials............................................... $368,783 $159,203
Work in process............................................. 54,288 29,622
Finished goods.............................................. 54,477 29,015
-------- --------
$477,548 $217,840
======== ========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Land and improvements....................................... $ 40,911 $ 19,459
Buildings................................................... 117,398 91,032
Leasehold improvements...................................... 36,728 11,300
Machinery and equipment..................................... 536,140 311,396
Furniture, fixtures and office equipment.................... 23,613 17,246
Computer equipment.......................................... 67,615 58,625
Transportation equipment.................................... 4,209 4,823
Construction in progress.................................... 17,536 19,126
-------- --------
844,150 533,007
Less accumulated depreciation and amortization.............. 256,656 179,485
-------- --------
$587,494 $353,522
======== ========
</TABLE>
During the year ended August 31, 2000, the Company began construction of
manufacturing facilities in Tiszaujvaros, Hungary and Chihuahua, Mexico. During
the years ended August 31, 2000, 1999 and 1998, the Company capitalized
approximately $1,046,000, $0 and $83,000, respectively, in interest related to
the constructed facilities.
Maintenance and repairs expense was approximately $13.4 million $10.6
million and $10.1 million for the years ended August 31, 2000, 1999 and 1998,
respectively.
40
<PAGE> 42
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes Payable and Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
-----------------
2000 1999
------- -------
<S> <C> <C>
Short-term debt(a).......................................... $ -- $21,501
Term loans(b)............................................... 33,333 41,666
Borrowings under revolving credit facility(c)............... -- --
Bank loans(d)............................................... -- 2,656
------- -------
Total notes payable and long-term debt...................... 33,333 65,823
Less current installments of long-term debt................. 8,333 10,989
Less short-term debt........................................ -- 21,501
------- -------
Notes payable and long-term debt, less current
installments.............................................. $25,000 $33,333
======= =======
</TABLE>
- ---------------
(a) At August 31, 1999, the Company had banking facilities of approximately $29
million available for trade finance, letters of credit, bank overdrafts,
trust receipts and short-term bank loans. The weighted average interest
rates on the various short-term debts as of August 31, 1999 were 7.46%.
These debts are collateralized by corporate guarantees from the Company and
certain subsidiaries of the Company. The facilities were terminated in
fiscal year 2000.
(b) In May 1996, the Company completed a private placement of $50,000,000 Senior
Notes due 2004. The Notes have a fixed interest rate of 6.89%, with interest
payable on a semi-annual basis. Principal is payable in six equal annual
installments which began May 30, 1999.
(c) On April 7, 2000, the Company renegotiated its unsecured line of credit
facility and established a $500 million unsecured revolving credit facility
with a syndicate of banks ("Revolver"). Under the terms of the Revolver,
borrowings can be made under either floating rate loans or Eurodollar rate
loans. The Company pays interest on outstanding floating rate loans at the
banks' prime rate. The Company pays interest on outstanding Eurodollar loans
at the London Interbank Offered Rate (LIBOR) in effect at the loan inception
plus a factor of 1.125% to 1.875% depending on the Company's funded debt to
total capitalization ratios. The Company pays a commitment fee on the unused
portion of the Revolver at 0.25% to 0.375% depending on the Company's funded
debt to total capitalization ratios. The renegotiated Revolver expires on
April 6, 2003 and outstanding borrowings are then due and payable. As of
August 31, 2000, there were no borrowings outstanding under the Revolver and
$500 million of the facility was available. As of August 31, 1999, there
were no borrowings outstanding under the Revolver and $250 million of the
facility was available.
(d) As of August 31, 1999, a subsidiary of the Company had $2,656,000,
outstanding under long-term loan agreements with a bank, which bear interest
at a variable rate from 1 to 3 months at the Hong Kong Interbank Offering
Rate (6.44% at August 31, 1999) plus 1.25% to 1.5%. The weighted average
interest rate on the long-term bank loans was 7.0% as of August 31, 1999.
The loans are collateralized by the Company's building in Hong Kong and
guarantees from the Company and certain other of its subsidiaries. The loan
was extinguished in fiscal year 2000.
The agreements related to the obligations described above contain a number
of restrictive financial and/or other covenants. The Company was in compliance
with the respective covenants as of August 31, 2000.
Aggregate annual maturities for notes payable and long-term debt are
$8,333,333 per year until 2004.
In July, 2000 Jabil Circuit entered into an asset backed securitization
program with Bank One, which provides for the sale of up to $225 million of
eligible accounts receivables of certain U.S. plants. We account for the sale of
receivables under this securitization program in accordance with Statement of
Financial Accounting Standards No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguish-
41
<PAGE> 43
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ments of Liabilities, as replaced by Statement of Financial Accounting Standards
No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. Receivables sold under this program will be
excluded from accounts receivable in the Consolidated Balance Sheets. The asset
backed securitization will be used as a financing tool to fund working capital.
As of August 31, 2000, we had not yet sold any receivables.
5. INCOME TAXES
Income tax expense amounted to $67.0 million, $48.5 million and $25.6
million for the years ended August 31, 2000, 1999 and 1998, respectively (an
effective rate of 31.5%, 36.4% and 30.8%, respectively). The actual expense
differs from the "expected" tax expense (computed by applying the U.S. federal
corporate tax rate of 35% to earnings before income taxes) as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------
2000 1999 1998
-------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax expense.......................... $ 74,444 $46,656 $29,064
State taxes, net of Federal benefit...................... 3,752 3,830 859
-------- ------- -------
Income of rate favorable jurisdictions................... (12,615) (4,683) (5,957)
Other, net............................................... 1,467 2,681 1,606
-------- ------- -------
Provision for income taxes............................... $ 67,048 $48,484 $25,572
======== ======= =======
Effective tax rate....................................... 31.5% 36.4% 30.8%
======== ======= =======
</TABLE>
The domestic and foreign components of income before income taxes were
comprised of the following for the years ended August 31 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, 2000 1999 1998
- ---------------------- -------- -------- -------
<S> <C> <C> <C>
U.S..................................................... $141,114 $112,378 $57,334
Foreign................................................. 71,582 20,925 25,707
-------- -------- -------
$212,696 $133,303 $83,041
======== ======== =======
</TABLE>
The components of income taxes for the fiscal years ended August 31, 2000,
1999 and 1998, were as follows:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, CURRENT DEFERRED TOTAL
- ---------------------- ------- -------- -------
<S> <C> <C> <C>
2000:
U.S..................................................... $38,034 $14,227 $52,261
State................................................... 5,411 361 5,772
Foreign................................................. 9,834 (819) 9,015
------- ------- -------
$53,279 $13,769 $67,048
======= ======= =======
1999:
U.S..................................................... $30,311 $ 5,705 $36,016
State................................................... 5,397 495 5,892
Foreign................................................. 8,135 (1,559) 6,576
------- ------- -------
$43,843 $ 4,641 $48,484
======= ======= =======
</TABLE>
42
<PAGE> 44
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, CURRENT DEFERRED TOTAL
- ---------------------- ------- -------- -------
<S> <C> <C> <C>
1998:
U.S..................................................... $26,682 $(4,001) $22,681
State................................................... 1,770 (449) 1,321
Foreign................................................. 2,389 (819) 1,570
------- ------- -------
$30,841 $(5,269) $25,572
======= ======= =======
</TABLE>
Jabil has been granted tax incentives, including tax holidays, for its
Hungarian, Chinese and Malaysian subsidiaries. These tax incentives expire
between 2000 and 2010, and are subject to certain conditions with which the
Company expects to comply. The subsidiaries generated income during the years
ended August 31, 2000, 1999 and 1998, resulting in a tax holiday of
approximately $12.6 million ($0.07 per share), $4.7 million ($0.03 per share)
and $5.9 million ($0.04 per share), respectively. The Company has filed an
application for a Malaysian income tax holiday.
The Company intends to indefinitely re-invest income from all of its
foreign subsidiaries. The aggregate undistributed earnings of the Company's
foreign subsidiaries for which no deferred tax liability has been recorded is
approximately $136.7 million as of August 31, 2000. Determination of the amount
of unrecognized deferred tax liability on these undistributed earning is not
practicable.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, 2000 1999
---------------------- ------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................... $ 1,507 $ 1,507
Accounts receivable, principally due to allowance for
doubtful accounts...................................... 1,262 1,319
Grant receivable.......................................... 950 146
Inventories, principally due to reserves and additional
costs inventoried for tax purposes pursuant to the Tax
Reform Act of 1986..................................... 7,363 4,608
Compensated absences, principally due to accrual for
financial reporting purposes........................... 2,697 1,672
Accrued expenses, principally due to accrual for financial
reporting purposes..................................... 14 1,071
Other..................................................... 4,760 4,086
------- -------
Total gross deferred tax assets........................... 18,553 14,409
Less valuation allowance.................................. (513) (513)
------- -------
Net deferred tax assets........................... $18,040 $13,896
======= =======
Deferred tax liabilities:
Intangible assets......................................... $ 1,904 $ 3,534
Property, plant and equipment, principally due to
differences in depreciation and amortization........... 26,208 6,665
------- -------
Deferred tax liabilities.......................... $28,112 $10,199
======= =======
</TABLE>
Based on the Company's historical operating income, management believes
that it is more likely than not that the Company will realize the benefit of its
net deferred tax assets.
43
<PAGE> 45
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY
a. Public Offering
On June 6, 2000, the Company completed an equity offering of 13 million
shares of its Common Stock. The shares were offered at a price of $41.75 per
share for total gross proceeds of $542.8 million. Net proceeds to the Company
were approximately $525.8 million after underwriter's discount and fees and
expenses.
b. Stock Option Plans
As of August 31, 2000, options to purchase a total of 5,356,600 shares were
outstanding under the 1983 and 1989 stock option plans. The Board of Directors
terminated these plans in November 1992, and no additional options may be issued
thereunder. The exercise price of the outstanding options under these plans was
equal to fair market value, as determined by the Company, on the date of grant.
The Company's 1992 Stock Option Plan (the "1992 Plan") provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and for the granting of non-statutory stock
options to employees and consultants of the Company. The 1992 Plan was adopted
by the Board of Directors in November 1992 and approved by the stockholders in
December 1992. A total of 23,440,000 shares of common stock have been reserved
for issuance under the 1992 Plan. As of August 31, 2000, options to purchase
7,626,027 shares are outstanding under the 1992 Plan.
The exercise price of all incentive stock options granted under the 1992
Plan is to be at least equal to the fair market value of shares of common stock
on the date of grant. With respect to any participant who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company, the exercise price of any stock option granted is to equal at least
110% of the fair market value on the grant date and the maximum term of the
option may not exceed five years. The term of all other options under the 1992
Plan may not exceed ten years.
In connection with the merger with GET, the Company has assumed all options
outstanding under the GET Stock Option Plan (the "GET Plan"). Options under the
GET Plan have been converted into the Company's options and adjusted to effect
the appropriate conversion ratio as specified by the applicable merger
agreement. The options generally vest over three to four years and expire ten
years after the date of grant. Due to the merger between the Company and GET,
the GET Plan was terminated. As a result, no further options may be granted
under the GET Plan.
44
<PAGE> 46
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes option activity from September 1, 1997
through August 31, 2000:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED
AVAILABLE OUTSTANDING AVERAGE
FOR GRANT OPTIONS OPTION PRICE
---------- ----------- ------------
<S> <C> <C> <C>
Balance at August 31, 1997................................. 939,131 10,589,188 $0.90
Options authorized....................................... 4,967,555 -- --
Options granted.......................................... (1,912,000) 1,912,000 4.73
Options cancelled........................................ 661,516 (661,516) 1.63
Options exercised........................................ -- (878,005) 0.77
---------- ----------
Balance at August 31, 1998................................. 4,656,202 10,961,667 1.53
Options authorized....................................... 6,000,000 -- --
Options granted.......................................... (3,389,200) 3,389,200 7.98
Options cancelled........................................ 394,470 (394,470) 2.18
Options exercised........................................ -- (1,263,531) 1.83
---------- ----------
Balance at August 31, 1999................................. 7,661,472 12,692,866 3.20
Options authorized....................................... 5,234,540 -- --
Options granted.......................................... (3,975,476) 2,752,398 7.70
Options cancelled........................................ 110,991 (110,991) 4.51
Options exercised........................................ -- (2,351,646) 3.02
---------- ----------
Balance at August 31, 2000................................. 9,031,527 12,982,627 7.60
========== ==========
</TABLE>
At August 31, 2000, options for 8,391,811 shares were exercisable.
The range of exercise prices, shares, weighted average remaining
contractual life and exercise price for the options outstanding as of August 31,
2000 are presented below:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-
REMAINING AVERAGE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE
- ------------------------ ---------- ---------------- --------------
<S> <C> <C> <C>
$ 0.22 - 1.86................................ 6,271,118 1.52 $ 0.32
4.24 - 16.55................................ 4,020,538 7.86 8.08
20.50 - 25.00................................ 2,514,686 9.13 23.08
31.63 - 53.75................................ 176,285 9.44 35.06
---------- ---- ------
$ 0.22 - 24.75................................ 12,982,627 5.07 $ 7.60
========== ==== ======
</TABLE>
The range of exercise prices, shares and weighted average exercise price of
the options exercisable at August 31, 2000 are presented below:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
RANGE OF EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- ------------------------ ----------- --------------
<S> <C> <C>
$ .22 - 1.86.............................................. 6,260,398 $ 0.32
4.24 - 16.55.............................................. 1,626,453 8.08
20.50 - 25.00.............................................. 486,479 23.08
31.63 - 53.75.............................................. 18,481 32.67
--------- ------
$ 0.22 - 24.75.............................................. 8,391,811 $ 3.21
========= ======
</TABLE>
The per-share weighted-average fair value of stock options granted during
2000, 1999 and 1998 was $16.61, $12.57 and $11.23, respectively, on the date of
the grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: 2000 -- expected dividend yield of 0%, risk-free
interest rate of 5.75%, expected volatility of 91%, and an expected life of 4
years; 1999 -- expected dividend yield of
45
<PAGE> 47
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
0%, risk-free interest rate of 6.0%, expected volatility of 96%, and an expected
life of 5 years; 1998 -- expected dividend yield of 0%, risk-free interest rate
of 5.6%, expected volatility of 78% and an expected life of 5 years.
c. Stock Purchase Plan
The Company's 1992 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in November 1992 and approved by the
stockholders in December 1992. A total of 5,820,000 shares of common stock have
been reserved for issuance under the Purchase Plan. The Purchase Plan is
intended to qualify under Section 423 of the Internal Revenue Code.
Employees are eligible to participate after 90 days of employment with the
Company. The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions, which may not exceed 10% of an employee's
compensation, as defined, at a price equal to 85% of the fair market value of
the common stock at the beginning or end of the offering period, whichever is
lower. Unless terminated sooner, the Purchase Plan will terminate ten years from
its effective date. As of August 31, 2000, a total of 4,159,943 shares had been
issued under the Purchase Plan.
The per-share weighted-average fair value of stock issued to employees in
2000, 1999 and 1998, respectively, under the Company's 1992 Employee Stock
Purchase Plan was $38.18, $16.32 and $13.76, respectively, using the
Black-Scholes option-pricing model with the identical assumptions as those
listed for stock options granted during those years.
d. Pro Forma Results
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Additionally, no compensation costs
are reflected for the discount related to shares granted to employees under the
1992 Employee Stock Purchase Plan. Had the Company determined compensation cost
based on Statement 123, the Company's net income would have been as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ----------------- -----------------
NET DILUTED NET DILUTED NET DILUTED
INCOME EPS INCOME EPS INCOME EPS
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
As reported........................ $145,648 $0.78 $84,819 $ 0.49 $57,469 $ 0.35
Statement 123 Compensation (net of
tax)............................. (27,575) (0.15) (5,635) (0.03) (2,232) (0.01)
Pro forma disclosure............... 118,073 0.63 79,184 0.46 55,237 0.34
</TABLE>
As discussed in Note 1(m) the disclosure presented above represents only
the estimated fair value of stock options granted in fiscal 1996 and subsequent
years. Such disclosure is not necessarily indicative of the fair value of stock
options that could be granted by the Company in future fiscal years or of all
options currently outstanding.
7. CONCENTRATION OF RISK AND SEGMENT DATA
a. Concentration of Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential credit
losses.
46
<PAGE> 48
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sales of the Company's products are concentrated among specific customers.
Sales to the following customers, expressed as a percentage of consolidated net
revenue, and the percentage of accounts receivable for each customer, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF ACCOUNTS
NET REVENUE RECEIVABLE
YEAR ENDED AUGUST 31, AUGUST 31,
----------------------- --------------
2000 1999 1998 2000 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cisco Systems, Inc.................................. 20% 18% 18% 12% *
Dell Computer Corporation........................... 16 * * 25 *
Hewlett-Packard Company............................. 14 22 * * 16%
Lucent Technologies................................. 10 * * * *
3Com Corporation.................................... * * 16 * *
</TABLE>
- ---------------
* Amount was less than 10% of total
b. Segment Data
The Company adopted the Financial Accounting Standards Board Statement No.
131, Disclosures about Segments of an Enterprise and Related Information in
fiscal year 1999. Statement No. 131 establishes standards for reporting
information about segments in financial statements. Operating segments are
defined as components of an enterprise about which separate financial
information is available and that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
The Company derives its revenues from providing manufacturing services to
major electronic OEM's on a contract basis. Operating segments consist of the
Company's manufacturing locations. The services provided, the manufacturing
processes, class of customers and the order fulfillment process is similar and
generally interchangeable across manufacturing locations. The Company has
aggregated its operating segments into the Electronic Manufacturing Services
segment.
The following table sets forth segment information (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net revenue........................................ $3,558,321 $2,238,391 $1,484,245
Depreciation and amortization...................... 99,337 63,417 42,333
Interest (income).................................. (7,385) (4,536) (238)
Interest expense................................... 7,605 7,110 3,876
Segment income before income tax................... 222,908 152,348 116,437
Corporate and non-recurring charges................ (10,212) (19,045) (33,396)
---------- ---------- ----------
Income before income taxes......................... $ 212,696 $ 133,303 $ 83,041
========== ========== ==========
Long-lived assets.................................. $ 630,922 $ 374,308 $ 273,726
Total assets....................................... 2,018,192 1,035,421 625,173
Capital expenditure................................ 333,139 168,674 111,269
</TABLE>
47
<PAGE> 49
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company operates in the following geographic areas: the United States,
China, Mexico, Malaysia, Scotland and Other. Sales to unaffiliated customers are
based on the Company's manufacturing location providing services. The following
table sets forth information concerning these geographic areas (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
United States.................................... $2,014,669 $1,341,927 $ 869,849
China............................................ 234,571 238,045 206,871
Mexico........................................... 561,834 197,039 41,570
Malaysia......................................... 272,999 138,715 143,431
Scotland......................................... 266,088 140,452 211,907
Other............................................ 208,160 182,213 10,617
---------- ---------- ----------
$3,558,321 $2,238,391 $1,484,245
========== ========== ==========
Long-lived assets:
United States.................................... $ 334,665 $ 189,172 $ 136,796
China............................................ 40,201 41,557 37,402
Mexico........................................... 116,551 63,344 30,499
Malaysia......................................... 49,003 27,272 27,235
Scotland......................................... 40,093 34,170 27,821
Other............................................ 50,409 18,793 13,973
---------- ---------- ----------
$ 630,922 $ 374,308 $ 273,726
========== ========== ==========
</TABLE>
8. FOREIGN CURRENCY EXCHANGE CONTRACTS
The purpose of the Company's foreign currency hedging activity is to
protect the Company from the risk that the eventual dollar net cash flows
resulting from the sale and purchase of products in foreign currencies will be
adversely affected by changes in the exchange rates. It is the Company's policy
to utilize derivative financial instruments to reduce foreign exchange risks
where internal netting strategies cannot be effectively employed. The Company
does not hold or issue financial instruments for trading purposes. Fluctuations
in the value of hedging instruments are offset by fluctuations in the underlying
exposures being hedged, and deferred gains and losses on these contracts are
recognized when the future purchases and sales being hedged are realized.
The Company had no foreign currency exchange contracts outstanding at
August 31, 2000 or August 31, 1999.
48
<PAGE> 50
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
a. Lease Agreements
The Company leases certain facilities and computer services under
non-cancelable operating leases. The future minimum lease payments under
non-cancelable operating leases outstanding August 31, 2000 are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AUGUST 31,
- -----------------------------
<S> <C>
2001................................................... $ 25,959
2002................................................... 25,301
2003................................................... 20,339
2004................................................... 17,951
2005................................................... 12,636
Thereafter............................................. 46,490
--------
Total minimum lease payments...................... $148,676
========
</TABLE>
Total rent expense for operating leases was approximately $24.6 million,
$14.7 million, and $7.7 million for the years ended August 31, 2000, 1999 and
1998, respectively.
b. Litigation
The Company is party to certain lawsuits in the ordinary course of
business. Management does not believe that these proceedings individually or in
the aggregate, will have a material adverse effect on the Company's financial
position, results of operations or cash flows.
10. ACQUISITIONS
On August 3, 1998 the Company acquired certain assets (primarily raw
material inventory and property, plant and equipment) relating to the LaserJet
Formatter Manufacturing Organization business unit of Hewlett-Packard Company
located in Boise, Idaho, and Bergamo, Italy. The acquisition price was
approximately $80 million and was accounted for under the purchase method of
accounting. The acquisition resulted in goodwill and other intangible assets of
approximately $11.2 million, which is being amortized on a straight-line basis
over ten years.
Simultaneously, the Company entered into a manufacturing arrangement to
continue to produce the LaserJet circuit board assemblies being produced by the
Hewlett-Packard operations in Boise and Bergamo.
In conjunction with the HP Acquisition, the Company recorded an
acquisition-related charge of $20.8 million consisting of an in-process
technology write-off of $6.5 million, work force related expenses of $10.0
million, and $4.3 million of other expenses.
On September 1, 1999 the Company acquired, through our Jabil Global
Services subsidiary, the net assets of EFTC Services, Inc., an electronic
product service and repair business. Jabil Global Services continues to offer
repair and warranty services for existing and future customers from its
hub-based operations in Memphis, Tennessee; Louisville, Kentucky; and Tampa,
Florida. The purchase price of approximately $27 million was paid in cash. The
acquisition was accounted for as a purchase and resulted in approximately $18
million of goodwill, which is being amortized on a straight-line basis over a
period of 15 years. The consolidated financial statements include the operating
results of the acquired business from the date of acquisition.
On September 13, 1999 the Company issued approximately 10.2 million shares
of our common stock for all of the outstanding common stock of GET
Manufacturing, Inc., a China-based electronics manufacturing
49
<PAGE> 51
JABIL CIRCUIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
services provider. The business combination was accounted for as a
pooling-of-interests and, accordingly, our historical consolidated financial
statements presented herein have been restated to include the accounts and
results of operations of GET Manufacturing, Inc.
In connection with the merger, the Company recorded a merger-related charge
of $7.0 million consisting of professional fees and other expenses in the fourth
quarter of fiscal year 1999. In the first quarter of fiscal year 2000, we
incurred a merger-related charge of $5.2 million ($4.7 million after-tax)
consisting of key employee severance and legal and professional fees.
On February 1, 2000, the Company acquired the net assets of Bull
Information Technology, an electronic manufacturing service provider. The
business operates in the city of Contagem, State of Minas Gerais, in the Belo
Horizonte region Brazil. The purchase price of approximately $6 million was paid
in cash. The acquisition was accounted for as a purchase and resulted in
approximately $5 million of goodwill, which is being amortized, on a
straight-line basis over a period of 10 years. The consolidated financial
statements include the operating results of the acquired business from the date
of the acquisition. Pro forma results of operations have not been presented
because the effect of the acquisition was not material.
On July 20, 2000 the Company acquired the share capital of Telenor
Technology Services Limited, a repair and logistics services division of Telenor
Mobile Communications AS, a Norwegian provider of telecommunication, data and
media communication services. The purchase price of approximately $4 million was
paid in cash. The acquisition was accounted for as a purchase and resulted in
approximately $2 million of goodwill, which is being amortized on a
straight-line basis over a period of 15 years. The acquired operations allow
Jabil Global Services to offer circuit board repair and warranty services for
European customers from Dublin, Ireland. The consolidated financial statements
include the operating results of the acquired business from the date of
acquisition. Pro forma results of operations have not been presented because the
effect of the acquisition was not material.
11. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities. As amended by Statements 137 and
138, Statement 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as other
hedging activities. The Company anticipates that the adoption of Statement 133
will not have a material impact on its financial position, results of operations
or cash flows. The Company will implement Statement 133 beginning in the first
quarter of its fiscal year ending August 31, 2001.
SEC Staff Accounting Bulletin Number 101 -- Revenue Recognition in
Financial Statements. We will be required to implement this bulletin in the
fourth fiscal quarter of our fiscal year ending August 31, 2001. As we have
historically made a practice of recognizing revenue in accordance with the
provisions of this bulletin as currently interpreted, we do not anticipate that
the adoption of the bulletin will have a material impact on our consolidated
financial statements.
50
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 27th day of
November 2000.
JABIL CIRCUIT, INC.
By: /s/ TIMOTHY L. MAIN
------------------------------------
Timothy L. Main
Date: November 27, 2000
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Timothy L. Main and Chris A. Lewis and
each of them, jointly and severally, his attorneys-in-fact, each with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM D. MOREAN Chairman of the Board of November 27, 2000
- ----------------------------------------------------- Directors
William D. Morean
/s/ THOMAS A. SANSONE Vice Chairman of the Board November 27, 2000
- ----------------------------------------------------- of Directors
Thomas A. Sansone
/s/ TIMOTHY L. MAIN President and Chief November 27, 2000
- ----------------------------------------------------- Executive Officer
Timothy L. Main (Principal Executive
Officer)
/s/ CHRIS A. LEWIS Chief Financial Officer November 27, 2000
- ----------------------------------------------------- (Principal Financial and
Chris A. Lewis Accounting Officer)
/s/ LAWRENCE J. MURPHY Director November 27, 2000
- -----------------------------------------------------
Lawrence J. Murphy
/s/ MEL S. LAVITT Director November 27, 2000
- -----------------------------------------------------
Mel S. Lavitt
/s/ STEVEN A. RAYMUND Director November 27, 2000
- -----------------------------------------------------
Steven A. Raymund
/s/ FRANK NEWMAN Director November 27, 2000
- -----------------------------------------------------
Frank Newman
</TABLE>
51
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1(9) -- Registrant's Certificate of Incorporation, as amended.
3.2(9) -- Registrant's Bylaws, as amended.
4.1(2) -- Form of Certificate for Shares of Registrant's Common Stock.
10.1(1)(7) -- 1983 Stock Option Plan and forms of agreement used
thereunder.
10.2(1)(7) -- 1989 Non-Qualified Stock Option Plan and forms of agreement
used thereunder.
10.3(7)(10) -- 1992 Stock Option Plan and forms of agreement used
thereunder, as amended.
10.4(7)(11) -- 1992 Employee Stock Purchase Plan and forms of agreement
used thereunder, as amended.
10.5(1)(7) -- Restated cash or deferred profit sharing plan under section
401(k).
10.6(1)(7) -- Form of Indemnification Agreement between Registrant and its
officers and Directors.
10.7(1) -- Letter Agreement dated November 27, 1992 between Registrant
and Scottish Office Industry Department relating to grant to
establish Scottish facility.
10.8(3)(7) -- Amendment to 1989 Non-Qualified Stock Option Plan.
10.9(4) -- Lease Agreement dated October 1, 1997 between registrant and
Charrington Estates.
10.10(4) -- Lease Agreement dated October 30, 1997 between registrant
and Teachers Insurance and Annuity Association.
10.11(5) -- Lease Agreement dated May 12, 1998 between registrant and
Lincoln-RECP Great Oaks OPCO. LLC.
10.12(6) -- Agreement and Plan of Merger among Jabil Circuit, Inc., JG
Acquisition, Inc., GET Manufacturing, Inc. and Mr. Shin Fang
dated August 11, 1999 and amended September 13, 1999.
10.13(8) -- Lease Agreement dated May 16, 2000 for 6835 Via Del Oro, San
Jose, California between Registrant and The Realty
Associates Fund IV.
10.14(9) -- Amended and Restated Loan Agreement dated as of April 7,
2000 between Registrant and certain banks and Bank One and
Suntrust Bank as agents for banks.
10.15 -- Receivables Sale Agreement dated as of August 10, 2000 among
Jabil Circuit, Inc. and Jabil Circuit of Texas, L.P. as
originators and Jabil Circuit Financial, Inc. as buyer.
10.16 -- Receivables Purchase Agreement dated as of August 10, 2000
among Jabil Circuit Financial, Inc. as seller and servicer
and Jabil Circuit, Inc. as sub-servicer and Falcon Asset
Securitization Corporation and Bank One as agent for Falcon.
21.1 -- List of Subsidiaries.
23.1 -- Independent Auditors' Consent.
23.2 -- Independent Auditors' Consent.
24.1 -- Power of Attorney (See Signature page).
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
(1) Incorporated by reference to the Registration Statement on Form S-1 filed
by the Registrant on March 3, 1993 (File No. 33-58974).
(2) Incorporated by reference to exhibit Amendment No. 1 to the Registration
Statement on Form S-1 filed by the Registrant on March 17, 1993 (File No.
33-58974).
(3) Incorporated by reference to exhibit the Registrant's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1994.
52
<PAGE> 54
(4) Incorporated by reference to exhibit to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1997.
(5) Incorporated by reference to exhibit to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1998.
(6) Incorporated by reference to exhibit to the Registrant's Current Report on
Form 8-K filed by the Registrant on September 28, 1999.
(7) Indicates management compensatory plan, contract or arrangement.
(8) Incorporated by reference to exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended May 31, 2000.
(9) Incorporated by reference to exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended February 29, 2000.
(10) Incorporated by reference to the Registration Statement on Form S-8 filed
by the Registrant on August 31, 1999.
(11) Incorporated by reference to the Registration Statement on Form S-8 filed
by the Registrant on October 10, 1997.
53
<PAGE> 55
SCHEDULE II
JABIL CIRCUIT, INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND WRITE- END OF
OF PERIOD EXPENSES OFFS PERIOD
---------- ---------- ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 2000:
Allowance for uncollectible accounts receivable......... $ 4,639 $ 648 $ 279 $ 5,008
Reserve for excess and obsolete inventory............... $12,869 $7,562 $6,423 $14,008
======= ====== ====== =======
YEAR ENDED AUGUST 31, 1999:
Allowance for uncollectible accounts receivable......... $ 3,948 $1,246 $ 555 $ 4,639
Reserve for excess and obsolete inventory............... $12,193 $6,233 $5,557 $12,869
======= ====== ====== =======
YEAR ENDED AUGUST 31, 1998:
Allowance for uncollectible accounts receivable......... $ 3,696 $1,677 $1,425 $ 3,948
Reserve for excess and obsolete inventory............... $11,560 $6,133 $5,500 $12,193
======= ====== ====== =======
</TABLE>
See accompanying independent auditors' report.
54
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>2
<FILENAME>g65591ex10-15.txt
<DESCRIPTION>RECEIVABLES SALE AGREEMENT
<TEXT>
<PAGE> 1
Exhibit 10.15
RECEIVABLES SALE AGREEMENT
dated as of August 10, 2000
AMONG
JABIL CIRCUIT, INC.,
as an Originator,
JABIL CIRCUIT OF TEXAS, LP,
as an Originator
AND
JABIL CIRCUIT FINANCIAL, INC.,
as Buyer
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
---
<S> <C>
ARTICLE I
AMOUNTS AND TERMS ................................................................. 1
Section 1.1 Purchase of Receivables ......................................... 1
Section 1.2 Payment for the Purchase ........................................ 3
Section 1.3 Purchase Price Credit Adjustments ............................... 4
Section 1.4 Payments and Computations, Etc .................................. 5
Section 1.5 Transfer of Records ............................................. 5
Section 1.6 Characterization ................................................ 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES .................................................... 6
Section 2.1 Representations and Warranties of Originators ................... 6
ARTICLE III
CONDITIONS OF PURCHASE ............................................................ 9
Section 3.1 Conditions Precedent to Purchase ................................ 9
Section 3.2 Conditions Precedent to Subsequent Payments ..................... 9
ARTICLE IV
COVENANTS ......................................................................... 10
Section 4.1 Affirmative Covenants of Originators ............................ 10
Section 4.2 Negative Covenants of Originators ............................... 14
ARTICLE V
ADMINISTRATION AND COLLECTION ..................................................... 15
Section 5.1 Designation of Sub-Servicer ..................................... 15
Section 5.2 Collection Accounts ............................................. 15
Section 5.3 Responsibilities of Jabil and Originators ....................... 15
Section 5.4 Servicing Fees .................................................. 16
ARTICLE VI
TERMINATION EVENTS ................................................................ 16
Section 6.1 Termination Events .............................................. 16
Section 6.2 Remedies ........................................................ 17
ARTICLE VII
INDEMNIFICATION ................................................................... 17
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.1 Indemnities by Originators ...................................... 17
Section 7.2 Other Costs and Expenses ........................................ 19
ARTICLE VIII
MISCELLANEOUS ..................................................................... 19
Section 8.1 Waivers and Amendments .......................................... 20
Section 8.2 Notices ......................................................... 20
Section 8.3 Protection of Ownership Interests of Buyer ...................... 20
Section 8.4 Confidentiality ................................................. 21
Section 8.5 Bankruptcy Petition ............................................. 21
Section 8.6 CHOICE OF LAW ................................................... 21
Section 8.7 CONSENT TO JURISDICTION ......................................... 21
Section 8.8 WAIVER OF JURY TRIAL ............................................ 22
Section 8.9 Integration; Binding Effect; Survival of Terms .................. 22
Section 8.10 Counterparts; Severability; Section References .................. 22
</TABLE>
ii
<PAGE> 4
Exhibits and Schedules
<TABLE>
<S> <C> <C>
EXHIBIT I -- Definitions
EXHIBIT II -- Principal Place of Business; Location(s) of Records; Federal
Employer Identification Number; Other Names
EXHIBIT III -- Lock-Boxes; Collection Accounts; Collection Banks
EXHIBIT IV -- Form of Compliance Certificate
EXHIBIT V -- Credit and Collection Policy
EXHIBIT VI -- Forms of Invoice
EXHIBIT VII -- Form of Subordinated Note
EXHIBIT VIII -- Form of Subscription Agreement
SCHEDULE A -- List of Documents to Be Delivered to Buyer Prior to the
Purchase
SCHEDULE B ---- Pending Litigation
</TABLE>
iii
<PAGE> 5
RECEIVABLES SALE AGREEMENT
THIS RECEIVABLES SALE AGREEMENT, dated as of August 10, 2000
is by and among JABIL CIRCUIT, INC., a Delaware corporation ("Jabil"), JABIL
CIRCUIT OF TEXAS, LP, a Florida limited partnership ("Jabil Texas," together
with Jabil, each individually, an "Originator" and collectively, the
"Originators"), and JABIL CIRCUIT FINANCIAL, INC., a Delaware corporation
("Buyer"). Unless defined elsewhere herein, capitalized terms used in this
Agreement shall have the meanings assigned to such terms in Exhibit I.
PRELIMINARY STATEMENTS
Originators now own, and from time to time hereafter will own,
Receivables. Originators wish to sell and assign to Buyer, and Buyer wishes to
purchase from Originators, all of the applicable Originator's right, title and
interest in and to such Receivables, together with the Related Security and
Collections with respect thereto.
Originators and Buyer intend the transactions contemplated
hereby to be true sales of the Receivables from the applicable Originator to
Buyer, providing Buyer with the full benefits of ownership of the Receivables,
and Originators and Buyer do not intend these transactions to be, or for any
purpose to be characterized as, loans from Buyer to Originators.
Following the purchase of Receivables from Originators, Buyer
will sell undivided interests therein and in the associated Related Security and
Collections pursuant to that certain Receivables Purchase Agreement dated as of
August 10, 2000 (as the same may from time to time hereafter be amended,
supplemented, restated or otherwise modified, the "Purchase Agreement") among
Buyer, as Seller and as Servicer, Jabil, as Sub-Servicer, Falcon Asset
Securitization Corporation ("Falcon"), the financial institutions from time to
time party thereto as "Financial Institutions" and Bank One, NA (Main Office
Chicago) or any successor agent appointed pursuant to the terms of the Purchase
Agreement, as agent for Falcon and such Financial Institutions (in such
capacity, the "Agent").
ARTICLE I
AMOUNTS AND TERMS
Section 1.1 Purchase of Receivables.
(a) Effective on the date hereof, in consideration for
the Purchase Price (which may be satisfied in connection with a capital
contribution in accordance with Section 1.1(b)) and upon the terms and subject
to the conditions set forth herein, each Originator does hereby sell, assign,
transfer, set-over and otherwise convey to Buyer, without recourse (except to
the extent expressly provided herein), and Buyer does hereby purchase from such
Originator, all of such Originator's right, title and interest in and to all
Receivables originated by such Originator and existing as of the close of
business on the Business Day immediately prior to the
<PAGE> 6
date hereof and all such Receivables thereafter arising through and including
the Termination Date, together, in each case, with all Related Security relating
thereto and all Collections thereof. In accordance with the preceding sentence,
on the date hereof Buyer shall acquire all of such Originator's right, title and
interest in and to all Receivables originated by such Originator and existing as
of the close of business on the Business Day immediately prior to the date
hereof and thereafter arising through and including the Termination Date,
together with all Related Security relating thereto and all Collections thereof;
provided, that, Buyer shall be obligated to pay the Purchase Price therefor in
accordance with Section 1.2 (which may be satisfied in connection with a capital
contribution made pursuant to Section 1.1(b)). In connection with the payment of
the Purchase Price for any Receivables purchased hereunder, Buyer may request
that Originators deliver, and each Originator shall deliver, such approvals,
opinions, information, reports or documents as Buyer may reasonably request.
(b) Jabil may elect to forgive the Buyer's obligation to
pay the Purchase Price for Receivables conveyed to Buyer from Jabil by making a
capital contribution pursuant to the Subscription Agreement and thereby
increasing the value of Jabil's equity interest in the Buyer. The Buyer agrees
to offset the amount of such contributions against the Purchase Price for such
Receivables. Any such capital contribution shall be agreed to in writing by
Jabil and the Buyer on the Initial Cutoff Date or applicable Settlement Date, as
applicable, and shall satisfy, and constitute the payment of, the payment of the
Purchase Price for the Receivables so contributed. All of the Receivables so
paid for through such offset shall constitute purchased Receivables hereunder
and shall be subject to all of the representations, warranties and indemnities
made hereunder.
(c) It is the intention of the parties hereto that the
Purchase of Receivables made hereunder shall constitute a sale of "accounts" and
"chattel paper" (as such terms are used in Article 9 of the UCC), which sale is
absolute and irrevocable and provides Buyer with the full benefits of ownership
of the Receivables. Except for the Purchase Price Credits owed pursuant to
Section 1.3, the sale of Receivables hereunder is made without recourse to
either Originator; provided, however, that (i) each Originator shall be liable
to Buyer for all representations, warranties and covenants made by such
Originator pursuant to the terms of the Transaction Documents to which such
Originator is a party, and (ii) such sale does not constitute and is not
intended to result in an assumption by Buyer or any assignee thereof of any
obligation of the applicable Originator or any other Person arising in
connection with the Receivables, the related Contracts and/or other Related
Security or any other obligations of such Originator. In view of the intention
of the parties hereto that the Purchase of Receivables made hereunder shall
constitute a sale of such Receivables rather than loans secured thereby, each
Originator agrees that it will, on or prior to the date hereof and in accordance
with Section 4.1(e)(ii), mark its master data processing records relating to the
Receivables with a legend acceptable to Buyer and to the Agent (as Buyer's
assignee), evidencing that Buyer has purchased such Receivables as provided in
this Agreement and to note in its financial statements that its Receivables have
been sold to Buyer. Upon the request of Buyer or the Agent (as Buyer's
assignee), each Originator will execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate to perfect and
maintain the perfection of Buyer's ownership interest in the Receivables and the
Related Security and Collections with respect thereto, or as Buyer or the Agent
(as Buyer's assignee) may reasonably request.
2
<PAGE> 7
Section 1.2 Payment for the Purchase.
(a) The Purchase Price for the Purchase from each
Originator of its respective Receivables in existence on the close of business
on the Business Day immediately preceding the date hereof (the "Initial Cutoff
Date"), if not satisfied in accordance with Section 1.1(b), shall be payable in
full by Buyer to each Originator on the date hereof, and shall be paid to each
Originator in the following manner:
(i) by delivery of immediately available funds, to the
extent of funds made available to Buyer in connection with its subsequent sale
of an interest in such Receivables to the Purchasers under the Purchase
Agreement; provided that a portion of such funds owed to Jabil shall be offset
by amounts owed by Jabil to Buyer on account of the issuance of equity in the
manner contemplated in the Subscription Agreement and having, when combined with
the value of the cash and Receivables then owned by the Buyer, a total value of
not less than the Required Capital Amount, and
(ii) the balance, by delivery of the proceeds of a
subordinated revolving loan from such Originator to Buyer (each a "Subordinated
Loan") in an amount not to exceed the least of (i) the remaining unpaid portion
of such Purchase Price, (ii) the maximum Subordinated Loan that could be
borrowed without rendering Buyer's Net Worth less than the Required Capital
Amount and (iii) the maximum Subordinated Loan that could be borrowed without
rendering the Net Value less than the aggregate outstanding principal balance of
the Subordinated Loans (including the Subordinated Loans proposed to be made on
such date). Each Originator is hereby authorized by Buyer to endorse on the
schedule attached to its Subordinated Note made payable to and delivered to such
Originator an appropriate notation evidencing the date and amount of each
advance thereunder, as well as the date of each payment with respect thereto,
provided that the failure to make such notation shall not affect any obligation
of Buyer thereunder.
The Purchase Price for each Receivable coming into existence after the Initial
Cutoff Date shall be due and owing in full by Buyer to the applicable Originator
or its designee on the date each such Receivable came into existence (except
that Buyer may, with respect to any such Purchase Price, offset against such
Purchase Price any amounts owed by such Originator to Buyer hereunder and which
have become due but remain unpaid) and shall be paid to such Originator in the
manner provided in the following paragraphs (b), (c) and (d).
(b) With respect to any Receivables coming into existence
after the date hereof, on each Settlement Date, Buyer shall pay the Purchase
Price therefor (if not satisfied in accordance with Section 1.1(b)) in
accordance with Section 1.2(c) and in the following manner:
first, by delivery of immediately available funds, to
the extent of funds available to Buyer from its subsequent sale of an
interest in the Receivables to the Agent for the benefit of the
Purchasers under the Purchase Agreement or other cash on hand; and
3
<PAGE> 8
second, by delivery of the proceeds of a Subordinated
Loan, provided that the making of any such Subordinated Loan shall be
subject to the provisions set forth in Section 1.2(a)(ii).
Subject to the limitations set forth in Section 1.2(a)(ii), each Originator
irrevocably agrees to advance each Subordinated Loan requested by Buyer on or
prior to the Termination Date. The Subordinated Loans made by each Originator
shall be evidenced by, and shall be payable in accordance with the terms and
provisions of the applicable Subordinated Note and shall be payable solely from
funds which Buyer is not required under the Purchase Agreement to set aside for
the benefit of, or otherwise pay over to, the Purchasers.
(c) Although the Purchase Price for each Receivable
coming into existence after the date hereof shall be due and payable in full by
Buyer to the applicable Originator on the date such Receivable came into
existence, settlement of the Purchase Price between Buyer and each Originator
shall be effected on a monthly basis on Settlement Dates with respect to all
Receivables coming into existence during the same Calculation Period and based
on the information contained in the Monthly Report delivered by the Servicer
pursuant to Article VIII of the Purchase Agreement for the Calculation Period
then most recently ended. Although settlement shall be effected on Settlement
Dates, increases or decreases in the amount owing under each Subordinated Note
made pursuant to Section 1.2(b) and any contribution of capital by Jabil to
Buyer made pursuant to Section 1.1(b) shall be deemed to have occurred and shall
be effective as of the last Business Day of the Calculation Period to which such
settlement relates.
Section 1.3 Purchase Price Credit Adjustments. If on any
day:
(a) the Outstanding Balance of a Receivable is:
(i) reduced as a result of any defective or rejected
goods or services, any discount or any adjustment or otherwise by the applicable
Originator (other than cash Collections on account of the Receivables),
(ii) reduced or canceled as a result of a setoff in
respect of any claim by any Person (whether such claim arises out of the same or
a related transaction or an unrelated transaction), or
(b) any of the representations and warranties set forth
in Article II are no longer true with respect to any Receivable,
then, in such event, Buyer shall be entitled to a credit (each, a "Purchase
Price Credit") against the Purchase Price otherwise payable hereunder equal to
the Outstanding Balance of such Receivable. If such Purchase Price Credit
exceeds the Original Balance of the Receivables of the applicable Originator
coming into existence on any day, then such Originator shall pay the remaining
amount of such Purchase Price Credit in cash promptly thereafter, provided that
if the Termination Date has not occurred, the applicable Originator shall be
allowed to deduct the remaining amount of such Purchase Price Credit from any
indebtedness owed to it under the Subordinated Note.
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Section 1.4 Payments and Computations, Etc. All amounts
to be paid or deposited by Buyer hereunder shall be paid or deposited in
accordance with the terms hereof on the day when due in immediately available
funds to the account of the applicable Originator designated from time to time
by such Originator or as otherwise directed by such Originator. In the event
that any payment owed by any Person hereunder becomes due on a day that is not a
Business Day, then such payment shall be made on the next succeeding Business
Day. If any Person fails to pay any amount hereunder when due, such Person
agrees to pay, on demand, the Default Fee in respect thereof until paid in full;
provided, however, that such Default Fee shall not at any time exceed the
maximum rate permitted by applicable law. All computations of interest payable
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed.
Section 1.5 Transfer of Records.
(a) In connection with the Purchase of Receivables
hereunder, each Originator hereby sells, transfers, assigns and otherwise
conveys to Buyer all of such Originator's right and title to and interest in the
Records (other than Contracts) relating to all of its Receivables sold hereunder
and all rights (with respect to enforcement or otherwise) under the Contracts
relating to all of its Receivables sold hereunder, without the need for any
further documentation in connection with the Purchase. In connection with such
transfer, each Originator hereby grants to each of Buyer, the Agent and the
Servicer upon the occurrence of an Amortization Event under the Purchase
Agreement, an irrevocable, non-exclusive license to use, without royalty or
payment of any kind, all software used by such Originator to account for the
Receivables, to the extent necessary to administer the Receivables, whether such
software is owned by such Originator or is owned by others and used by such
Originator under license agreements with respect thereto, provided that should
the consent of any licensor of such Originator to such grant of the license
described herein be required, such Originator hereby agrees that upon the
request of Buyer (or the Agent as Buyer's assignee), such Originator will use
its reasonable efforts to obtain the consent of such third-party licensor. The
license granted hereby shall be irrevocable, and shall terminate on the date
this Agreement terminates in accordance with its terms. Upon the termination of
this Agreement any such software used by the Buyer, the Agent or the Servicer
during the term of this Agreement shall be returned to the applicable
Originator.
(b) Each Originator (i) shall take such action requested
by Buyer and/or the Agent (as Buyer's assignee), from time to time hereafter,
that may be necessary or appropriate to ensure that Buyer and its assigns under
the Purchase Agreement have an enforceable ownership interest in the Records
relating to the Receivables purchased from such Originator hereunder, and (ii)
shall use its reasonable efforts to ensure that Buyer, the Agent and the
Servicer each has an enforceable right (whether by license or sublicense or
otherwise) to use all of the computer software used to account for the
Receivables and/or to recreate such Records.
Section 1.6 Characterization. If, notwithstanding the
intention of the parties expressed in Section 1.1(c), any sale or contribution
by either Originator to Buyer of Receivables hereunder shall be characterized as
a secured loan and not a sale or such sale shall for any reason be ineffective
or unenforceable, then this Agreement shall be deemed to constitute a security
agreement under the UCC and other applicable law. For this purpose and without
being in derogation of the parties' intention that the sale of Receivables
hereunder shall constitute a true
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sale thereof, such Originator hereby grants to Buyer a duly perfected security
interest in all of such Originator's right, title and interest in, to and under
the following assets, now existing or hereafter arising: (i) all Receivables
originated by it, (ii) the Collections, (iii) each Lock-Box, (iv) each
Collection Account, (v) all Related Security, (vi) all other rights and payments
relating to such Receivables, (vii) all proceeds of any of the foregoing, and
(viii) all other assets in which the Seller has acquired, may hereafter acquire
and/or purports to have acquired an interest hereunder, which security interest
shall be prior to all other Adverse Claims thereto. After the occurrence of an
Termination Event, Buyer and its assigns shall have, in addition to the rights
and remedies which they may have under this Agreement, all other rights and
remedies provided to a secured creditor after default under the UCC and other
applicable law, which rights and remedies shall be cumulative.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of
Originators. Each Originator hereby represents and warrants, as to itself, to
Buyer that:
(a) Corporate Existence and Power. It is a corporation or
limited partnership duly organized, validly existing and in good standing under
the laws of its state of organization, and is duly qualified to do business and
is in good standing as a foreign entity, and has and holds all power, corporate
or otherwise, and all governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction in which its
business is conducted.
(b) Power and Authority; Due Authorization Execution and
Delivery. The execution and delivery by such Originator of this Agreement and
each other Transaction Document to which it is a party, and the performance of
its obligations hereunder and thereunder and, such Originator's use of the
proceeds of the Purchase made hereunder, are within its powers and authority,
corporate or otherwise, and have been duly authorized by all necessary action,
corporate or otherwise, on its part. This Agreement and each other Transaction
Document to which such Originator is a party has been duly executed and
delivered by such Originator.
(c) No Conflict. The execution and delivery by such
Originator of this Agreement and each other Transaction Document to which it is
a party, and the performance of its obligations hereunder and thereunder do not
contravene or violate (i) its certificate or articles of incorporation, by-laws
or limited partnership agreement (or equivalent organizational documents), (ii)
any law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or by which it or any
of its property is bound, or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on any assets of such Originator or
its Subsidiaries (except as created hereunder); and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law.
(d) Governmental Authorization. Other than the filing of
the financing statements required hereunder, no authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution
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and delivery by such Originator of this Agreement and each other Transaction
Document to which it is a party and the performance of its obligations hereunder
and thereunder.
(e) Actions, Suits. Other than as disclosed on Schedule
A, there are no actions, suits or proceedings pending, or to the best of such
Originator's knowledge, threatened, against or affecting such Originator, or any
of its properties, in or before any court, arbitrator or other body, that could
reasonably be expected to have a Material Adverse Effect. Such Originator is not
in default with respect to any order of any court, arbitrator or governmental
body.
(f) Binding Effect. This Agreement and each other
Transaction Document to which such Originator is a party constitute the legal,
valid and binding obligations of such Originator enforceable against such
Originator in accordance with their respective terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore
furnished by such Originator or any of its Affiliates to Buyer (or its assigns)
for purposes of or in connection with this Agreement, any of the other
Transaction Documents or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished by such Originator or any of its
Affiliates to Buyer (or its assigns) will be, true and accurate in every
material respect on the date such information is stated or certified and does
not and will not contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
(h) Use of Proceeds. No proceeds of the Purchase
hereunder will be used (i) for a purpose that violates, or would be inconsistent
with, Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System from time to time or (ii) to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(i) Good Title. At the time each Receivable originated by
it came into existence, such Originator shall be the legal and beneficial owner
of each such Receivables and Related Security with respect thereto, free and
clear of any Adverse Claim (other than the CISCO Receivables), except as created
by the Transaction Documents.
(j) Perfection. This Agreement, together with the filing
of the financing statements contemplated hereby, is effective to transfer to
Buyer (and Buyer shall acquire from such Originator) legal and equitable title
to, with the right to sell and encumber each Receivable originated by it
existing and hereafter arising, together with the Related Security and
Collections with respect thereto, free and clear of any Adverse Claim (other
than the CISCO Receivables), except as created by the Transactions Documents.
There have been duly filed all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Buyer's ownership interest in the Receivables, the
Related Security and the Collections. Each Contract which is "chattel paper"
within the meaning of Section 9-105 of the UCC of all applicable jurisdictions
has been stamped
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to reflect the fact that the Receivable and related rights arising under such
Contract has been assigned to Buyer.
(k) Places of Business. The principal places of business
and chief executive office of such Originator and the offices where it keeps all
of its Records are located at the address(es) listed on Exhibit II or such other
locations of which Buyer has been notified in accordance with Section 4.2(a) in
jurisdictions where all action required by Section 4.2(a) has been taken and
completed. Such Originator's Federal Employer Identification Number is correctly
set forth on Exhibit II.
(l) Collections. The conditions and requirements set
forth in Section 4.1(i) have at all times been satisfied and duly performed. The
names and addresses of all Collection Banks, together with the account numbers
of the Collection Accounts of Originator at each Collection Bank and the post
office box number of each Lock-Box, are listed on Exhibit III.
(m) Material Adverse Effect. Since August 31, 1999 no
event has occurred that would have a Material Adverse Effect.
(n) Names. In the past five (5) years, such Originator
has not used any corporate names, trade names or assumed names other than the
name in which such Originator has executed this Agreement.
(o) Ownership of Buyer. Jabil owns, directly or
indirectly, 100% of the issued and outstanding capital stock of Buyer, free and
clear of any Adverse Claim. Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of Buyer.
(p) Not a Holding Company or an Investment Company. Such
Originator is not a "holding company" or a "subsidiary holding company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or any successor statute. Such Originator is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or any successor statute.
(q) Compliance with Law. Such Originator has complied in
all respects with all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject. Each
Receivable, together with the Contract and Invoice related thereto, does not
contravene any laws, rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy), and no part of such Contract or Invoice is in
violation of any such law, rule or regulation.
(r) Compliance with Credit and Collection Policy. Such
Originator has complied in all material respects with the Credit and Collection
Policy with regard to each Receivable and the related Contract and Invoice, and
has not made any change to such Credit and Collection Policy, other than as
permitted under Section 4.2(c) and in compliance with the notification
requirements in Section 4.1(a)(vii).
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(s) Payments to Originators. With respect to each
Receivable originated by it and transferred to Buyer hereunder, the Purchase
Price received by such Originator constitutes reasonably equivalent value in
consideration therefor and such transfer was not made for or on account of an
antecedent debt. No transfer by such Originator of any Receivable hereunder is
or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11
U.S.C. ss.ss. 101 et seq.), as amended.
(t) Enforceability of Invoice. Each Invoice with respect
to each Receivable is effective to create, and has created, a legal, valid and
binding obligation of the related Obligor to pay the Outstanding Balance of the
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the
Net Receivables Balance as an Eligible Receivable on the date it came into
existence was an Eligible Receivable on such date.
(v) Accounting. The manner in which such Originator
accounts for the transactions contemplated by this Agreement does not jeopardize
the true sale analysis.
(w) No Adverse Selection. To the extent that such
Originator has retained Receivables that would be Eligible Receivables but which
have not been transferred to Buyer hereunder, such Originator has not selected
those Receivables to be transferred hereunder in any manner that materially
adversely affects Buyer.
(x) Compliance with Representations. On and as of the
date of the Purchase and on and as of each subsequent date each Receivable came
into existence, such Originator hereby represents and warrants that all of the
other representations and warranties set forth in this Article II are true and
correct on and as of each such date (and after giving effect to all Receivables
in existence on each such date) as though made on and as of each such date.
ARTICLE III
CONDITIONS OF PURCHASE
Section 3.1 Conditions Precedent to Purchase. The
Purchase under this Agreement is subject to the conditions precedent that (a)
Buyer shall have received on or before the date of such purchase those documents
listed on Schedule B and (b) all of the conditions to the initial purchase under
the Purchase Agreement shall have been satisfied or waived in accordance with
the terms thereof.
Section 3.2 Conditions Precedent to Subsequent Payments.
Buyer's obligation to pay for Receivables coming into existence after the date
hereof shall be subject to the further conditions precedent that (a) the
Termination Date shall not have occurred; and (b) Buyer (or its assigns) shall
have received such other approvals, opinions or documents as it may reasonably
request. Each Originator represents and warrants that the representations and
warranties set forth
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in Article II are true and correct on and as of the date each Receivable came
into existence as though made on and as of such date.
ARTICLE IV
COVENANTS
Section 4.1 Affirmative Covenants of Originators. Until
the date on which this Agreement terminates in accordance with its terms, each
Originator hereby covenants, as to itself, as set forth below:
(a) Reporting. Such Originator will maintain, for itself
and each of its respective Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
furnish to Buyer (or its assigns):
(i) Annual Reporting. Within 90 days after the close of
each of its respective fiscal years, audited, unqualified financial statements
(which shall include balance sheets, statements of income and retained earnings
and a statement of cash flows) for Jabil for such fiscal year certified in a
manner acceptable to Buyer (or its assigns) by independent public accountants
acceptable to Buyer (or its assigns).
(ii) Quarterly Reporting. Within 45 days after the close
of the first three (3) quarterly periods of each of its respective fiscal years,
balance sheets of Jabil as at the close of each such period and statements of
income and retained earnings and a statement of cash flows for Jabil for the
period from the beginning of such fiscal year to the end of such quarter, all
certified by its chief financial officer.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in substantially the
form of Exhibit IV signed by Jabil's Authorized Officer and dated the date of
such annual financial statement or such quarterly financial statement, as the
case may be.
(iv) Shareholders Statements and Reports. Promptly upon
the furnishing thereof to the shareholders of Jabil copies of all financial
statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
copies of all registration statements and reports which such Originator or any
of its Subsidiaries files with the Securities and Exchange Commission and which
are delivered to the "Banks" and the "Agent" under (and as defined in) the Jabil
Loan Agreement.
(vi) Copies of Notices. Promptly upon its receipt of any
notice, request for consent, financial statements, certification, report or
other communication under or in connection with any Transaction Document from
any Person other than Buyer, the Agent or Falcon, copies of the same.
(vii) Change in Credit and Collection Policy. At least
thirty (30) days prior to the effectiveness of any material change in or
amendment to the Credit and Collection Policy, a
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copy of the Credit and Collection Policy then in effect and a notice indicating
such change or amendment.
(viii) Other Information. Promptly, from time to time, such
other information, documents, records or reports relating to the Receivables or
the condition or operations, financial or otherwise, of such Originator as Buyer
(or its assigns) may from time to time reasonably request in order to protect
the interests of Buyer (and its assigns) under or as contemplated by this
Agreement.
(b) Notices. Such Originator will notify the Buyer (or
its assigns) in writing of any of the following promptly upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken with respect thereto:
(i) Termination Events or Potential Termination Events.
The occurrence of each Termination Event and each Potential Termination Event,
by a statement of an Authorized Officer of such Originator.
(ii) Judgment and Proceedings. (1) The entry of any
judgment or decree against such Originator or any of its Subsidiaries if the
aggregate amount of all judgments and decrees then outstanding against the
Originators and their respective Subsidiaries exceeds $5,000,000, or (2) the
institution of any litigation, arbitration proceeding or governmental proceeding
against such Originator which could reasonably be expected to have a Material
Adverse Effect.
(iii) Material Adverse Effect. The occurrence of any event
or condition that has, or could reasonably be expected to have, a Material
Adverse Effect.
(iv) Defaults Under Other Agreements. The occurrence of a
default or an event of default under any other material financing arrangement
pursuant to which such Originator is a debtor or an obligor.
(v) Downgrade of Jabil. Any downgrade in the rating of
any Indebtedness of Jabil by Standard and Poor's Ratings Group or by Moody's
Investors Service, Inc., setting forth the Indebtedness affected and the nature
of such change.
(vi) Jabil Mexico. As soon as such Originator becomes
aware thereof, notice of any action taken by Jabil Mexico or any other Person to
assert any claim against any property of Jabil or Jabil Mexico located in
Mexico.
(c) Compliance with Laws and Preservation of Corporate
Existence. Such Originator will comply in all respects with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject. Such Originator will preserve and maintain its
corporate or partnership existence, as the case may be, rights, franchises and
privileges in the jurisdiction of its organization and qualify and remain
qualified in good standing as a foreign entity in each jurisdiction where its
business is conducted.
(d) Audits. Such Originator will furnish to Buyer (or its
assigns) from time to time such information with respect to it and the
Receivables as Buyer (or its assigns) may
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reasonably request. Such Originator will, from time to time during regular
business hours as requested by Buyer (or its assigns), upon reasonable notice
and at the sole cost of such Originator, permit Buyer (or its assigns) or their
respective agents or representatives, (i) to examine and make copies of and
abstracts from all Records in the possession or under the control of such
Originator relating to its Receivables and the Related Security, including,
without limitation, the related Contracts and Invoices, and (ii) to visit the
offices and properties of such Originator for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to such
Originator's financial condition or its Receivables and the Related Security or
such Originator's performance under any of the Transaction Documents or such
Originator's performance under the Contracts and Invoices and, in each case,
with any of the officers or employees of such Originator having knowledge of
such matters; provided that such Originator shall not be required to pay for the
costs of such audit if (i) collectively, the Originators have paid the costs of
at least three other audits occurring during the nine month period immediately
preceding such audit, (ii) no Termination Event has occurred and (iii) the
results of the previous audits were acceptable to Buyer (or its assigns).
(e) Keeping and Marking of Records and Books.
(i) Such Originator will maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing its Receivables in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables originated by it (including, without limitation,
records adequate to permit the immediate identification of each new Receivable
and all Collections of and adjustments to each existing Receivable). Such
Originator will give Buyer (or its assigns) notice of any material change in the
administrative and operating procedures referred to in the previous sentence.
(ii) Such Originator will (A) on or prior to the date
hereof, mark its master data processing records and other books and records
relating to its Receivables with a legend, acceptable to Buyer (or its assigns),
describing Buyer's ownership interests in such Receivables and further
describing the Purchaser Interests of the Agent (on behalf of the Purchasers)
under the Purchase Agreement and (B) upon the request of Buyer (or its assigns)
at any time following the occurrence of an Amortization Event under the Purchase
Agreement, (x) mark each Contract and Invoice related to its Receivables with a
legend describing Buyer's ownership interests in its Receivables and further
describing the Purchaser Interests of the Agent (on behalf of the Purchasers)
and (y) deliver to Buyer (or its assigns) all such Contracts and Invoices
(including, without limitation, all multiple originals of any such Contract and
Invoice) relating to its Receivables.
(f) Compliance with Contracts and Credit and Collection
Policy. Such Originator will timely and fully (i) perform and comply with all
provisions, covenants and other promises required to be observed by it under the
applicable Contracts related to its Receivables, and (ii) comply in all respects
with the Credit and Collection Policy in regard to each such Receivable and the
related Contract and Invoice. Such Originator will pay when due any taxes
payable in connection with its Receivables, exclusive of taxes on or measured by
income or gross receipts of Buyer and its assigns.
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(g) Ownership. Such Originator will take all necessary
action to establish and maintain, irrevocably in Buyer, legal and equitable
title to the Receivables originated by it, and the Related Security and the
Collections with respect thereto, free and clear of any Adverse Claims other
than Adverse Claims in favor of Buyer (and its assigns), and with respect to the
CISCO Receivables, other than the Adverse Claim in favor of CISCO Systems, Inc.,
(including, without limitation, the filing of all financing statements or other
similar instruments or documents necessary under the UCC (or any comparable law)
of all appropriate jurisdictions to perfect Buyer's interest in such
Receivables, Related Security and Collections and such other action, including
the stamping of all Contracts constituting "chattel paper" within the meaning of
Section 9-105 of the UCC with a notation describing such assignment, to perfect,
protect or more fully evidence the interest of Buyer as Buyer (or its assigns)
may reasonably request).
(h) Purchasers' Reliance. Such Originator acknowledges
that the Agent and the Purchasers are entering into the transactions
contemplated by the Purchase Agreement in reliance upon Buyer's identity as a
legal entity that is separate from such Originator and any Affiliates thereof.
Therefore, from and after the date of execution and delivery of this Agreement,
such Originator will take all reasonable steps including, without limitation,
all steps that Buyer or any assignee of Buyer may from time to time reasonably
request to maintain Buyer's identity as a separate legal entity and to make it
manifest to third parties that Buyer is an entity with assets and liabilities
distinct from those of such Originator and any Affiliates thereof and not just a
division of such Originator. Without limiting the generality of the foregoing
and in addition to the other covenants set forth herein, such Originator (i)
will not hold itself out to third parties as liable for the debts of Buyer nor
purport to own the Receivables and other assets acquired by Buyer, (ii) will
take all other actions necessary on its part to ensure that Buyer is at all
times in compliance with the covenants set forth in Section 7.1(i) of the
Purchase Agreement and (iii) will cause all tax liabilities arising in
connection with the transactions contemplated herein or otherwise to be
allocated between such Originator and Buyer on an arm's-length basis and in a
manner consistent with the procedures set forth in U.S. Treasury Regulations
ss.ss.1.1502-33(d) and 1.1552-1.
(i) Collections. Such Originator will cause (1) all
proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into
a Collection Account and (2) each Lock-Box and Collection Account to be subject
at all times to a Collection Account Agreement that is in full force and effect.
In the event any payments relating to Receivables are remitted directly to such
Originator or any Affiliate of such Originator, such Originator will remit (or
will cause all such payments to be remitted) directly to a Collection Bank for
deposit into a Collection Account within two (2) Business Days following receipt
thereof and, at all times prior to such remittance, such Originator will itself
hold or, if applicable, will cause such payments to be held in trust for the
exclusive benefit of Buyer and its assigns. Such Originator will transfer
exclusive ownership, dominion and control of each Lock-Box and Collection
Account owned by it to Buyer and, will not grant the right to take dominion and
control of any Lock-Box or Collection Account at a future time or upon the
occurrence of a future event to any Person, except to Buyer (or its assigns) as
contemplated by this Agreement and the Purchase Agreement.
(j) Taxes. Such Originator will file all tax returns and
reports required by law to be filed by it and promptly pay all taxes and
governmental charges at any time owing.
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(k) Insurance. Such Originator will maintain in effect,
or cause to be maintained in effect, at such Originator's own expense, such
casualty and liability insurance as such Originator deems appropriate in its
good faith business judgement. Buyer (or its assigns) and the Agent, for the
benefit of the Purchasers, shall be named as additional insureds with respect to
all such liability insurance maintained by such Originator. Such Originator will
pay or cause to be paid, the premiums therefor and deliver to Buyer and the
Agent evidence satisfactory to Buyer and the Agent of such insurance coverage.
Copies of each policy shall be furnished to Buyer, the Agent and any Purchaser
in certificated form upon Buyer's, the Agent's or such Purchaser's request. The
foregoing requirements shall not be construed to negate, reduce or modify, and
are in addition to, such Originator's obligations hereunder.
Section 4.2 Negative Covenants of Originators. Until the
date on which this Agreement terminates in accordance with its terms, each
Originator hereby covenants, as to itself, that:
(a) Name Change, Offices and Records. Such Originator
will not change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the UCC) or relocate its chief
executive office or any office where Records are kept unless it shall have: (i)
given Buyer (or its assigns) at least forty-five (45) days' prior written notice
thereof and (ii) delivered to Buyer (or its assigns) all financing statements,
instruments and other documents requested by Buyer (or its assigns) in
connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. Such
Originator will not add or terminate any bank as a Collection Bank, or make any
change in the instructions to Obligors regarding payments to be made to any
Lock-Box or Collection Account, unless Buyer (or its assigns) shall have
received, at least ten (10) days before the proposed effective date therefor,
(i) written notice of such addition, termination or change and (ii) with respect
to the addition of a Collection Bank or a Collection Account or Lock-Box, an
executed Collection Account Agreement with respect to the new Collection Account
or Lock-Box; provided, however, that such Originator may make changes in
instructions to Obligors regarding payments if such new instructions require
such Obligor to make payments to another existing Collection Account.
(c) Modifications to Contracts, Invoices and Credit and
Collection Policy. Such Originator will not amend, modify or otherwise make any
change to the Credit and Collection Policy or any Contract or Invoice that could
adversely affect the collectibility of the Receivables or decrease the credit
quality of any newly created Receivables. Except as otherwise permitted in its
capacity as Sub-Servicer pursuant to Article V of this Agreement and Article
VIII of the Purchase Agreement, Jabil will not extend, amend or otherwise modify
the terms of any Receivable or any Invoice related thereto other than in
accordance with the Credit and Collection Policy.
(d) Sales, Liens. Such Originator will not sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any Receivable (other than the CISCO Receivables), Related Security or
Collections, or upon or with respect to any Contract under which any Receivable
arises, or any
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Lock-Box or Collection Account, or assign any right to receive income with
respect thereto (other than, in each case, the creation of the interests therein
in favor of Buyer provided for herein), and such Originators will defend the
right, title and interest of Buyer in, to and under any of the foregoing
property, against all claims of third parties claiming through or under such
Originator. Such Originator shall not create or suffer to exist any mortgage,
pledge, security interest, encumbrance, lien, charge or other similar
arrangement on any of its inventory which gives rise to a Receivable. The
provisions of this Section 4.2(d) shall not become effective until Section
5.2(l) of the Jabil Loan Agreement is amended (or otherwise modified or waived
in writing) to permit such provisions.
(e) No Adverse Selection. To the extent that such
Originator has retained Receivables that would be Eligible Receivables but which
have not been transferred to Buyer hereunder, such Originator will not select
those Receivables to be transferred hereunder in any manner that materially
adversely affects Buyer.
(f) Accounting for Purchase. Such Originator will not,
and will not permit any Affiliate to, account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than the sale of its Receivables and the Related Security by such
Originator to Buyer or in any other respect account for or treat the
transactions contemplated hereby in any manner other than as a sale of such
Receivables and the Related Security by such Originator to Buyer except to the
extent that such transactions are not recognized on account of consolidated
financial reporting in accordance with generally accepted accounting principles.
ARTICLE V
ADMINISTRATION AND COLLECTION
Section 5.1 Designation of Sub-Servicer. Jabil has been
designated, and has agreed to act as, sub-servicer ("Sub-Servicer") for Buyer in
Buyer's capacity as Servicer pursuant to the terms of the Purchase Agreement and
to perform all of the duties and obligations of the Servicer set forth herein
and in the Purchase Agreement with respect to the Receivables, Related Security
related thereto and Collections thereof.
Section 5.2 Collection Accounts. Each Originator hereby
transfers to Buyer the exclusive ownership and control of each Lock-Box and
Collection Account owned by it. Each Originator hereby authorizes Buyer, and
agrees that Buyer shall be entitled to (i) endorse such Originator's name on
checks and other instruments representing Collections, (ii) enforce the
Receivables, the related Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all cash, checks and other
instruments constituting Collections of Receivables to come into the possession
of Buyer.
Section 5.3 Responsibilities of Jabil and Originators.
Anything herein to the contrary notwithstanding, the exercise by Buyer (or its
assignees) of its rights hereunder shall not release the Sub-Servicer, or either
Originator from any of their duties or obligations with respect to any
Receivables or under the related Contracts or Invoices. Buyer shall have no
obligation or
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liability with respect to any Receivables or related Contracts or Invoices, nor
shall Buyer be obligated to perform the obligations of Jabil or either
Originator.
Section 5.4 Servicing Fees. In consideration of the
Sub-Servicer's agreement to perform the duties and obligations of the Servicer
under the Purchase Agreement, Buyer hereby agrees that, so long as Jabil shall
continue to perform as Sub-Servicer hereunder, Buyer shall pay over to Jabil a
fee on the first calendar day of each month, in arrears for the immediately
preceding month, equal to the actual servicing costs of the Sub-Servicer during
such month plus 5% of such actual servicing costs, as compensation for its
servicing activities.
ARTICLE VI
TERMINATION EVENTS
Section 6.1 Termination Events. The occurrence of any
one or more of the following events shall constitute a Termination Event:
(a) Either Originator shall fail (i) to make any payment
or deposit required hereunder when due, (ii) to observe or perform any covenant
set forth in Section 4.2 and such failure shall continue for three (3)
consecutive Business Days or (iii) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clauses (i) and (ii) of this
paragraph (a)) or any other Transaction Document to which it is a party and such
failure shall continue for five (5) consecutive Business Days.
(b) Any material representation, warranty, certification
or statement made by either Originator in this Agreement, any other Transaction
Document or in any other document delivered pursuant hereto or thereto shall
prove to have been incorrect when made or deemed made.
(c) Failure of either Originator to pay any Indebtedness
when due, which individually or together with other such Indebtedness as to
which any such failures exists has an aggregate outstanding principal amount in
excess of $10,000,000; or the default by either Originator in the performance of
any term, provision or condition contained in any agreement under which any such
Indebtedness was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of either
Originator shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the date of maturity
thereof.
(d) Either Originator or any of its respective
Subsidiaries shall generally not pay its debts as such debts become due or shall
admit in writing its inability to pay its debts generally or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against either Originator or any of its respective Subsidiaries
seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
any substantial part of its property or (ii) either Originator or any of its
respective Subsidiaries shall
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take any corporate action to authorize any of the actions set forth in the
foregoing clause (i) of this subsection (d). For the purposes of this Section
6.1(d), "Subsidiary" shall exclude a Subsidiary which (i) is not engaged in any
business activity and (ii) has no Subsidiaries engaged in any business activity.
(e) One or more final judgments for the payment of money
in any amount of $10,000,000 or more individually or in the aggregate, shall be
entered against either Originator on claims not covered by insurance or as to
which the insurance carrier has denied its responsibility, and such judgment
shall continue unsatisfied and in effect for fifteen (15) consecutive days
without a stay of execution.
Section 6.2 Remedies. Upon the occurrence and during the
continuation of a Termination Event, Buyer may take any of the following
actions: (i) declare the Termination Date to have occurred, whereupon the
Termination Date shall forthwith occur, without demand, protest or further
notice of any kind, all of which are hereby expressly waived by Originators and
(ii) to the fullest extent permitted by applicable law, declare that the Default
Fee shall accrue with respect to any amounts then due and owing by Buyer to
Originators. The aforementioned rights and remedies shall be in addition to all
other rights and remedies of Buyer and its assigns available under this
Agreement, by operation of law, at equity or otherwise, all of which are hereby
expressly preserved, including, without limitation, all rights and remedies
provided under the UCC, all of which rights shall be cumulative.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnities by Originators. Without limiting
any other rights that Buyer may have hereunder or under applicable law, each
Originator, jointly and severally, hereby agrees to indemnify Buyer and its
assigns, officers, directors, agents and employees (each an "Indemnified Party")
from and against any and all damages, losses, claims, taxes, liabilities, costs,
expenses and for all other amounts payable, including reasonable attorneys' fees
(which attorneys may be employees of Buyer) and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, by Buyer of an
interest in the Receivables, excluding, however:
(i) Indemnified Amounts to the extent a final judgment of
a court of competent jurisdiction holds that such Indemnified Amounts resulted
from gross negligence or willful misconduct on the part of the Indemnified Party
seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes
losses in respect of Receivables that are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or
(iii) taxes imposed by the United States, by the
jurisdiction in which such Indemnified Party's principal executive office is
located, or by any other jurisdiction in the United States where such
Indemnified Party has established a taxable nexus other than in
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connection with the transactions contemplated by this Agreement, on or measured
by the overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the Intended Characterization, but
not including any such taxes resulting from the adoption after the date hereof
of any law or any amendment or change in the interpretation of any existing or
future law that subjects such Indemnified Party to taxes that would not be
imposed by any law or the interpretation thereof existing on the date hereof
(except for changes in the rate of such taxes);
provided, however, that nothing contained in this sentence shall limit the
liability of Originators or limit the recourse of Buyer to Originators for
amounts otherwise specifically provided to be paid by Originators under the
terms of this Agreement. Without limiting the generality of the foregoing
indemnification, each Originator shall, jointly and severally, indemnify Buyer
for Indemnified Amounts (including, without limitation, losses in respect of
uncollectible receivables, regardless of whether reimbursement therefor would
constitute recourse to Originator) relating to or resulting from:
(i) any representation or warranty made by such
Originator (or any officers of such Originator) under or in connection
with this Agreement, any other Transaction Document or any other
information or report delivered by such Originator pursuant hereto or
thereto, which shall have been false or incorrect when made or deemed
made;
(ii) the failure by such Originator, to comply with any
applicable law, rule or regulation with respect to any Receivable,
Contract or Invoice related thereto, or the nonconformity of any
Receivable, Contract or Invoice included therein with any such
applicable law, rule or regulation or any failure of such Originator to
keep or perform any of its obligations, express or implied, with
respect to any Contract or Invoice;
(iii) any failure of such Originator to perform its duties,
covenants or other obligations in accordance with the provisions of
this Agreement or any other Transaction Document;
(iv) any products liability or similar claim arising out
of or in connection with merchandise, insurance or services that are
the subject of any Contract, Invoice or any Receivable;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (including, without limitation, a defense based on
such Receivable or the related Invoice or Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections of Receivables at any
time with other funds;
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(vii) any investigation, litigation or proceeding related
to or arising from this Agreement or any other Transaction Document,
the transactions contemplated hereby, the use of the proceeds of the
Purchase, the ownership of the Receivables or any other investigation,
litigation or proceeding relating to such Originator in which any
Indemnified Party becomes involved as a result of any of the
transactions contemplated hereby;
(viii) any inability to litigate any claim against any
Obligor in respect of any Receivable as a result of such Obligor being
immune from civil and commercial law and suit on the grounds of
sovereignty or otherwise from any legal action, suit or proceeding;
(ix) any Termination Event described in Section 6.1(d);
(x) any failure to vest and maintain vested in Buyer, or
to transfer to Buyer, legal and equitable title to, and ownership of,
the Receivables, the Related Security and the Collections, free and
clear of any Adverse Claim;
(xi) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws or the
failure to stamp each Contract constituting "chattel paper" within the
meaning of Section 9-105 of the UCC with a notation describing the
assignments to Buyer with respect to any Receivable, the Related
Security and Collections with respect thereto, and the proceeds of any
thereof, whether at the time of the Purchase or at any subsequent time;
(xii) any action or omission by such Originator which
reduces or impairs the rights of Buyer with respect to any Receivable
or the value of any such Receivable;
(xiii) the operations of Jabil Mexico and the enforcement of
the Agent's and the Purchaser's rights under the Estoppel Letter; and
(xiv) any attempt by any Person to void the Purchase
hereunder under statutory provisions or common law or equitable action.
Section 7.2 Other Costs and Expenses. Originators shall
pay to Buyer on demand all costs and out-of-pocket expenses in connection with
the preparation, execution, delivery and administration of this Agreement, the
transactions contemplated hereby and the other documents to be delivered
hereunder. Originators shall pay to Buyer on demand any and all costs and
expenses of Buyer, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other documents
delivered hereunder and in connection with any restructuring or workout of this
Agreement or such documents, or the administration of this Agreement following a
Termination Event.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waivers and Amendments.
(a) No failure or delay on the part of Buyer (or its
assigns) in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any waiver of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing signed by each Originator and
Buyer and, to the extent required under the Purchase Agreement, the Agent and
the Financial Institutions or the Required Financial Institutions.
Section 8.2 Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at such other
address or telecopy number as such Person may hereafter specify for the purpose
of notice to each of the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telecopy, upon the receipt
thereof, (ii) if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage prepaid or (iii)
if given by any other means, when received at the address specified in this
Section 8.2.
Section 8.3 Protection of Ownership Interests of Buyer.
(a) Each Originator agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and documents, and
take all actions, that may be necessary or desirable, or that Buyer (or its
assigns) may request, to perfect, protect or more fully evidence the Purchaser
Interests, or to enable Buyer (or its assigns) to exercise and enforce their
rights and remedies hereunder. At any time, Buyer (or its assigns) may, at the
applicable Originator's sole cost and expense, direct such Originator to notify
the Obligors of Receivables originated by such Originator of the ownership
interests of Buyer under this Agreement and may also direct that payments of all
amounts due or that become due under any or all Receivables be made directly to
Buyer or its designee. Such Originator shall, at the request of Buyer (or its
assigns) withhold the identity of Buyer in any such notification.
(b) If either Originator fails to perform any of its
obligations hereunder, Buyer (or its assigns) may (but shall not be required to)
perform, or cause performance of, such obligation, and Buyer's (or such
assigns') costs and expenses incurred in connection therewith shall be payable
by the applicable Originator as provided in Section 7.2. Each Originator
irrevocably authorizes Buyer (and its assigns) at any time and from time to time
in the sole discretion of Buyer (or its assigns), and appoints Buyer (and its
assigns) as its attorney(es)-in-fact, to act on behalf of such Originator (i) to
execute on behalf of such Originator as debtor and to file financing statements
necessary or desirable in Buyer's (or its assigns') sole discretion to perfect
and to maintain the perfection and priority of the interest of Buyer in the
Receivables and
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(ii) to file a carbon, photographic or other reproduction of this Agreement or
any financing statement with respect to the Receivables as a financing statement
in such offices as Buyer (or its assigns) in their sole discretion deem
necessary or desirable to perfect and to maintain the perfection and priority of
Buyer's interests in the Receivables. This appointment is coupled with an
interest and is irrevocable.
Section 8.4 Confidentiality.
(a) Each Originator shall maintain and shall cause each
of its employees and officers to maintain the confidentiality of this Agreement
and the other confidential proprietary information with respect to the Agent and
Falcon and their respective businesses obtained by it or them in connection with
the structuring, negotiating and execution of the transactions contemplated
herein, except that (i) such Originator and its officers and employees may
disclose such information to such Originator's external accountants and
attorneys and as required by any applicable law or order of any judicial or
administrative proceeding and (ii) such Originator and its officers and
employees may disclose the Transaction Documents, other than the Fee Letter and
the Concentration Limit Letter Agreement (or any information contained in the
Fee Letter or the Concentration Limit Letter Agreement that may also be
contained in any other Transaction Document), to any institution providing
financial services to such Originator, pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to the Agent (as
assignee of Buyer).
(b) Anything herein to the contrary notwithstanding, each
Originator hereby consents to the disclosure of any nonpublic information with
respect to it (i) to Buyer, the Agent, the Financial Institutions or Falcon by
each other, (ii) by Buyer, the Agent or the Purchasers to any prospective or
actual assignee or participant of any of them or (iii) by the Agent to any
rating agency, Commercial Paper dealer or provider of a surety, guaranty or
credit or liquidity enhancement to Falcon or any entity organized for the
purpose of purchasing, or making loans secured by, financial assets for which
Bank One acts as the administrative agent and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing. In
addition, the Purchasers and the Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction, request or order
of any judicial, administrative or regulatory authority or proceedings (whether
or not having the force or effect of law).
Section 8.5 Bankruptcy Petition. Each Originator and
Buyer each hereby covenants and agrees that, prior to the date that is one year
and one day after the payment in full of all outstanding senior Indebtedness of
Falcon, it will not institute against, or join any other Person in instituting
against, Falcon any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any state of the United States.
Section 8.6 CHOICE OF LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF NEW YORK.
Section 8.7 CONSENT TO JURISDICTION. EACH ORIGINATOR
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
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UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT EXECUTED BY SUCH ORIGINATOR PURSUANT TO THIS AGREEMENT AND SUCH
ORIGINATOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER (OR ITS
ASSIGNS) TO BRING PROCEEDINGS AGAINST EACH ORIGINATOR IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY EITHER ORIGINATOR AGAINST BUYER (OR ITS
ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY
DOCUMENT EXECUTED BY SUCH ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT
ONLY IN A COURT IN CHICAGO, ILLINOIS.
Section 8.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY ORIGINATORS PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
Section 8.9 Integration; Binding Effect; Survival of
Terms.
(a) This Agreement, the Subordinated Notes, the
Subscription Agreement and each Collection Account Agreement contain the final
and complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof superseding
all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns (including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by either
Originator pursuant to Article II, (ii) the indemnification and payment
provisions of Article VII, and Section 8.5 shall be continuing and shall survive
any termination of this Agreement.
Section 8.10 Counterparts; Severability; Section
References. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement. Any provisions of this
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Agreement which are prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to "Article," "Section," "Schedule"
or "Exhibit" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
set forth herein.
JABIL CIRCUIT, INC.
By:
-------------------------------------------
Name:
Title:
Address: 10560 9th Street North
St. Petersburg, FL 33716
Attn: Forbes Alexander,
Treasurer
cc: General Counsel
Fax: (727) 579-8529
JABIL CIRCUIT OF TEXAS, LP
By: Jabil Texas Holdings, LLC,
its sole General Partner
By: Jabil Circuit, Inc.
its sole Manager and Member
By:
-------------------------------------------
Name:
Title:
Address: 10800 Roosevelt Blvd.
St. Petersburg, FL 33716
Attn: Forbes Alexander
cc: General Counsel
Fax: (727) 579-8529
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JABIL CIRCUIT FINANCIAL, INC.
By:
-------------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 12119
Wilmington, DE 19801
Attn: Linda S. Bubacz,
Assistant Treasurer
Fax: (302) 552-3128
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EXHIBIT I
Definitions
This is Exhibit I to the Agreement (as hereinafter defined).
As used in the Agreement and the Exhibits, Schedules and Annexes thereto,
capitalized terms have the meanings set forth in this Exhibit I (such meanings
to be equally applicable to the singular and plural forms thereof). If a
capitalized term is used in the Agreement, or any Exhibit, Schedule or Annex
thereto, and not otherwise defined therein or in this Exhibit I, such term shall
have the meaning assigned thereto in Exhibit I to the Purchase Agreement.
"Agent" has the meaning set forth in the Preliminary
Statements to the Agreement.
"Agreement" means this Agreement.
"Authorized Officer" means, with respect to an Originator, its
corporate controller or chief financial officer.
"Base Rate" means a rate per annum equal to the corporate base
rate, prime rate or base rate of interest, as applicable, announced by Bank One
from time to time, changing when and as such rate changes.
"Business Day" means any day on which banks are not authorized
or required to close in New York, New York or Chicago, Illinois and The
Depository Trust Company of New York is open for business.
"Buyer" has the meaning set forth in the preamble to the
Agreement.
"Calculation Period" means each calendar month or portion
thereof which elapses during the term of the Agreement. The first Calculation
Period shall commence on the date of the Purchase of Receivables hereunder and
the final Calculation Period shall terminate on the Termination Date.
"Change of Control" means (i) the acquisition by any Person,
or two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the outstanding shares of
voting stock of Jabil, (ii) Jabil shall cease to own, free and clear of all
Adverse Claims, directly or indirectly, all of the outstanding partnership
interests in Jabil Texas or (iii) Jabil shall cease to own directly, free and
clear of all Adverse Claims, all of the outstanding shares of voting stock of
the Buyer.
"CISCO Receivable" means a Receivable for which the Obligor is
CISCO Systems, Inc.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all yield,
<PAGE> 31
Finance Charges or other related amounts accruing in respect thereof and all
cash proceeds of Related Security with respect to such Receivable.
"Contract" means, with respect to any Receivables, any and all
instruments, agreements or other writings (other than the related Invoice)
pursuant to which such Receivable arises or which evidences such Receivable.
"Credit and Collection Policy" means the Originators' credit
and collection policies and practices relating to Contracts, Invoices and
Receivables existing on the date hereof and summarized in Exhibit V, as modified
from time to time in accordance with the Agreement.
"Default Fee" means a per annum rate of interest equal to the
sum of (i) the Base Rate, plus (ii) 2% per annum.
"Dilutions" means, at any time, the aggregate amount of
reductions or cancellations described in Section 1.3(a) of the Agreement.
"Discount Factor" means a percentage calculated to provide
Buyer with a reasonable return on its investment in the Receivables after taking
account of (i) the time value of money based upon the anticipated dates of
collection of the Receivables and the cost to Buyer of financing its investment
in the Receivables during such period and (ii) the risk of nonpayment by the
Obligors. Originators and Buyer may agree from time to time to change the
Discount Factor based on changes in one or more of the items affecting the
calculation thereof, provided that any change to the Discount Factor shall take
effect as of the commencement of a Calculation Period, shall apply only
prospectively and shall not affect the Purchase Price payment in respect of
Purchase which occurred during any Calculation Period ending prior to the
Calculation Period during which Originators and Buyer agree to make such change.
"Falcon" has the meaning set forth in the Preliminary
Statements to the Agreement.
"Federal Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy", as amended and any successor statute thereto.
"Finance Charges" means, with respect to a Receivable, any
finance, interest, late payment charges or similar charges owing by an Obligor
pursuant to the related Contract and Invoice.
"Intended Characterization" means, for income tax purposes,
the characterization of the acquisition by the Purchasers of Purchaser Interests
under the Purchase Agreement as a loan or loans by the Purchasers to Buyer
secured by the Receivables, the Related Security and the Collections.
"Invoice" means, with respect to any Receivable, an invoice in
substantially the form of one of the form invoices set forth on Exhibit VI
hereto or otherwise approved by the Buyer (and its assigns) in writing.
2
<PAGE> 32
"Jabil" means Jabil Circuit, Inc., a Delaware corporation,
together with its successors and permitted assigns.
"Jabil Loan Agreement" means that certain Amended and Restated
Loan Agreement dated as of April 7, 2000 among Jabil, certain borrowing
subsidiaries, the banks named therein, Bank One, NA, as Administrative Agent
thereunder, and SunTrust Bank, as Syndication Agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Jabil Mexico" means Jabil Circuit de Mexico, S.A. de C.V., a
corporation organized under the laws of Mexico as a Sociedad Anonima de Capital
Variable.
"Jabil Texas" means Jabil Circuit of Texas, LP, a Florida
limited partnership, together with its successors and permitted assigns.
"JCFI" means Jabil Circuit Financial, Inc., a Delaware
corporation, together with its successors and permitted assigns.
"Material Adverse Effect" means a material adverse effect on
(i) the financial condition or operations of either Originator and its
respective Subsidiaries, (ii) the ability of either Originator to perform its
respective obligations under the Agreement or any other Transaction Document,
(iii) the legality, validity or enforceability of the Agreement or any other
Transaction Document, (iv) either Originator's, Buyer's, the Agent's or any
Purchaser's interest in the Receivables generally or in any significant portion
of the Receivables, the Related Security or Collections with respect thereto, or
(v) the collectibility of the Receivables generally or of any material portion
of the Receivables.
"Net Value" means, as of any date of determination, an amount
equal to the sum of (i) the aggregate Outstanding Balance of the Receivables at
such time, minus (ii) the sum of (A) the aggregate Capital outstanding at such
time, plus (B) the Aggregate Reserves.
"Net Worth" means as of the last Business Day of each
Calculation Period preceding any date of determination, the excess, if any, of
(a) the aggregate Outstanding Balance of the Receivables at such time, over (b)
the sum of (i) the aggregate Capital outstanding at such time, plus (ii) the
aggregate outstanding principal balance of the Subordinated Loans (including any
Subordinated Loan proposed to be made on the date of determination).
"Obligor" means a Person obligated to make payments pursuant
to a Contract and/or Invoice.
"Original Balance" means, with respect to any Receivable, the
Outstanding Balance of such Receivable on the date it was purchased by Buyer.
"Originator" and "Originators" have the meanings set forth in
the preamble to the Agreement.
"Potential Termination Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute a Termination
Event.
3
<PAGE> 33
"Purchase" means the purchase under the Agreement by Buyer
from the applicable Originator of the Receivables originated by such Originator,
the Related Security and the Collections related thereto, together with all
related rights in connection therewith.
"Purchase Agreement" has the meaning set forth in the
Preliminary Statements to the Agreement.
"Purchase Price" means, with respect to any Purchase on any
date, the aggregate price to be paid by Buyer to the applicable Originator for
such Purchase in accordance with Section 1.2 of the Agreement for the
Receivables, Collections and Related Security being sold to Buyer by such
Originator on such date, which price shall equal (i) the product of (x) the
Original Balance of such Receivables, multiplied by (y) one minus the Discount
Factor then in effect, minus (ii) any Purchase Price Credits to be credited
against the Purchase Price otherwise payable in accordance with Section 1.3 of
the Agreement.
"Purchase Price Credit" has the meaning set forth in Section
1.3 of the Agreement.
"Purchaser" means Falcon or a Financial Institution, as
applicable.
"Receivable" means all indebtedness and other obligations owed
to the applicable Originator (at the time it arises, and before giving effect to
any transfer or conveyance under the Agreement) or Buyer (after giving effect to
the transfers under the Agreement) or in which the Buyer or the applicable
Originator has a security interest or other interest, including, without
limitation, any indebtedness, obligation or interest constituting an account,
chattel paper, instrument or general intangible, arising in connection with the
sale of goods or the rendering of services by the applicable Originator and
further includes, without limitation, the obligation to pay any Finance Charges
with respect thereto. Indebtedness and other rights and obligations arising from
any one transaction, including, without limitation, indebtedness and other
rights and obligations represented by an individual Invoice, shall constitute a
Receivable separate from a Receivable consisting of the indebtedness and other
rights and obligations arising from any other transaction; provided further,
that any indebtedness, rights or obligations referred to in the immediately
preceding sentence shall be a Receivable regardless of whether the account
debtor or the applicable Originator treats such indebtedness, rights or
obligations as a separate payment obligation.
"Records" means, with respect to any Receivable, all
Contracts, Invoices, and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) relating to such
Receivable, any Related Security therefor and the related Obligor.
"Related Security" means, with respect to any Receivable:
(i) all of the applicable Originator's interest in the
inventory and goods (including returned or repossessed inventory or goods), if
any, the sale, financing or lease of which by the applicable Originator gave
rise to such Receivable, and all insurance contracts with respect thereto,
4
<PAGE> 34
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements and security agreements
describing any collateral securing such Receivable,
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to such
Receivable or otherwise,
(iv) all service contracts and other contracts and
agreements associated with such Receivable,
(v) all Records (other than Contracts) related to such
Receivable and all rights (with respect to enforcement or otherwise) under the
Contracts related to such Receivable, and
(vi) all proceeds of any of the foregoing.
"Required Capital Amount" means, (i) as of any date prior to
the date of the initial Incremental Purchase under the Purchase Agreement,
$20,000 and (ii) as of any date of determination on or after the date of the
initial Incremental Purchase under the Purchase Agreement, an amount equal to
the greater of (A) the twenty-four month rolling average of Dilutions and (B)
three percent (3%) of the Purchase Limit under the Purchase Agreement at such
time.
"Settlement Date" means the fifth (5th) Business Day of each
month, or such day as the Buyer shall otherwise determine, and if such day is
not a Business Day, the next succeeding Business Day.
"Subordinated Loan" has the meaning set forth in Section
1.2(a) of the Agreement.
"Subordinated Note" means a promissory note in substantially
the form of Exhibit VII hereto as more fully described in Section 1.2 of the
Agreement, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Subscription Agreement" means that certain Stockholder and
Subscription Agreement, dated as of even date herewith, between Jabil and Buyer,
substantially in the form of Exhibit VIII hereto.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or by
one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, limited liability company,
joint venture or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.
"Termination Date" means the earliest to occur of (i) the date
on which the Buyer specifies upon at least 10 days' written notice, (ii) the
Business Day specified in a written notice
5
<PAGE> 35
from Buyer to Originators following the occurrence of any Termination Event, and
(iii) the date on which the Buyer and the Originators mutually agree this
Agreement shall terminate; provided, that in no event shall the Termination Date
occur prior to the date on which the Purchase Agreement terminates.
"Termination Event" has the meaning set forth in Section 6.1
of the Agreement.
"Transaction Documents" means, collectively, this Agreement,
each Collection Account Agreement, the Subordinated Notes, the Subscription
Agreement, the Performance Undertaking, the Estoppel Letter and all other
instruments, documents and agreements executed and delivered in connection
herewith.
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles. All terms
used in Article 9 of the UCC in the State of Illinois, and not specifically
defined herein, are used herein as defined in such Article 9.
6
<PAGE> 36
EXHIBIT II
Places of Business; Locations of Records;
Federal Employer Identification Number(s); Other Names
JABIL CIRCUIT, INC.
Federal Employer Identification number: 38-1886260.
Records are located at the places of business below:
FLORIDA
10560 Ninth Street North
St. Petersburg, Florida 33716
SAN JOSE, CALIFORNIA
30 Great Oaks Boulevard
San Jose, California 95119
IDAHO
1303 East Central Drive
Meridian, Idaho 83642
MASSACHUSETTS
495R Billerica Avenue
Billerica, Massachusetts 01862
MICHIGAN
1700 Atlantic Boulevard
Metro North Technology Park
Auburn Hills, Michigan 48326
GUADALAJARA, MEXICO
C/O Jabil Circuit de Mexico SA de CV
Avenida Valdepenas #1993
Lomas de Zapopan 45130
Zapopan, Jalisco, Mexico
JABIL CIRCUIT OF TEXAS, LP
Federal Employer Identification number: 59-3583292
Records are located at the places of business below:
10800 Roosevelt Blvd
St, Petersburg, FL 33716
Places of Business:
<PAGE> 37
EXHIBIT III
Lock-boxes; Collection Accounts; Collection Banks
<TABLE>
<CAPTION>
Collection Bank Lockbox address Related Collection Account
--------------- --------------- --------------------------
<S> <C> <C>
Bank One, NA PO Box 70914 55-95649 Jabil Circuit Financial, Inc. (Michigan)
Chicago, IL 60673-0914
Bank One, NA PO Box 70870 55-95533 Jabil Circuit Financial, Inc. (Florida)
Chicago, IL 60673-0870
Bank One, NA PO Box 93303 51-00046 Jabil Circuit Financial, Inc. (Guadalajara)
Chicago, IL 60673-3303
Bank One, NA PO Box 21011 51-23046 Jabil Circuit Financial, Inc. (Idaho)
Chicago IL 60673-1011
Bank One, NA PO Box 13506 10-10800 Jabil Circuit Financial, Inc. (Massachusetts)
Newark, NJ 07188-0506
Bank One, NA PO Box 100716 51-34919 Jabil Circuit Financial, Inc. (California)
Pasadena, CA 91189-0716
</TABLE>
<PAGE> 38
EXHIBIT IV
Form of Compliance Certificate
This Compliance Certificate is furnished pursuant to that
certain Receivables Sale Agreement dated as of August 10, 2000, between Jabil
Circuit, Inc. ("Jabil"), Jabil Circuit of Texas, LP ("Jabil Texas") and Jabil
Circuit Financial, Inc. ("Buyer") (the "Agreement"). Capitalized terms used and
not otherwise defined herein are used with the meanings attributed thereto in
the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ______________ of [Jabil][Jabil
Texas].
2. I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed review of the
transactions and conditions of [Jabil][Jabil Texas] and its Subsidiaries during
the accounting period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes a Termination Event or a Potential Termination Event, as each
such term is defined under the Agreement, during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth below.
4. Described below are the exceptions, if any, to
paragraph 3 by listing, in detail, the nature of the condition or event, the
period during which it has existed and the action which [Jabil][Jabil Texas] has
taken, is taking, or proposes to take with respect to each such condition or
event:
The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _____ day of _______,
20__.
------------------------------------
[Name]
<PAGE> 39
EXHIBIT V
Credit and Collection Policy
(Attached.)
<PAGE> 40
EXHIBIT VI
Forms of Invoice
(Attached.)
<PAGE> 41
EXHIBIT VII
Form of Subordinated Note
(Attached.)
<PAGE> 42
SUBORDINATED NOTE
August 10, 2000
1. Note. FOR VALUE RECEIVED, the undersigned, Jabil
Circuit Financial, Inc., a Delaware corporation ("JCFI"), hereby unconditionally
promises to pay to the order of [Jabil Circuit, Inc., a Delaware corporation
("Jabil")], in lawful money of the United States of America and in immediately
available funds, on the date following the Termination Date which is one year
and one day after the date on which (i) the Outstanding Balance of all
Receivables sold under the "Sale Agreement" referred to below has been reduced
to zero and (ii) [Jabil] has paid to the Buyer all indemnities, adjustments and
other amounts which may be owed thereunder in connection with the Purchases (the
"Collection Date"), the aggregate unpaid principal sum outstanding of all
"Subordinated Loans" made from time to time by Jabil to JCFI pursuant to and in
accordance with the terms of that certain Receivables Sale Agreement dated as of
August 10, 2000 between [Jabil] and JCFI (as amended, restated, supplemented or
otherwise modified from time to time, the "Sale Agreement"). Reference to
Section 1.2 of the Sale Agreement is hereby made for a statement of the terms
and conditions under which the loans evidenced hereby have been and will be
made. All terms which are capitalized and used herein and which are not
otherwise specifically defined herein shall have the meanings ascribed to such
terms in the Sale Agreement.
2. Interest. JCFI further promises to pay interest on
the outstanding unpaid principal amount hereof from the date hereof until
payment in full hereof at a rate equal to the Base Rate; provided, however, that
if JCFI shall default in the payment of any principal hereof, JCFI promises to
pay, on demand, interest at the rate of the Base Rate plus 2.00% per annum on
any such unpaid amounts, from the date such payment is due to the date of actual
payment. Interest shall be payable on the first Business Day of each month in
arrears; provided, however, that JCFI may elect on the date any interest payment
is due hereunder to defer such payment and upon such election the amount of
interest due but unpaid on such date shall constitute principal under this
Subordinated Note. The outstanding principal of any loan made under this
Subordinated Note shall be due and payable on the Collection Date and may be
repaid or prepaid at any time without premium or penalty.
3. Principal Payments. [Jabil] is authorized and
directed by JCFI to enter on the grid attached hereto, or, at its option, in its
books and records, the date and amount of each loan made by it which is
evidenced by this Subordinated Note and the amount of each payment of principal
made by JCFI, and absent manifest error, such entries shall constitute prima
facie evidence of the accuracy of the information so entered; provided that
neither the failure of Jabil to make any such entry or any error therein shall
expand, limit or affect the obligations of JCFI hereunder.
4. Subordination. The indebtedness evidenced by this
Subordinated Note is subordinated to the prior payment in full of all of JCFI's
recourse obligations under that certain Receivables Purchase Agreement dated as
of August 10, 2000 by and among JCFI, as seller and as servicer, Jabil, as
sub-servicer, Falcon Asset Securitization Corporation ("Falcon"), certain
entities party thereto as "Financial Institutions" and Bank One, NA (Main Office
Chicago), as Agent (the "Agent") for Falcon and the Financial Institutions (as
amended, restated,
<PAGE> 43
supplemented or otherwise modified from time to time, the "Purchase Agreement").
The subordination provisions contained herein are for the direct benefit of, and
may be enforced by, the Agent and the Purchasers and/or any of their respective
assignees (collectively, the "Senior Claimants") under the Purchase Agreement.
Until the date on which all "Capital" outstanding under the Purchase Agreement
has been repaid in full and all other obligations of JCFI, the Servicer and the
Sub-Servicer thereunder and under the "Fee Letter" referenced therein (all such
obligations, collectively, the "Senior Claim") have been indefeasibly paid and
satisfied in full, Jabil shall not demand, accelerate, sue for, take, receive or
accept from JCFI, directly or indirectly, in cash or other property or by
set-off or any other manner (including, without limitation, from or by way of
collateral) any payment or security of all or any of the indebtedness under this
Subordinated Note or exercise any remedies or take any action or proceeding to
enforce the same; provided, however, that (i) Jabil hereby agrees that it will
not institute against JCFI any proceeding of the type described in Section
6.1(d) of the Sale Agreement unless and until the Collection Date has occurred
and (ii) nothing in this paragraph shall restrict JCFI from paying, or Jabil
from requesting, any payments under this Subordinated Note so long as JCFI is
not required under the Purchase Agreement to set aside for the benefit of, or
otherwise pay over to, the funds used for such payments to any of the Senior
Claimants and further provided that the making of such payment would not
otherwise violate the terms and provisions of the Purchase Agreement. Should any
payment, distribution or security or proceeds thereof be received by Jabil in
violation of the immediately preceding sentence, Jabil agrees that such payment
shall be segregated, received and held in trust for the benefit of, and deemed
to be the property of, and shall be immediately paid over and delivered to the
Agent for the benefit of the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of any
proceeding of the type described in Section 6.1(d) of the Sale Agreement
involving JCFI as debtor, then and in any such event the Senior Claimants shall
receive payment in full of all amounts due or to become due on or in respect of
Capital and the Senior Claim (including "CP Costs" and "Yield" as defined and as
accruing under the Purchase Agreement after the commencement of any such
proceeding, whether or not any or all of such CP Costs or Yield is an allowable
claim in any such proceeding) before Jabil is entitled to receive payment on
account of this Subordinated Note, and to that end, any payment or distribution
of assets of JCFI of any kind or character, whether in cash, securities or other
property, in any applicable insolvency proceeding, which would otherwise be
payable to or deliverable upon or with respect to any or all indebtedness under
this Subordinated Note, is hereby assigned to and shall be paid or delivered by
the Person making such payment or delivery (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly to the Agent
for application to, or as collateral for the payment of, the Senior Claim until
such Senior Claim shall have been paid in full and satisfied.
6. Amendments. This Subordinated Note shall not be
amended or modified except in accordance with Section 8.1 of the Sale Agreement.
The terms of this Subordinated Note may not be amended or otherwise modified
without the prior written consent of the Agent for the benefit of the
Purchasers.
7. GOVERNING LAW. THIS SUBORDINATED NOTE SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE LAWS AND DECISIONS OF THE
<PAGE> 44
STATE OF NEW YORK. WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
SUBORDINATED NOTE.
8. Waivers. All parties hereto, whether as makers,
endorsers, or otherwise, severally waive presentment for payment, demand,
protest and notice of dishonor. Jabil additionally expressly waives all notice
of the acceptance by any Senior Claimant of the subordination and other
provisions of this Subordinated Note and expressly waives reliance by any Senior
Claimant upon the subordination and other provisions herein provided.
9. Assignment. This Subordinated Note may not be
assigned, pledged or otherwise transferred to any party without the prior
written consent of the Agent, and any such attempted transfer shall be void.
JABIL CIRCUIT FINANCIAL, INC.
By:
----------------------------------------
Title:
<PAGE> 45
Schedule
to
SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Date Amount of Amount of Unpaid
Subordinated Principal Principal Notation made
Loan Paid Balance by
<S> <C> <C> <C> <C>
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
- ---------------- --------------------------- ------------------- ------------------- -------------------
</TABLE>
<PAGE> 46
EXHIBIT VIII
Form of Subscription Agreement
(Attached.)
5
<PAGE> 47
SCHEDULE A
PENDING LITIGATION
None.
<PAGE> 48
SCHEDULE B
DOCUMENTS TO BE DELIVERED TO BUYER
ON OR PRIOR TO THE PURCHASE
(Attached.)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>3
<FILENAME>g65591ex10-16.txt
<DESCRIPTION>RECEIVABLES PURCHASE AGREEMENT
<TEXT>
<PAGE> 1
Exhibit 10.16
RECEIVABLES PURCHASE AGREEMENT
dated as of August 10, 2000
Among
JABIL CIRCUIT FINANCIAL, INC.,
as Seller and as Servicer,
JABIL CIRCUIT, INC.,
as Sub-Servicer,
FALCON ASSET SECURITIZATION CORPORATION
and
BANK ONE, NA (MAIN OFFICE CHICAGO)
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
PURCHASE ARRANGEMENTS.................................................................1
Section 1.1 Purchase Facility............................................................1
Section 1.2 Increases....................................................................2
Section 1.3 Decreases....................................................................2
Section 1.4 Payment Requirements.........................................................2
ARTICLE II
PAYMENTS AND COLLECTIONS..............................................................4
Section 2.1 Payments.....................................................................4
Section 2.2 Collections Prior to Amortization............................................5
Section 2.3 Collections Following Amortization...........................................5
Section 2.4 Application of Collections...................................................6
Section 2.5 Payment Recission............................................................6
Section 2.6 Maximum Purchaser Interests..................................................6
Section 2.7 Clean Up Call................................................................7
ARTICLE III
FALCON FUNDING........................................................................7
Section 3.1 CP Costs.....................................................................7
Section 3.2 CP Costs Payments............................................................7
Section 3.3 Calculation of CP Costs......................................................7
ARTICLE IV
FINANCIAL INSTITUTION FUNDING.........................................................7
Section 4.1 Financial Institution Funding................................................7
Section 4.2 Yield Payments...............................................................8
Section 4.3 Selection and Continuation of Tranche Periods................................8
Section 4.4 Financial Institution Discount Rates.........................................8
Section 4.5 Suspension of the LIBO Rate..................................................8
ARTICLE V
REPRESENTATIONS AND WARRANTIES........................................................9
Section 5.1 Representations and Warranties of Seller.....................................9
Section 5.2 Representations and Warranties of Sub-Servicer..............................13
Section 5.3 Financial Institution Representations and Warranties........................14
ARTICLE VI
CONDITIONS OF PURCHASES..............................................................15
Section 6.1 Conditions Precedent to Initial Incremental Purchase........................15
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
Section 6.2 Conditions Precedent to All Purchases and Reinvestments.....................15
ARTICLE VII
COVENANTS............................................................................16
Section 7.1 Affirmative Covenants of the Seller Parties.................................16
Section 7.2 Negative Covenants of the Seller Parties....................................23
ARTICLE VIII
ADMINISTRATION AND COLLECTION........................................................24
Section 8.1 Designation of Servicer and Sub-Servicer....................................24
Section 8.2 Duties of Servicer..........................................................25
Section 8.3 Collection Notices..........................................................26
Section 8.4 Responsibilities of Seller..................................................27
Section 8.5 Reports.....................................................................27
Section 8.6 Servicing Fees..............................................................27
ARTICLE IX
AMORTIZATION EVENTS..................................................................27
Section 9.1 Amortization Events.........................................................27
Section 9.2 Remedies....................................................................29
ARTICLE X
INDEMNIFICATION......................................................................30
Section 10.1 Indemnities by The Seller Parties...........................................30
Section 10.2 Increased Cost and Reduced Return...........................................33
Section 10.3 Other Costs and Expenses....................................................33
Section 10.4 Allocations.................................................................34
ARTICLE XI
THE AGENT............................................................................34
Section 11.1 Authorization and Action....................................................34
Section 11.2 Delegation of Duties........................................................34
Section 11.3 Exculpatory Provisions......................................................35
Section 11.4 Reliance by Agent...........................................................35
Section 11.5 Non-Reliance on Agent and Other Purchasers..................................35
Section 11.6 Reimbursement and Indemnification...........................................36
Section 11.7 Agent in its Individual Capacity............................................36
Section 11.8 Successor Agent.............................................................36
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS..........................................................36
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
Section 12.1 Assignments.................................................................36
Section 12.2 Participations..............................................................37
ARTICLE XIII
LIQUIDITY FACILITY...................................................................38
Section 13.1 Transfer to Financial Institutions..........................................38
Section 13.2 Transfer Price Reduction Yield..............................................38
Section 13.3 Payments to Falcon..........................................................38
Section 13.4 Limitation on Commitment to Purchase from Falcon............................38
Section 13.5 Defaulting Financial Institutions...........................................39
Section 13.6 Terminating Financial Institutions..........................................39
ARTICLE XIV
MISCELLANEOUS........................................................................40
Section 14.1 Waivers and Amendments......................................................40
Section 14.2 Notices.....................................................................41
Section 14.3 Ratable Payments............................................................42
Section 14.4 Protection of Ownership Interests of the Purchasers.........................42
Section 14.5 Confidentiality.............................................................43
Section 14.6 Bankruptcy Petition.........................................................43
Section 14.7 Limitation of Liability.....................................................43
Section 14.8 CHOICE OF LAW...............................................................44
Section 14.9 CONSENT TO JURISDICTION.....................................................44
Section 14.10 WAIVER OF JURY TRIAL........................................................44
Section 14.11 Integration; Binding Effect; Survival of Terms..............................44
Section 14.12 Counterparts; Severability; Section References..............................45
Section 14.13 Bank One Roles..............................................................45
Section 14.14 Characterization............................................................45
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit I Definitions
Exhibit II Form of Purchase Notice
Exhibit III Places of Business of the Seller Parties; Locations of Records;
Federal Employer Identification Number(s)
Exhibit IV Names of Collection Banks; Collection Accounts
Exhibit V Form of Compliance Certificate
Exhibit VI Form of Collection Account Agreement
Exhibit VII Form of Assignment Agreement
Exhibit VIII Credit and Collection Policy
Exhibit IX Form of Invoice(s)
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TABLE OF CONTENTS
(continued)
Exhibit X Form of Monthly Report
Exhibit XI Form of Performance Undertaking
Schedule A Commitments of Financial Institutions
Schedule B Closing Documents
Schedule C Pending Litigation
Schedule D Excluded Receivables
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JABIL CIRCUIT FINANCIAL, INC.
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of August 10, 2000 is
among Jabil Circuit Financial, Inc., a Delaware corporation ("JCFI"), as seller
("Seller") and as initial servicer ("Servicer"), Jabil Circuit, Inc., a Delaware
corporation, as sub-servicer ("Sub-Servicer", Sub-Servicer, Servicer and Seller
are referred to herein as the "Seller Parties" and each a "Seller Party"), the
entities listed on Schedule A to this Agreement (together with any of their
respective successors and assigns hereunder, the "Financial Institutions"),
Falcon Asset Securitization Corporation ("Falcon") and Bank One, NA (Main Office
Chicago), as agent for the Purchasers hereunder or any successor agent hereunder
(together with its successors and assigns hereunder, the "Agent"). Unless
defined elsewhere herein, capitalized terms used in this Agreement shall have
the meanings assigned to such terms in Exhibit I.
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Purchaser Interests to the
Purchasers from time to time.
Falcon may, in its absolute and sole discretion, purchase Purchaser
Interests from Seller from time to time.
In the event that Falcon declines to make any purchase, the Financial
Institutions shall, at the request of Seller, purchase Purchaser Interests from
time to time. In addition, the Financial Institutions have agreed to provide a
liquidity facility to Falcon in accordance with the terms hereof.
Bank One, NA (Main Office Chicago) has been requested and is willing to
act as Agent on behalf of Falcon and the Financial Institutions in accordance
with the terms hereof.
ARTICLE I
PURCHASE ARRANGEMENTS
Section 1.1 Purchase Facility.
(a) Upon the terms and subject to the conditions hereof,
Seller may, at its option, sell and assign Purchaser Interests to the Agent for
the benefit of one or more of the Purchasers. In accordance with the terms and
conditions set forth herein, Falcon may, at its option, instruct the Agent to
purchase on behalf of Falcon, or if Falcon shall decline to purchase, the Agent
shall purchase, on behalf of the Financial Institutions, Purchaser Interests
from time to time in an aggregate amount not to exceed at such time the lesser
of (i) the Purchase Limit and (ii) the aggregate amount of the Commitments
during the period from the date hereof to but not including the Facility
Termination Date.
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(b) Seller may, upon at least 10 Business Days' notice to
the Agent, terminate in whole or reduce in part, ratably among the Financial
Institutions, the unused portion of the Purchase Limit; provided that each
partial reduction of the Purchase Limit shall be in an amount equal to
$5,000,000 or an integral multiple thereof.
Section 1.2 Increases. Seller shall provide the Agent
with at least two (2) Business Days' prior notice in a form set forth as Exhibit
II hereto of each Incremental Purchase (a "Purchase Notice"). Each Purchase
Notice shall be subject to Section 6.2 hereof and, except as set forth below,
shall be irrevocable and shall specify the requested Purchase Price (which shall
not be less than $1,000,000) and date of purchase (which, in the case of any
Incremental Purchase (after the initial Incremental Purchase hereunder), shall
only be on a Settlement Date unless otherwise consented to by the Agent) and, in
the case of an Incremental Purchase to be funded by the Financial Institutions,
the requested Discount Rate and Tranche Period. Following receipt of a Purchase
Notice, the Agent will determine whether Falcon agrees to make the purchase. If
Falcon declines to make a proposed purchase, Seller may cancel the Purchase
Notice or, in the absence of such a cancellation, the Incremental Purchase of
the Purchaser Interest will be made by the Financial Institutions. On the date
of each Incremental Purchase, upon satisfaction of the applicable conditions
precedent set forth in Article VI, Falcon or the Financial Institutions, as
applicable, shall deposit to the Facility Account, in immediately available
funds, no later than 12:00 noon (Chicago time), an amount equal to (i) in the
case of Falcon, the aggregate Purchase Price of the Purchaser Interests Falcon
is then purchasing or (ii) in the case of a Financial Institution, such
Financial Institution's Pro Rata Share of the aggregate Purchase Price of the
Purchaser Interests the Financial Institutions are purchasing.
Section 1.3 Decreases. Seller shall provide the Agent
with prior written notice in conformity with the Required Notice Period (a
"Reduction Notice") of any proposed reduction of Aggregate Capital from
Collections. Such Reduction Notice shall designate (i) the date (the "Proposed
Reduction Date") upon which any such reduction of Aggregate Capital shall occur
(which date shall give effect to the applicable Required Notice Period), and
(ii) the amount of Aggregate Capital to be reduced which shall be applied
ratably to the Purchaser Interests of Falcon and the Financial Institutions in
accordance with the amount of Capital (if any) owing to Falcon, on the one hand,
and the amount of Capital (if any) owing to the Financial Institutions (ratably,
based on their respective Pro Rata Shares), on the other hand (the "Aggregate
Reduction"). Only one (1) Reduction Notice shall be outstanding at any time. No
Aggregate Reduction will be made following the occurrence of the Amortization
Date without the consent of the Agent.
Section 1.4 Payment Requirements. All amounts to be paid
or deposited by any Seller Party pursuant to any provision of this Agreement
shall be paid or deposited in accordance with the terms hereof no later than
11:00 a.m. (Chicago time) on the day when due in immediately available funds,
and if not received before 11:00 a.m. (Chicago time) shall be deemed to be
received on the next succeeding Business Day. If such amounts are payable to a
Purchaser they shall be paid to the Agent, for the account of such Purchaser, at
1 Bank One Plaza, Chicago, Illinois 60670 until otherwise notified by the Agent.
Upon notice to Seller, the Agent may debit the Facility Account for all amounts
due and payable hereunder. All computations of Yield, per annum fees calculated
as part of any CP Costs, per annum fees
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hereunder and per annum fees under the Fee Letter shall be made on the basis of
a year of 360 days for the actual number of days elapsed. If any amount
hereunder shall be payable on a day which is not a Business Day, such amount
shall be payable on the next succeeding Business Day.
Section 1.5 Pledged Collateral. (a) As security for the
obligations and liabilities hereunder of Seller now or hereafter existing or
arising, including, without limitation, the obligations of Seller under Section
2.1 and Article X, Seller hereby pledges and makes a collateral assignment, and
grants a security interest, to the Agent for the benefit of the Purchasers in
all of Seller's right, title and interest in and to (i) the Demand Note, (ii)
all additional indebtedness from time to time owed to Seller by Jabil and
related to the Demand Note, and the instruments evidencing such indebtedness,
(iii) all interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
the Demand Note or such other indebtedness, and (iv) all proceeds of any and all
of the foregoing collateral (the items described in clauses (i) through (iv)
being, collectively, the "Pledged Collateral").
(b) All instruments representing or evidencing the
Pledged Collateral shall be delivered to and held by or on behalf of the Agent
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Agent. Seller shall not at any
time after the occurrence of a Potential Amortization Event or an Amortization
Event ask for, sue or receive any payment on the Pledged Collateral (whether in
cash or other assets, by exercise of any right of set-off or otherwise) without
the prior written consent of the Agent. In any event, Seller shall not receive
any payment on the Pledged Collateral by allowing Jabil to exercise a right of
set-off if (i) after giving effect to such payment: (A) a Potential Amortization
Event or an Amortization Event would occur or (B) the Required Capital Amount
(as such term is defined in the Receivables Sale Agreement) would not be
maintained by the Seller or (ii) such payment would violate the terms of the
Subordinated Note (as such term is defined in the Receivables Sale Agreement )
issued by the Seller to Jabil. In the event that Seller shall at any time after
the occurrence of a Potential Amortization Event or an Amortization Event
receive any payment on or with respect to any Pledged Collateral, Seller shall
immediately so notify the Agent and shall forthwith deliver the same to the
Agent in the form received to be held by the Agent as additional Pledged
Collateral or to be applied in accordance with the terms of this Agreement.
Seller agrees that it shall not, at any time, without the prior written consent
of the Agent, (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
(ii) create or permit to exist any Adverse Claim upon or with respect to any of
the Pledged Collateral, except for the security interest under this Agreement,
or (iii) amend, waive, forgive, terminate or otherwise modify any of the Pledged
Collateral.
(c) Seller represents and warrants as follows: (i) the
Demand Note has been duly authorized, issued and delivered by Jabil, and the
Demand Note (and each other instrument comprising a part of the Pledged
Collateral that shall have been issued by Jabil) is the legal, valid and binding
obligation of Jabil thereof, and Jabil is not in default thereunder; (ii) Seller
is the legal and beneficial owner of the Pledged Collateral free and clear of
any Adverse Claim except for the security interest created by this Agreement;
(iii) the pledge of the Pledged Collateral pursuant to this Agreement creates a
valid and perfected first priority security interest in the
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Pledged Collateral, securing the payment of the obligations and liabilities of
Seller hereunder, and (iv) no consent of any other Person and no authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (A) for the pledge by Seller of the
Pledged Collateral pursuant to this Agreement, (B) for the perfection or
maintenance of the security interest created hereby (including the first
priority nature of such security interest) or (C) for the exercise by the Agent
of the rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement.
(d) Seller agrees that at any time and from time to time,
at the expense of Seller, Seller will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Agent to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
(e) Upon the occurrence and during the continuance of an
Amortization Event or Potential Amortization Event, (i) the Agent shall have all
rights and remedies of a secured creditor under the UCC and other applicable law
in respect of the Pledged Collateral and (ii) the Agent may at any time make
demand on Jabil or any other obligor in respect of any of the Pledged Collateral
for payment of the Pledged Collateral. Any amounts received by the Agent in the
exercise of its rights under this Section 1.5(e) may, at the option of the
Agent, be applied to any obligations or liabilities of Seller then due and
payable or be held by the Agent as additional Pledged Collateral hereunder.
(f) This Agreement shall create a continuing security
interest in the Pledged Collateral and shall remain in full force and effect
until the later of (i) the reduction to zero of the Aggregate Unpaids and all
other amounts payable under this Agreement and (ii) the termination of this
Agreement.
ARTICLE II
PAYMENTS AND COLLECTIONS
Section 2.1 Payments. Notwithstanding any limitation on
recourse contained in this Agreement, Seller shall promptly pay to the Agent
when due, for the account of the relevant Purchaser or Purchasers on a full
recourse basis, (i) such fees as set forth in the Fee Letter (which fees shall
be sufficient to pay all fees owing to the Financial Institutions), (ii) all CP
Costs, (iii) all amounts payable as Yield, (iv) all amounts payable as Deemed
Collections (which shall be immediately due and payable by Seller and applied to
reduce outstanding Aggregate Capital hereunder in accordance with Sections 2.2
and 2.3 hereof), (v) all amounts payable to reduce the Seller Interest, if
required, pursuant to Section 2.6, (vi) all amounts payable pursuant to Article
X, if any, (vii) all Servicer costs and expenses, including the Servicing Fee,
in connection with servicing, administering and collecting the Receivables,
(viii) all Broken Funding Costs and (ix) all Default Fees (collectively, the
"Obligations"). If any Person fails to pay any of the Obligations when due, such
Person agrees to pay, on demand, the Default Fee in respect thereof until paid.
Notwithstanding the foregoing, no provision of this Agreement or the Fee Letter
shall require the payment or permit the collection of any amounts hereunder in
excess
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of the maximum permitted by applicable law. If at any time Seller receives any
Collections or is deemed to receive any Collections, Seller shall immediately
pay such Collections or Deemed Collections to the Servicer for application in
accordance with the terms and conditions hereof and, at all times prior to such
payment, such Collections or Deemed Collections shall be held in trust by Seller
for the exclusive benefit of the Purchasers and the Agent.
Section 2.2 Collections Prior to Amortization. Prior to
the Amortization Date, any Collections and/or Deemed Collections received by the
Servicer shall be set aside and held in trust by the Servicer for the payment of
any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in
this Section 2.2. If at any time any Collections are received by the Servicer
prior to the Amortization Date, (i) the Servicer shall set aside the Termination
Percentage of Collections evidenced by the Purchaser Interests of each
Terminating Financial Institution and (ii) Seller hereby requests and the
Purchasers (other than any Terminating Financial Institutions) hereby agree to
make, simultaneously with such receipt, a reinvestment (each a "Reinvestment")
with that portion of the balance of each and every Collection received by the
Servicer that is part of any Purchaser Interest (other than any Purchaser
Interests of Terminating Financial Institutions), such that after giving effect
to such Reinvestment, the amount of Capital of such Purchaser Interest
immediately after such receipt and corresponding Reinvestment shall be equal to
the amount of Capital immediately prior to such receipt. On each Settlement Date
prior to the occurrence of the Amortization Date, the Servicer shall remit to
the Agent's account the amounts set aside during the preceding Settlement Period
that have not been subject to a Reinvestment and apply such amounts (if not
previously paid in accordance with Section 2.1) first, to reduce unpaid
Obligations and second, to reduce the Capital of all Purchaser Interests of
Terminating Financial Institutions, applied ratably to each Terminating
Financial Institution according to its respective Termination Percentage. If
such Capital and Obligations shall be reduced to zero, any additional
Collections received by the Servicer (i) if applicable, shall be remitted to the
Agent's account no later than 11:00 a.m. (Chicago time) to the extent required
to fund any Aggregate Reduction on such Settlement Date and (ii) any balance
remaining thereafter shall be remitted from the Servicer to Seller on such
Settlement Date. Each Terminating Financial Institution shall be allocated a
ratable portion of Collections from the date of any assignment by Falcon
pursuant to Section 13.6 (the "Termination Date") until such Terminating
Financing Institution's Capital shall be paid in full. This ratable portion
shall be calculated on the Termination Date of each Terminating Financial
Institution as a percentage equal to (i) Capital of such Terminating Financial
Institution outstanding on its Termination Date, divided by (ii) the Aggregate
Capital outstanding on such Termination Date (the "Termination Percentage").
Each Terminating Financial Institution's Termination Percentage shall remain
constant prior to the Amortization Date. On and after the Amortization Date,
each Termination Percentage shall be disregarded, and each Terminating Financial
Institution's Capital shall be reduced ratably with all Financial Institutions
in accordance with Section 2.3.
Section 2.3 Collections Following Amortization. On the
Amortization Date and on each day thereafter, the Servicer shall set aside and
hold in trust, for the holder of each Purchaser Interest, all Collections
received on such day and an additional amount for the payment of any accrued and
unpaid Obligations owed by Seller and not previously paid by Seller in
accordance with Section 2.1. On and after the Amortization Date, the Servicer
shall, at any time upon the request from time to time by (or pursuant to
standing instructions from) the Agent
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(i) remit to the Agent's account the amounts set aside pursuant to the preceding
sentence, and (ii) apply such amounts to reduce the Capital associated with each
such Purchaser Interest and any other Aggregate Unpaids.
Section 2.4 Application of Collections. If there shall
be insufficient funds on deposit for the Servicer to distribute funds in payment
in full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as
applicable), the Servicer shall distribute funds:
first, to the payment of the Servicer's reasonable
out-of-pocket costs and expenses in connection with servicing,
administering and collecting the Receivables, including the Servicing
Fee, if Seller or one of its Affiliates is not then acting as the
Servicer,
second, to the reimbursement of the Agent's costs of
collection and enforcement of this Agreement,
third, to the Agent for the benefit of the Purchasers for the
ratable payment of all accrued CP Costs, Yield and fees payable
pursuant to the Fee Letter,
fourth, (to the extent applicable) to the ratable reduction of
the Aggregate Capital (without regard to any Termination Percentage),
fifth, for the ratable payment of all other unpaid
Obligations, provided that to the extent such Obligations relate to the
payment of Servicer costs and expenses, including the Servicing Fee,
when Seller or one of its Affiliates is acting as the Servicer, such
costs and expenses will not be paid until after the payment in full of
all other Obligations, and
sixth, after the Aggregate Unpaids have been indefeasibly
reduced to zero, to Seller.
Collections applied to the payment of Aggregate Unpaids shall
be distributed in accordance with the aforementioned provisions, and, giving
effect to each of the priorities set forth in this Section 2.4, shall be shared
ratably (within each priority) among the Agent and the Purchasers in accordance
with the amount of such Aggregate Unpaids owing to each of them in respect of
each such priority.
Section 2.5 Payment Recission. No payment of any of the
Aggregate Unpaids shall be considered paid or applied hereunder to the extent
that, at any time, all or any portion of such payment or application is
rescinded by application of law or judicial authority, or must otherwise be
returned or refunded for any reason. Seller shall remain obligated for the
amount of any payment or application so rescinded, returned or refunded, and
shall promptly pay to the Agent (for application to the Person or Persons who
suffered such recission, return or refund) the full amount thereof, plus the
Default Fee from the date of any such recission, return or refunding.
Section 2.6 Maximum Purchaser Interests. Seller shall
ensure that the Purchaser Interests of the Purchasers shall at no time exceed in
the aggregate 100%. If the aggregate of the Purchaser Interests of the
Purchasers exceeds 100%, Seller shall pay to the Agent within one (1) Business
Day an amount to be applied to reduce the Aggregate Capital (as
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allocated by the Agent), such that after giving effect to such payment the
aggregate of the Purchaser Interests equals or is less than 100%.
Section 2.7 Clean Up Call. In addition to Seller's
rights pursuant to Section 1.3, Seller shall have the right (after providing
written notice to the Agent in accordance with the Required Notice Period), at
any time following the reduction of the Aggregate Capital to a level that is
less than 10.0% of the original Purchase Limit, to repurchase from the
Purchasers all, but not less than all, of the then outstanding Purchaser
Interests. The purchase price in respect thereof shall be an amount equal to the
Aggregate Unpaids through the date of such repurchase, payable in immediately
available funds. Such repurchase shall be without representation, warranty or
recourse of any kind by, on the part of, or against any Purchaser or the Agent.
ARTICLE III
FALCON FUNDING
Section 3.1 CP Costs. Seller shall pay CP Costs with
respect to the Capital associated with each Purchaser Interest of Falcon for
each day that any Capital in respect of such Purchaser Interest is outstanding.
Each Purchaser Interest funded substantially with Pooled Commercial Paper will
accrue CP Costs each day on a pro rata basis, based upon the percentage share
the Capital in respect of such Purchaser Interest represents in relation to all
assets held by Falcon and funded substantially with Pooled Commercial Paper.
Section 3.2 CP Costs Payments. On each Settlement Date,
Seller shall pay to the Agent (for the benefit of Falcon) an aggregate amount
equal to all accrued and unpaid CP Costs in respect of the Capital associated
with all Purchaser Interests of Falcon for the immediately preceding Accrual
Period in accordance with Article II.
Section 3.3 Calculation of CP Costs. On the third
Business Day immediately preceding each Settlement Date, Falcon shall calculate
the aggregate amount of CP Costs for the applicable Accrual Period and shall
notify Seller of such aggregate amount.
ARTICLE IV
FINANCIAL INSTITUTION FUNDING
Section 4.1 Financial Institution Funding. Each
Purchaser Interest of the Financial Institutions shall accrue Yield for each day
during its Tranche Period at either the LIBO Rate or the Base Rate in accordance
with the terms and conditions hereof. Until Seller gives notice to the Agent of
another Discount Rate in accordance with Section 4.4, the initial Discount Rate
for any Purchaser Interest transferred to the Financial Institutions pursuant to
the terms and conditions hereof shall be the Base Rate. If the Financial
Institutions acquire by assignment from Falcon any Purchaser Interest pursuant
to Article XIII, each Purchaser Interest so assigned shall each be deemed to
have a new Tranche Period commencing on the date of any such assignment.
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Section 4.2 Yield Payments. On the Settlement Date for
each Purchaser Interest of the Financial Institutions, Seller shall pay to the
Agent (for the benefit of the Financial Institutions) an aggregate amount equal
to the accrued and unpaid Yield for the entire Tranche Period of each such
Purchaser Interest in accordance with Article II.
Section 4.3 Selection and Continuation of Tranche
Periods.
(a) With consultation from (and approval by) the Agent,
Seller shall from time to time request Tranche Periods for the Purchaser
Interests of the Financial Institutions, provided that, if at any time the
Financial Institutions shall have a Purchaser Interest, Seller shall always
request Tranche Periods such that at least one Tranche Period shall end on the
date specified in clause (A) of the definition of Settlement Date.
(b) Seller or the Agent, upon notice to and consent by
the other received at least three (3) Business Days prior to the end of a
Tranche Period (the "Terminating Tranche") for any Purchaser Interest, may,
effective on the last day of the Terminating Tranche: (i) divide any such
Purchaser Interest into multiple Purchaser Interests, (ii) combine any such
Purchaser Interest with one or more other Purchaser Interests that have a
Terminating Tranche ending on the same day as such Terminating Tranche or (iii)
combine any such Purchaser Interest with a new Purchaser Interests to be
purchased on the day such Terminating Tranche ends, provided, that in no event
may a Purchaser Interest of Falcon be combined with a Purchaser Interest of the
Financial Institutions.
Section 4.4 Financial Institution Discount Rates. Seller
may select the LIBO Rate or the Base Rate for each Purchaser Interest of the
Financial Institutions. Seller shall by 11:00 a.m. (Chicago time): (i) at least
three (3) Business Days prior to the expiration of any Terminating Tranche with
respect to which the LIBO Rate is being requested as a new Discount Rate and
(ii) at least one (1) Business Day prior to the expiration of any Terminating
Tranche with respect to which the Base Rate is being requested as a new Discount
Rate, give the Agent irrevocable notice of the new Discount Rate for the
Purchaser Interest associated with such Terminating Tranche. Until Seller gives
notice to the Agent of another Discount Rate, the initial Discount Rate for any
Purchaser Interest transferred to the Financial Institutions pursuant to the
terms and conditions hereof shall be the Base Rate.
Section 4.5 Suspension of the LIBO Rate. (a) If any
Financial Institution notifies the Agent that it has determined that funding its
Pro Rata Share of the Purchaser Interests of the Financial Institutions at a
LIBO Rate would violate any applicable law, rule, regulation, or directive of
any governmental or regulatory authority, whether or not having the force of
law, or that (i) deposits of a type and maturity appropriate to match fund its
Purchaser Interests at such LIBO Rate are not available or (ii) such LIBO Rate
does not accurately reflect the cost of acquiring or maintaining a Purchaser
Interest at such LIBO Rate, then the Agent shall suspend the availability of
such LIBO Rate and require Seller to select the Base Rate for any Purchaser
Interest accruing Yield at such LIBO Rate.
(b) If less than all of the Financial Institutions give a
notice to the Agent pursuant to Section 4.5(a), each Financial Institution which
gave such a notice shall be obliged, at the
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request of Seller, Falcon or the Agent, to assign all of its rights and
obligations hereunder to (i) another Financial Institution or (ii) another
funding entity nominated by Seller or the Agent that is acceptable to Falcon and
willing to participate in this Agreement through the Liquidity Termination Date
in the place of such notifying Financial Institution; provided that (i) the
notifying Financial Institution receives payment in full, pursuant to an
Assignment Agreement, of an amount equal to such notifying Financial
Institution's Pro Rata Share of the Capital and Yield owing to all of the
Financial Institutions and all accrued but unpaid fees and other costs and
expenses payable in respect of its Pro Rata Share of the Purchaser Interests of
the Financial Institutions, and (ii) the replacement Financial Institution
otherwise satisfies the requirements of Section 12.1(b).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Seller.
Seller hereby represents and warrants to the Agent and the Purchasers as of the
date hereof and as of the date of each Incremental Purchase and the date of each
Reinvestment that:
(a) Corporate Existence and Power. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation. Seller is duly qualified to do business and is in
good standing as a foreign corporation, and has and holds all corporate power
and all governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is
conducted.
(b) Power and Authority; Due Authorization, Execution and
Delivery. The execution and delivery by Seller of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and Seller's use of the proceeds of
purchases made hereunder, are within its corporate powers and authority and have
been duly authorized by all necessary corporate action on its part. This
Agreement and each other Transaction Document to which Seller is a party have
been duly executed and delivered by Seller.
(c) No Conflict. The execution and delivery by Seller of
this Agreement and each other Transaction Document to which it is a party, and
the performance of its obligations hereunder and thereunder do not contravene or
violate (i) its certificate or articles of incorporation or by-laws, (ii) any
law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or by which it or any
of its property is bound, or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on any assets of Seller or its
Subsidiaries (except as created hereunder) and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law.
(d) Governmental Authorization. Other than the filing of
the financing statements required hereunder, no authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution
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and delivery by Seller of this Agreement and each other Transaction Document to
which it is a party and the performance of its obligations hereunder and
thereunder.
(e) Actions, Suits. There are no actions, suits or
proceedings pending, or to the best of Seller's knowledge, threatened, against
or affecting Seller, or any of its properties, in or before any court,
arbitrator or other body. Seller is not in default with respect to any order of
any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other
Transaction Document to which Seller is a party constitute the legal, valid and
binding obligations of Seller enforceable against Seller in accordance with
their respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Accuracy of Information. All information heretofore
furnished by Seller or any of its Affiliates to the Agent or the Purchasers for
purposes of or in connection with this Agreement, any of the other Transaction
Documents or any transaction contemplated hereby or thereby is, and all such
information hereafter furnished by Seller or any of its Affiliates to the Agent
or the Purchasers (including all Monthly Reports) will be, true and accurate in
every material respect on the date such information is stated or certified and
does not and will not contain any material misstatement of fact or omit to state
a material fact or any fact necessary to make the statements contained therein
not misleading.
(h) Use of Proceeds. No proceeds of any purchase
hereunder will be used (i) for a purpose that violates, or would be inconsistent
with, Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System from time to time or (ii) to acquire any security in any
transaction which is subject to Section 12, 13 or 14 of the Securities Exchange
Act of 1934, as amended.
(i) Good Title. Immediately prior to each purchase
hereunder, Seller shall be the legal and beneficial owner of the Receivables and
Related Security with respect thereto, free and clear of any Adverse Claim,
except as created by the Transaction Documents. There have been duly filed all
financing statements or other similar instruments or documents necessary under
the UCC (or any comparable law) of all appropriate jurisdictions to perfect
Seller's ownership interest in each Receivable, its Collections and the Related
Security. Each Contract which is "chattel paper" within the meaning of Section
9-105 of the UCC of all applicable jurisdictions has been stamped to reflect the
fact that such Contract has been assigned to the Seller.
(j) Perfection. This Agreement, together with the filing
of the financing statements contemplated hereby, is effective to, and shall,
upon each purchase hereunder, transfer to the Agent for the benefit of the
relevant Purchaser or Purchasers (and the Agent for the benefit of such
Purchaser or Purchasers shall acquire from Seller) a valid and perfected first
priority undivided percentage ownership or security interest in each Receivable
existing or hereafter arising and in the Related Security and Collections with
respect thereto, free and clear
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of any Adverse Claim, except as created by the Transactions Documents. There
have been duly filed all financing statements or other similar instruments or
documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect the Agent's (on behalf of the Purchasers) ownership or
security interest in the Receivables, the Related Security and the Collections.
Each Contract which is "chattel paper" within the meaning of Section 9-105 of
the UCC of all applicable jurisdictions has been stamped to reflect the fact
that such Contract has been assigned to the Agent for the benefit of the
Purchasers.
(k) Places of Business and Locations of Records. The
principal places of business and chief executive office of Seller and the
offices where it keeps all of its Records are located at the address(es) listed
on Exhibit III or such other locations of which the Agent has been notified in
accordance with Section 7.2(a) in jurisdictions where all action required by
Section 14.4(a) has been taken and completed. Seller's Federal Employer
Identification Number is correctly set forth on Exhibit III.
(l) Collections. The conditions and requirements set
forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and
duly performed. The names and addresses of all Collection Banks, together with
the account numbers of the Collection Accounts of Seller at each Collection Bank
and the post office box number of each Lock-Box, are listed on Exhibit IV.
Seller has not granted any Person, other than the Agent as contemplated by this
Agreement, dominion and control of any Lock-Box or Collection Account, or the
right to take dominion and control of any such Lock-Box or Collection Account at
a future time or upon the occurrence of a future event.
(m) Material Adverse Effect. Since the date of this
Agreement, no event has occurred that would have a Material Adverse Effect.
(n) Names. In the past five (5) years, Seller has not
used any corporate names, trade names or assumed names other than the name in
which it has executed this Agreement.
(o) Ownership of Seller. Jabil owns, directly or
indirectly, 100% of the issued and outstanding capital stock of Seller, free and
clear of any Adverse Claim. Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of Seller.
(p) Not a Holding Company or an Investment Company.
Seller is not a "holding company" or a "subsidiary holding company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or any successor statute. Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or any successor statute.
(q) Compliance with Law. Seller has complied in all
respects with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject. Each Receivable,
together with the Contract and Invoice related thereto, does not contravene any
laws, rules or regulations applicable thereto (including, without
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limitation, laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy), and no part of such Contract or Invoice is in
violation of any such law, rule or regulation.
(r) Compliance with Credit and Collection Policy. Seller
has complied in all material respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract and Invoice, and has not made
any change to such Credit and Collection Policy, other than as permitted under
Section 7.2(c), and in compliance with the notification requirements in Section
7.1(a)(vii).
(s) Payments to Originators. With respect to each
Receivable transferred to Seller under the Receivables Sale Agreement, Seller
has given reasonably equivalent value to the applicable Originator in
consideration therefor and such transfer was not made for or on account of an
antecedent debt. No transfer by either Originator of any Receivable under the
Receivables Sale Agreement is or may be voidable under any section of the
Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.
(t) Enforceability of Invoice. Each Invoice with respect
to each Receivable is effective to create, and has created, a legal, valid and
binding obligation of the related Obligor to pay the Outstanding Balance of the
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the
Net Receivables Balance as an Eligible Receivable on the date of its purchase
under the Receivables Sale Agreement was an Eligible Receivable on such purchase
date.
(v) Net Receivables Balance. Seller has determined that,
immediately after giving effect to each purchase hereunder, the Net Receivables
Balance is at least equal to the sum of (i) the Aggregate Capital, plus (ii) the
Aggregate Reserves.
(w) Accounting. The manner in which Seller accounts for
the transactions contemplated by this Agreement and the Receivables Sale
Agreement does not jeopardize the true sale analysis.
(x) Purpose. Seller has determined that, from a business
viewpoint, the purchase of the Receivables and related interests thereto from
the Originators under the Receivables Sale Agreement, and the sale of Purchaser
Interests to the Purchasers and the other transactions contemplated herein, are
in the best interests of Seller.
(y) Other Representations and Warranties. Seller has
determined that this Agreement is effective to transfer to the Agent and the
Purchasers, as assignees of Seller, the full benefit of and a direct claim
against each of Jabil and each Originator in respect of each representation or
warranty made by the Jabil and each Originator under any Transaction Document.
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Section 5.2 Representations and Warranties of
Sub-Servicer. Sub-Servicer hereby represents and warrants to the Agent and the
Purchasers as of the date hereof and as of the date of each Incremental Purchase
and the date of each Reinvestment that:
(a) Corporate Existence and Power. Sub-Servicer is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation. Sub-Servicer is duly qualified to do business and
is in good standing as a foreign corporation, and has and holds all corporate
power and all governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its business is
conducted.
(b) Power and Authority; Due Authorization, Execution and
Delivery. The execution and delivery by Sub-Servicer of this Agreement and each
other Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder are within its corporate powers and
authority and have been duly authorized by all necessary corporate action on its
part. This Agreement and each other Transaction Document to which Sub-Servicer
is a party has been duly executed and delivered by Sub-Servicer.
(c) No Conflict. The execution and delivery by
Sub-Servicer of this Agreement and each other Transaction Document to which it
is a party, and the performance of its obligations hereunder and thereunder do
not contravene or violate (i) its certificate or articles of incorporation or
by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or by which it or any of its property is bound, or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on any assets of Sub-Servicer or its Subsidiaries (except as created hereunder)
and no transaction contemplated hereby requires compliance with any bulk sales
act or similar law.
(d) Governmental Authorization. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution and delivery by
Sub-Servicer of this Agreement and each other Transaction Document to which it
is a party and the performance of its obligations hereunder and thereunder.
(e) Actions, Suits. Other than as disclosed on Schedule
C, there are no actions, suits or proceedings pending, or to the best of
Sub-Servicer's knowledge, threatened, against or affecting Sub-Servicer, or any
of its properties, in or before any court, arbitrator or other body that could
reasonably be expected to have a Material Adverse Effect. Sub-Servicer is not in
default with respect to any order of any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other
Transaction Document to which Sub-Servicer is a party constitute the legal,
valid and binding obligations of Sub-Servicer enforceable against Sub-Servicer
in accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
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(g) Accuracy of Information. All information heretofore
furnished by Sub-Servicer or any of its Affiliates to the Agent or the
Purchasers for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by Sub-Servicer or any of its
Affiliates to the Agent or the Purchasers (including all Monthly Reports) will
be, true and accurate in every material respect on the date such information is
stated or certified and does not and will not contain any material misstatement
of fact or omit to state a material fact or any fact necessary to make the
statements contained therein not misleading.
(h) Collections. The conditions and requirements set
forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and
duly performed. The names and addresses of all Collection Banks, together with
the account numbers of the Collection Accounts at each Collection Bank and the
post office box number of each Lock-Box, are listed on Exhibit IV.
(i) Material Adverse Effect. Since August 31, 1999, no
event has occurred that would have a Material Adverse Effect.
(j) Compliance with Law. Sub-Servicer has complied in all
respects with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject. Each Receivable,
together with the Contract and Invoice related thereto, does not contravene any
laws, rules or regulations applicable to the collection and servicing thereof
(including, without limitation, laws, rules and regulations relating to fair
credit billing, fair credit reporting, fair debt collection practices and
privacy), and no part of such Contract or Invoice is in violation of any such
law, rule or regulation.
(k) Compliance with Credit and Collection Policy.
Sub-Servicer has complied in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract and
Invoice, and has not made any change to such Credit and Collection Policy, other
than as permitted under Section 7.2(c), and in compliance with the notification
requirements in Section 7.1(a)(vii).
Section 5.3 Financial Institution Representations and
Warranties. Each of the Agent and each Financial Institution hereby represents
and warrants, as to itself, to the Seller, the Agent and Falcon that:
(a) Existence and Power. Such Person is a corporation or
a banking association duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, and has all
corporate power to perform its obligations hereunder.
(b) No Conflict. The execution and delivery by such
Person of this Agreement and the performance of its obligations hereunder are
within its corporate powers, have been duly authorized by all necessary
corporate action, do not contravene or violate (i) its certificate or articles
of incorporation or association or by-laws, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or
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decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on its assets. This Agreement has
been duly authorized, executed and delivered by such Person.
(c) Governmental Authorization. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution and delivery by
such Person of this Agreement and the performance of its obligations hereunder.
(d) Binding Effect. This Agreement constitutes the legal,
valid and binding obligation of such Person enforceable against such Person in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally and by general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law).
ARTICLE VI
CONDITIONS OF PURCHASES
Section 6.1 Conditions Precedent to Initial Incremental
Purchase. The initial Incremental Purchase of a Purchaser Interest under this
Agreement is subject to the conditions precedent that the Agent shall have
received on or before the date of such purchase those documents listed on
Schedule B and the Agent shall have received all fees and expenses required to
be paid on such date pursuant to the terms of this Agreement and the Fee Letter.
Section 6.2 Conditions Precedent to All Purchases and
Reinvestments. Each purchase of a Purchaser Interest (other than pursuant to
Section 13.1) and each Reinvestment shall be subject to the further conditions
precedent that in the case of each such purchase or Reinvestment: (a) the
Servicer or the Sub-Servicer shall have delivered to the Agent on or prior to
the date of such purchase, in form and substance satisfactory to the Agent, all
Monthly Reports as and when due under Section 8.5 and upon the Agent's request,
the Servicer or the Sub-Servicer shall have delivered to the Agent at least
three (3) days prior to such purchase or Reinvestment an interim Monthly Report
showing the amount of Eligible Receivables; (b) the Facility Termination Date
shall not have occurred; (c) the Agent shall have received such other approvals,
opinions or documents as it may reasonably request and (d) on the date of each
such Incremental Purchase or Reinvestment, the following statements shall be
true (and acceptance of the proceeds of such Incremental Purchase or
Reinvestment shall be deemed a representation and warranty by Seller that such
statements are then true):
(i) the representations and warranties set forth in
Section 5.1 are true and correct on and as of the date of such
Incremental Purchase or Reinvestment as though made on and as of such
date;
(ii) no event has occurred and is continuing, or would
result from such Incremental Purchase or Reinvestment, that will
constitute an Amortization Event, and no event has occurred and is
continuing, or would result from such Incremental Purchase or
Reinvestment, that would constitute a Potential Amortization Event; and
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(iii) the Aggregate Capital does not exceed the Purchase
Limit and the aggregate Purchaser Interests do not exceed 100%.
It is expressly understood that each Reinvestment shall, unless otherwise
directed by the Agent or any Purchaser, occur automatically on each day that the
Servicer shall receive any Collections without the requirement that any further
action be taken on the part of any Person and notwithstanding the failure of
Seller to satisfy any of the foregoing conditions precedent in respect of such
Reinvestment. The failure of Seller to satisfy any of the foregoing conditions
precedent in respect of any Reinvestment shall give rise to a right of the
Agent, which right may be exercised at any time on demand of the Agent, to
rescind the related purchase and direct Seller to pay to the Agent for the
benefit of the Purchasers an amount equal to the Collections prior to the
Amortization Date that shall have been applied to the affected Reinvestment.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants of the Seller Parties.
Until the date on which the Aggregate Unpaids have been indefeasibly paid in
full and this Agreement terminates in accordance with its terms, each of Seller
and the Sub-Servicer hereby covenants, as to itself, as set forth below:
(a) Reporting. Such Seller Party will maintain, for
itself and each of its Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish or cause to be furnished to
the Agent:
(i) Annual Reporting. Within 90 days after the close of
each of its respective fiscal years, (A) in the case of the
Sub-Servicer audited, unqualified financial statements (which shall
include balance sheets, statements of income and retained earnings and
a statement of cash flows) for such fiscal year certified in a manner
acceptable to the Agent by independent public accountants acceptable to
the Agent and (B) in the case of the Seller, financial statements
(which shall include balance sheets, statements of income and retained
earnings and a statement of cash flows) for such fiscal year.
(ii) Quarterly Reporting. Within 45 days after the close
of the first three (3) quarterly periods of each of its respective
fiscal years, balance sheets of each such Person as at the close of
each such period and statements of income and retained earnings and a
statement of cash flows for each such Person for the period from the
beginning of such fiscal year to the end of such quarter, all certified
by its respective chief financial officer.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in
substantially the form of Exhibit V signed by such Person's Authorized
Officer, as applicable, and dated the date of such annual financial
statement or such quarterly financial statement, as the case may be.
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(iv) Shareholders Statements and Reports. Promptly upon
the furnishing thereof to the shareholders of Jabil copies of all
financial statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
copies of all registration statements and reports which Jabil or any of
its Subsidiaries files with the Securities and Exchange Commission and
which are delivered to the "Banks" and the "Agent" under (and as
defined in) the Jabil Loan Agreement.
(vi) Copies of Notices. Promptly upon its receipt of any
notice, request for consent, financial statements, certification,
report or other communication under or in connection with any
Transaction Document from any Person other than the Agent or Falcon,
copies of the same.
(vii) Change in Credit and Collection Policy. At least
thirty (30) days prior to the effectiveness of any material change in
or material amendment to the Credit and Collection Policy, a copy of
the Credit and Collection Policy then in effect and a notice (A)
indicating such change or amendment, and (B) if such proposed change or
amendment would be reasonably likely to adversely affect the
collectibility of the Receivables or decrease the credit quality of any
newly created Receivables, requesting the Agent's consent thereto.
(viii) Other Information. Promptly, from time to time, such
other information, documents, records or reports relating to the
Receivables or the condition or operations, financial or otherwise, of
such Seller Party as the Agent may from time to time reasonably request
in order to protect the interests of the Agent and the Purchasers under
or as contemplated by this Agreement.
(b) Notices. Such Seller Party will notify the Agent in
writing of any of the following promptly upon learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken with
respect thereto:
(i) Amortization Events or Potential Amortization Events.
The occurrence of each Amortization Event and each Potential
Amortization Event, by a statement of an Authorized Officer of such
Seller Party.
(ii) Judgment and Proceedings. (1) The entry of any
judgment or decree against the Sub-Servicer or any of its respective
Subsidiaries if the aggregate amount of all judgments and decrees then
outstanding against the Sub-Servicer and its Subsidiaries exceeds
$5,000,000 and (2) the institution of any litigation, arbitration
proceeding or governmental proceeding against the Sub-Servicer which
could reasonably be expected to have a Material Adverse Effect; and (B)
the entry of any judgment or decree or the institution of any
litigation, arbitration proceeding or governmental proceeding against
Seller.
(iii) Material Adverse Effect. The occurrence of any event
or condition that has had, or could reasonably be expected to have, a
Material Adverse Effect.
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(iv) Termination Date. The occurrence of the "Termination
Date" under and as defined in the Receivables Sale Agreement.
(v) Defaults Under Other Agreements. The occurrence of a
default or an event of default under any other material financing
arrangement pursuant to which such Seller Party is a debtor or an
obligor.
(vi) Downgrade of Jabil. Any downgrade in the rating of
any Indebtedness of Jabil by Standard & Poor's Ratings Group or by
Moody's Investors Service, Inc., setting forth the Indebtedness
affected and the nature of such change.
(vii) Jabil Mexico. As soon as the Seller becomes aware
thereof, notice of any action taken by Jabil Mexico or any other Person
to assert any claim against any property of Jabil or Jabil Mexico
located in Mexico.
(c) Compliance with Laws and Preservation of Corporate
Existence. Such Seller Party will comply in all respects with all applicable
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject. Such Seller Party will preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where its business is conducted.
(d) Audits. Such Seller Party will (and will cause the
Originators to) furnish to the Agent from time to time such information with
respect to it and the Receivables as the Agent may reasonably request. Such
Seller Party will, from time to time during regular business hours as requested
by the Agent upon reasonable notice and at the sole cost of such Seller Party,
permit the Agent, or its agents or representatives (and will cause the
Originators to permit the Agent or its agents or representatives), (i) to
examine and make copies of and abstracts from all Records in the possession or
under the control of such Person relating to the Receivables and the Related
Security, including, without limitation, the related Contracts and Invoices, and
(ii) to visit the offices and properties of such Person for the purpose of
examining such materials described in clause (i) above, and to discuss matters
relating to such Person's financial condition or the Receivables and the Related
Security or any Person's performance under any of the Transaction Documents or
any Person's performance under the Contracts and Invoices and, in each case,
with any of the officers or employees of such Person having knowledge of such
matters; provided that such Seller Party shall not be required to pay for the
costs of such audit if (i) collectively, the Seller Parties have paid the costs
of at least three other audits occurring during the nine month period
immediately preceding such audit, (ii) no Amortization Event has occurred and
(iii) the results of the Agent's previous audits were acceptable to the Agent.
(e) Keeping and Marking of Records and Books.
(i) The Sub-Servicer will (and will cause the Originators
to) maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and other
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information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit
the immediate identification of each new Receivable and all Collections
of and adjustments to each existing Receivable). The Sub-Servicer will
(and will cause the Originators to) give the Agent notice of any
material change in the administrative and operating procedures referred
to in the previous sentence.
(ii) Such Seller Party will (and will cause the
Originators to) (A) on or prior to the date hereof, mark its master
data processing records and other books and records relating to the
Purchaser Interests with a legend, acceptable to the Agent, describing
the Purchaser Interests and (B) upon the request of the Agent at any
time following the occurrence of an Amortization Event, (x) mark each
Contract and Invoice with a legend describing the Purchaser Interests
and (y) deliver to the Agent all Contracts and Invoices (including,
without limitation, all multiple originals of any such Contract and
Invoice) relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection
Policy. Such Seller Party will (and will cause the Originators to) timely and
fully (i) perform and comply with all provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
and (ii) comply in all respects with the Credit and Collection Policy in regard
to each Receivable and the related Contract and Invoice.
(g) Performance and Enforcement of Receivables Sale
Agreement. Seller will, and will require the Originators to, perform each of
their respective obligations and undertakings under and pursuant to the
Receivables Sale Agreement, will purchase Receivables thereunder in strict
compliance with the terms thereof and will vigorously enforce the rights and
remedies accorded to Seller under the Receivables Sale Agreement. Seller will
take all actions to perfect and enforce its rights and interests (and the rights
and interests of the Agent and the Purchasers as assignees of Seller) under the
Receivables Sale Agreement as the Agent may from time to time reasonably
request, including, without limitation, making claims to which it may be
entitled under any indemnity, reimbursement or similar provision contained in
the Receivables Sale Agreement.
(h) Ownership. Seller will (or will cause the Originators
to) take all necessary action to (i) vest legal and equitable title to the
Receivables, the Related Security and the Collections purchased under the
Receivables Sale Agreement irrevocably in Seller, free and clear of any Adverse
Claims other than Adverse Claims in favor of the Agent and the Purchasers
(including, without limitation, the filing of all financing statements or other
similar instruments or documents necessary under the UCC (or any comparable law)
of all appropriate jurisdictions to perfect Seller's interest in such
Receivables, Related Security and Collections and such other action, including
the stamping of all Contracts constituting "chattel paper" within the meaning of
Section 9-105 of the UCC with a notation describing such assignment, to perfect,
protect or more fully evidence the interest of Seller therein as the Agent may
reasonably request), and (ii) establish and maintain, in favor of the Agent, for
the benefit of the Purchasers, a valid and perfected first priority undivided
percentage ownership interest (and/or a valid and perfected first priority
security interest) in all Receivables, Related Security and Collections to the
full extent
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contemplated herein, free and clear of any Adverse Claims other than Adverse
Claims in favor of the Agent for the benefit of the Purchasers (including,
without limitation, the filing of all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect the Agent's (for the benefit of the
Purchasers) interest in such Receivables, Related Security and Collections and
such other action, including the stamping of all Contracts constituting "chattel
paper" within the meaning of Section 9-105 of the UCC with a notation describing
such assignment, to perfect, protect or more fully evidence the interest of the
Agent for the benefit of the Purchasers as the Agent may reasonably request).
(i) Purchasers' Reliance. Seller acknowledges that the
Purchasers are entering into the transactions contemplated by this Agreement in
reliance upon Seller's identity as a legal entity that is separate from Jabil
and any of its Affiliates (collectively, the "Jabil Entities"). Therefore, from
and after the date of execution and delivery of this Agreement, Seller shall
take all reasonable steps, including, without limitation, all steps that the
Agent or any Purchaser may from time to time reasonably request, to maintain
Seller's identity as a separate legal entity and to make it manifest to third
parties that Seller is an entity with assets and liabilities distinct from those
of any Jabil Entity and not just a division of any Jabil Entity. Without
limiting the generality of the foregoing and in addition to the other covenants
set forth herein, Seller will:
(i) conduct its own business in its own name and require
that all full-time employees of Seller, if any, identify themselves as
such and not as employees of any Jabil Entity (including, without
limitation, by means of providing appropriate employees with business
or identification cards identifying such employees as Seller's
employees);
(ii) compensate all employees, consultants and agents
directly, from Seller's own funds, for services provided to Seller by
such employees, consultants and agents and, to the extent any employee,
consultant or agent of Seller is also an employee, consultant or agent
of any Jabil Entity, allocate the compensation of such employee,
consultant or agent between Seller and such Jabil Entity, as
applicable, on a basis that reflects the services rendered to Seller
and such Jabil Entity, as applicable;
(iii) clearly identify its offices (by signage or
otherwise) as its offices and, if such office is located in the offices
of a Jabil Entity, Seller shall lease such office at a fair market
rent;
(iv) have a separate telephone number, which will be
answered only in its name and separate stationery, invoices and checks
in its own name;
(v) conduct all transactions with each Originator and the
Sub-Servicer (including, without limitation, any delegation of its
obligations hereunder as Servicer) strictly on an arm's-length basis,
allocate all overhead expenses (including, without limitation,
telephone and other utility charges) for items shared between Seller
and such Originator or the Sub-Servicer on the basis of actual use to
the extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use;
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(vi) at all times have a Board of Directors consisting of
three members, at least one member of which is an Independent Director;
(vii) observe all corporate formalities as a distinct
entity, and ensure that all corporate actions relating to (A) the
selection, maintenance or replacement of the Independent Director, (B)
the dissolution or liquidation of Seller or (C) the initiation of,
participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving Seller, are
duly authorized by unanimous vote of its Board of Directors (including
the Independent Director);
(viii) maintain Seller's books and records separate from
those of any Jabil Entity and otherwise readily identifiable as its own
assets rather than assets of any Jabil Entity;
(ix) prepare its financial statements separately from
those of any Jabil Entity and insure that any consolidated financial
statements of any Jabil Entity that include Seller and that are filed
with the Securities and Exchange Commission or any other governmental
agency have notes clearly stating that Seller is a separate corporate
entity and that its assets will be available first and foremost to
satisfy the claims of the creditors of Seller;
(x) except as herein specifically otherwise provided,
maintain the funds or other assets of Seller separate from, and not
commingled with, those of any Jabil Entity and only maintain bank
accounts or other depository accounts to which Seller alone is the
account party, into which Seller alone makes deposits and from which
Seller alone (or the Agent hereunder) has the power to make
withdrawals;
(xi) pay all of Seller's operating expenses from Seller's
own assets (except for certain payments by a Jabil Entity or other
Persons pursuant to allocation arrangements that comply with the
requirements of this Section 7.1(i));
(xii) operate its business and activities such that: it
does not engage in any business or activity of any kind, or enter into
any transaction or indenture, mortgage, instrument, agreement,
contract, lease or other undertaking, other than the transactions
contemplated and authorized by this Agreement and the Receivables Sale
Agreement; and does not create, incur, guarantee, assume or suffer to
exist any indebtedness or other liabilities, whether direct or
contingent, other than (1) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business, (2) the incurrence of obligations under
this Agreement, (3) the incurrence of obligations, as expressly
contemplated in the Receivables Sale Agreement, to make payment to the
Originators thereunder for the purchase of Receivables from the
Originators under the Receivables Sale Agreement, and (4) the
incurrence of operating expenses in the ordinary course of business of
the type otherwise contemplated by this Agreement;
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(xiii) maintain its corporate charter in conformity with
this Agreement, such that it does not amend, restate, supplement or
otherwise modify its Certificate of Incorporation or By-Laws in any
respect that would impair its ability to comply with the terms or
provisions of any of the Transaction Documents, including, without
limitation, Section 7.1(i) of this Agreement;
(xiv) maintain the effectiveness of, and continue to
perform under the Receivables Sale Agreement and the Performance
Undertaking, such that it does not amend, restate, supplement, cancel,
terminate or otherwise modify the Receivables Sale Agreement or the
Performance Undertaking, or give any consent, waiver, directive or
approval thereunder or waive any default, action, omission or breach
under the Receivables Sale Agreement or the Performance Undertaking or
otherwise grant any indulgence thereunder, without (in each case) the
prior written consent of the Agent;
(xv) maintain its corporate separateness such that it does
not merge or consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions, and except as otherwise contemplated herein) all or
substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any
Person, nor at any time create, have, acquire, maintain or hold any
interest in any Subsidiary.
(xvi) maintain at all times the Required Capital Amount (as
defined in the Receivables Sale Agreement) and refrain from making any
dividend, distribution, redemption of capital stock or payment of any
subordinated indebtedness which would cause the Required Capital Amount
to cease to be so maintained; and
(xvii) take such other actions as are necessary on its part
to ensure that the facts and assumptions set forth in the opinion
issued by Holland & Knight LLP, as counsel for Seller, in connection
with the closing or initial Incremental Purchase under this Agreement
and relating to substantive consolidation issues, and in the
certificates accompanying such opinion, remain true and correct in all
material respects at all times.
(j) Collections. Such Seller Party will cause (1) all
proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into
a Collection Account and (2) each Lock-Box and Collection Account to be subject
at all times to a Collection Account Agreement that is in full force and effect.
In the event any payments relating to Receivables are remitted directly to
Seller or any Affiliate of Seller, Seller will remit (or will cause all such
payments to be remitted) directly to a Collection Bank and deposited into a
Collection Account within two (2) Business Days following receipt thereof, and,
at all times prior to such remittance, Seller will itself hold or, if
applicable, will cause such payments to be held in trust for the exclusive
benefit of the Agent and the Purchasers. Seller will maintain exclusive
ownership, dominion and control (subject to the terms of this Agreement) of each
Lock-Box and Collection Account and shall not grant the right to take dominion
and control of any Lock-Box or Collection Account at a future time or upon the
occurrence of a future event to any Person, except to the Agent as contemplated
by this Agreement.
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(k) Taxes. Such Seller Party will file all tax returns
and reports required by law to be filed by it and will promptly pay all taxes
and governmental charges at any time owing. Seller will pay when due any taxes
payable in connection with the Receivables, exclusive of taxes on or measured by
income or gross receipts of Falcon, the Agent or any Financial Institution.
(l) Insurance. Seller will maintain in effect, or cause
to be maintained in effect, at Seller's own expense, such casualty and liability
insurance as Seller shall deem appropriate in its good faith business judgment.
The Agent, for the benefit of the Purchasers, shall be named as an additional
insured with respect to all such liability insurance maintained by Seller.
Seller will pay or cause to be paid, the premiums therefor and deliver to the
Agent evidence satisfactory to the Agent of such insurance coverage. Copies of
each policy shall be furnished to the Agent and any Purchaser in certificated
form upon the Agent's or such Purchaser's request. The foregoing requirements
shall not be construed to negate, reduce or modify, and are in addition to,
Seller's obligations hereunder.
(m) Payment to Originators. With respect to any
Receivable purchased by Seller from either Originator, such sale shall be
effected under, and in strict compliance with the terms of, the Receivables Sale
Agreement, including, without limitation, the terms relating to the amount and
timing of payments to be made to the applicable Originator in respect of the
purchase price for such Receivable.
Section 7.2 Negative Covenants of the Seller Parties.
Until the date on which the Aggregate Unpaids have been indefeasibly paid in
full and this Agreement terminates in accordance with its terms, each of Seller
and Sub-Servicer hereby covenants, as to itself, that:
(a) Name Change, Offices and Records. Such Seller Party
will not change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the UCC) or relocate its chief
executive office or any office where Records are kept unless it shall have: (i)
given the Agent at least forty-five (45) days' prior written notice thereof and
(ii) delivered to the Agent all financing statements, instruments and other
documents requested by the Agent in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. Except as
may be required by the Agent pursuant to Section 8.2(b), such Seller Party will
not add or terminate any bank as a Collection Bank, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box or
Collection Account, unless the Agent shall have received, at least ten (10) days
before the proposed effective date therefor, (i) written notice of such
addition, termination or change and (ii) with respect to the addition of a
Collection Bank or a Collection Account or Lock-Box, an executed Collection
Account Agreement with respect to the new Collection Account or Lock-Box;
provided, however, that the Sub-Servicer may make changes in instructions to
Obligors regarding payments if such new instructions require such Obligor to
make payments to another existing Collection Account.
(c) Modifications to Contracts, Invoices and Credit and
Collection Policy. Such Seller Party will not, and will not permit either
Originator to, amend, modify or otherwise
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make any change to the Credit and Collection Policy or any Contract or Invoice
that could adversely affect the collectibility of the Receivables or decrease
the credit quality of any newly created Receivables. Except as provided in
Section 8.2(d), the Sub-Servicer will not, and will not permit either Originator
to, extend, amend or otherwise modify the terms of any Receivable or any Invoice
related thereto other than in accordance with the Credit and Collection Policy.
(d) Sales, Liens. Seller will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any Receivable, Related Security or Collections, or upon or with respect to any
Contract or Invoice under which any Receivable arises, or any Lock-Box or
Collection Account, or assign any right to receive income with respect thereto
(other than, in each case, the creation of the interests therein in favor of the
Agent and the Purchasers provided for herein), and Seller will defend the right,
title and interest of the Agent and the Purchasers in, to and under any of the
foregoing property, against all claims of third parties claiming through or
under Seller or either Originator. Seller will not create or suffer to exist any
mortgage, pledge, security interest, encumbrance, lien, charge or other similar
arrangement on any of its inventory, the financing or lease of which gives rise
to any Receivable. The provisions of this Section 7.2(d) shall not become
effective until Section 5.2(l) of the Jabil Loan Agreement is amended (or
otherwise modified or waived in writing) to permit such provisions.
(e) Net Receivables Balance. At no time prior to the
Amortization Date shall Seller permit the Net Receivables Balance to be less
than an amount equal to the sum of (i) the Aggregate Capital plus (ii) the
Aggregate Reserves.
(f) Termination Date Determination. Seller will not
designate the Termination Date (as defined in the Receivables Sale Agreement),
or send any written notice to either Originator in respect thereof, without the
prior written consent of the Agent, except with respect to the occurrence of
such Termination Date arising pursuant to Section 6.1(d) of the Receivables Sale
Agreement.
(g) Restricted Junior Payments. From and after the
occurrence of any Amortization Event, Seller will not make any Restricted Junior
Payment if, after giving effect thereto, Seller would fail to meet its
obligations set forth in Section 7.2(e).
ARTICLE VIII
ADMINISTRATION AND COLLECTION
Section 8.1 Designation of Servicer and Sub-Servicer.
(a) The servicing, administration and collection of the
Receivables shall be conducted by such Person (the "Servicer") so designated
from time to time in accordance with this Section 8.1. JCFI is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms of this Agreement. At any time following the occurrence of
an Amortization Event, the Agent may at any time designate as Servicer any
Person to succeed JCFI or any successor Servicer.
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(b) JCFI may delegate, and JCFI hereby delegates to
Jabil, as sub-servicer of the Servicer (the "Sub-Servicer"), all of its duties
and responsibilities as Servicer and Jabil hereby agrees to perform all of the
duties and obligations of the Servicer hereunder in respect of the Receivables
in its capacity as Sub-Servicer in accordance with the terms hereof. In its
capacity as Sub-Servicer, Jabil shall be an independent contractor of JCFI.
Without the prior written consent of the Agent and the Required Financial
Institutions, JCFI shall not be permitted to delegate any of its duties or
responsibilities as Servicer to any Person other than (i) Jabil and (ii) with
respect to certain Charged-Off Receivables, outside collection agencies in
accordance with its customary practices. Jabil shall not be permitted to further
delegate to any other Person (other than Jabil Mexico with respect to those
Receivables arising from the sale of products manufactured by Jabil Mexico) any
of its duties or responsibilities as Sub-Servicer delegated to it by JCFI. If
pursuant to the last sentence of Section 8.1(a) the Agent shall designate as
Servicer any Person other than JCFI, all duties and responsibilities theretofore
delegated by JCFI to Jabil as Sub-Servicer may, at the discretion of the Agent,
be terminated forthwith on notice given by the Agent to JCFI and to Jabil. Jabil
further agrees that it shall be directly liable to the Agent and the Purchasers
for the full and prompt performance of all duties and responsibilities of the
Servicer.
(c) Notwithstanding the foregoing subsection (b), (i)
JCFI shall be and remain primarily liable to the Agent and the Purchasers for
the full and prompt performance of all duties and responsibilities of the
Servicer hereunder and (ii) the Agent and the Purchasers shall be entitled to
deal exclusively with JCFI in matters relating to the discharge by the Servicer
of its duties and responsibilities hereunder. The Agent and the Purchasers shall
not be required to give notice, demand or other communication to any Person
other than JCFI in order for communication to the Servicer and its sub-servicer
or other delegate with respect thereto to be accomplished. JCFI, at all times
that it is the Servicer, shall be responsible for providing any sub-servicer or
other delegate of the Servicer with any notice given to the Servicer under this
Agreement.
Section 8.2 Duties of Servicer. The Servicer shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy.
(a) The Servicer will instruct all Obligors to pay all
Collections directly to a Lock-Box or Collection Account. The Servicer shall
effect a Collection Account Agreement substantially in the form of Exhibit VI
with each bank party to a Collection Account at any time. In the case of any
remittances received in any Lock-Box or Collection Account that shall have been
identified, to the satisfaction of the Servicer, to not constitute Collections
or other proceeds of the Receivables or the Related Security, the Servicer shall
promptly remit such items to the Person identified to it as being the owner of
such remittances. From and after the date the Agent delivers to any Collection
Bank a Collection Notice pursuant to Section 8.3, the Agent may request that the
Servicer, and the Servicer thereupon promptly shall instruct all Obligors with
respect to the Receivables, to remit all payments thereon to a new depositary
account specified by the Agent and, at all times thereafter, Seller the Servicer
and the Sub-Servicer shall not
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deposit or otherwise credit, and shall not permit any other Person to deposit or
otherwise credit to such new depositary account any cash or payment item other
than Collections.
(b) The Servicer shall administer the Collections in
accordance with the procedures described herein and in Article II. The Servicer
shall set aside and hold in trust for the account of Seller and the Purchasers
their respective shares of the Collections in accordance with Article II. The
Servicer shall, upon the request of the Agent, segregate, in a manner acceptable
to the Agent, all cash, checks and other instruments received by it from time to
time constituting Collections from the general funds of the Servicer, the
Sub-Servicer or Seller prior to the remittance thereof in accordance with
Article II. If the Servicer shall be required to segregate Collections pursuant
to the preceding sentence, the Servicer shall segregate and deposit with a bank
designated by the Agent such allocable share of Collections of Receivables set
aside for the Purchasers on the first Business Day following receipt by the
Servicer of such Collections, duly endorsed or with duly executed instruments of
transfer.
(c) The Servicer may, in accordance with the Credit and
Collection Policy, extend the maturity of any Receivable or adjust the
Outstanding Balance of any Receivable as the Servicer determines to be
appropriate to maximize Collections thereof; provided, however, that such
extension or adjustment shall not alter the status of such Receivable as a
Delinquent Receivable or Charged-Off Receivable or limit the rights of the Agent
or the Purchasers under this Agreement. Notwithstanding anything to the contrary
contained herein, the Agent shall have the absolute and unlimited right to
direct the Servicer or the Sub-Servicer to commence or settle any legal action
with respect to any Receivable or to foreclose upon or repossess any Related
Security, provided that the Agent has given the Seller seven (7) days' prior
notice and during such notice period the outstanding Balance of such Receivable
has not been reduced to zero.
(d) The Servicer shall hold in trust for Seller and the
Purchasers all Records that (i) evidence or relate to the Receivables, the
related Contracts, Invoices and Related Security or (ii) are otherwise necessary
or desirable to collect the Receivables and shall, as soon as practicable upon
demand of the Agent, deliver or make available to the Agent all such Records, at
a place selected by the Agent. The Servicer shall, as soon as practicable
following receipt thereof turn over to Seller any cash collections or other cash
proceeds received with respect to Indebtedness not constituting Receivables. The
Servicer shall, from time to time at the request of any Purchaser, furnish to
the Purchasers (promptly after any such request) a calculation of the amounts
set aside for the Purchasers pursuant to Article II.
(e) Any payment by an Obligor in respect of any
indebtedness owed by it to an Originator or Seller shall, except as otherwise
specified by such Obligor or otherwise required by contract or law and unless
otherwise instructed by the Agent, be applied as a Collection of any Receivable
of such Obligor (starting with the oldest such Receivable) to the extent of any
amounts then due and payable thereunder before being applied to any other
receivable or other obligation of such Obligor.
Section 8.3 Collection Notices. The Agent is authorized
at any time to date and to deliver to the Collection Banks the Collection
Notices. Seller hereby transfers to the Agent for the benefit of the Purchasers,
effective when the Agent delivers such notice, the
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exclusive ownership and control of each Lock-Box and the Collection Accounts. In
case any authorized signatory of Seller whose signature appears on a Collection
Account Agreement shall cease to have such authority before the delivery of such
notice, such Collection Notice shall nevertheless be valid as if such authority
had remained in force. Seller hereby authorizes the Agent, and agrees that the
Agent shall be entitled to (i) endorse Seller's name on checks and other
instruments representing Collections, (ii) enforce the Receivables, the related
Contracts, Invoices and the Related Security and (iii) take such action as shall
be necessary or desirable to cause all cash, checks and other instruments
constituting Collections of Receivables to come into the possession of the Agent
rather than Seller.
Section 8.4 Responsibilities of Seller. Anything herein
to the contrary notwithstanding, the exercise by the Agent and the Purchasers of
their rights hereunder shall not release the Servicer, the Sub-Servicer, the
Originators or Seller from any of their duties or obligations with respect to
any Receivables or under the related Contracts or Invoices. The Purchasers shall
have no obligation or liability with respect to any Receivables or related
Contracts or Invoices, nor shall any of them be obligated to perform the
obligations of Seller.
Section 8.5 Reports. The Servicer shall prepare and
forward to the Agent (i) on the fifteenth (15th) day of each month and at such
times as the Agent shall request, a Monthly Report and (ii) at such times as the
Agent shall request, a listing by Obligor of all Receivables together with an
aging of such Receivables.
Section 8.6 Servicing Fees. In consideration of JCFI's
agreement to act as Servicer hereunder, the Purchasers hereby agree that, so
long as JCFI shall continue to perform as Servicer hereunder, Seller shall pay
over to JCFI a fee (the "Servicing Fee") on the first calendar day of each
month, in arrears for the immediately preceding month, equal to 1% per annum of
the Net Receivables Balance during such period, as compensation for its
servicing activities.
ARTICLE IX
AMORTIZATION EVENTS
Section 9.1 Amortization Events. The occurrence of any
one or more of the following events shall constitute an Amortization Event:
(a) Any Seller Party shall fail (i) to make any payment
or deposit required hereunder when due, (ii) to observe or perform any covenant
set forth in Section 7.2 and such failure shall continue for three (3)
consecutive Business Days or (iii) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clauses (i) and (ii) of this
paragraph (a) and paragraph 9.1(e)) and such failure shall continue for five (5)
consecutive Business Days.
(b) Any representation or warranty made by any Seller
Party in this Agreement, any other Transaction Document or in any other document
delivered pursuant hereto or thereto shall prove to have been incorrect when
made or deemed made or any certification or
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statement made by any Seller Party in connection with the foregoing shall prove
to have been incorrect in any material respect when made or deemed made.
(c) Failure of Seller to pay any Indebtedness when due,
or the failure of Jabil to pay any Indebtedness when due, which individually or
together with other such Indebtedness as to which any such failures exists has
an aggregate outstanding principal amount in excess of $5,000,000; or the
default by any Seller Party or Originator in the performance of any term,
provision or condition contained in any agreement under which any such
Indebtedness was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of any Seller
Party or Originator shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment) prior to the date of
maturity thereof.
(d) (i) Any Seller Party, either Originator or any of
their respective Subsidiaries shall generally not pay its debts as such debts
become due or shall admit in writing its inability to pay its debts generally or
shall make a general assignment for the benefit of creditors; or (ii) any
proceeding shall be instituted by or against any Seller Party, either Originator
or any of their respective Subsidiaries seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its property
or (iii) any Seller Party, either Originator or any of their respective
Subsidiaries shall take any corporate or partnership action to authorize any of
the actions set forth in clauses (i) or (ii) above in this subsection (d). For
purposes of this Section 9.1(d), "Subsidiary" shall exclude a Subsidiary which
(i) is not engaged in any business activity, (ii) has no Subsidiaries engaged in
any business activity, and (iii) has no Indebtedness outstanding in excess of
$10,000.
(e) Seller shall fail to comply with the terms of Section
2.6 hereof and such failure is not cured on the following Business Day.
(f) As at the end of any calendar month:
(i) the average of the Delinquency Ratios as at the
end of such month and the two preceding months shall
exceed 12.0% and the Delinquency Ratio as at the end
of such month shall exceed 15.0%;
(ii) the average of the Dilution Ratios as at the end
of such month and the two preceding months shall
exceed 5.75% and the Dilution Ratio as at the end of
such month shall exceed 10.0%; or
(iii) the average of the Default Ratios as at the end
of such month and the two preceding months shall
exceed 4.25% and the Default Ratio as at the end of
such month shall exceed 4.75%.
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(g) A Change of Control shall occur.
(h) (i) One or more final judgments for the payment of
money shall be entered against Seller or (ii) one or more final judgments for
the payment of money in an amount of $10,000,000 or more individually or in the
aggregate, shall be entered against the Sub-Servicer on claims not covered by
insurance or as to which the insurance carrier has denied its responsibility,
and such judgment shall continue unsatisfied and in effect for fifteen (15)
consecutive days without a stay of execution.
(i) (i) The "Termination Date" under and as defined in
the Receivables Sale Agreement shall occur under the Receivables Sale Agreement,
or (ii) the Seller or either Originator shall cease to perform any of their
respective material obligations and undertakings under and pursuant to the
Receivables Sale Agreement or shall fail to vigorously enforce the rights and
remedies accorded under the Receivables Purchase Agreement after the occurrence
of such failure, or (iii) the Originators shall for any reason cease to
transfer, or cease to have the legal capacity to transfer, or otherwise be
incapable of transferring Receivables to Seller under the Receivables Sale
Agreement.
(j) This Agreement shall terminate in whole or in part
(except in accordance with its terms), or shall cease to be effective or to be
the legally valid, binding and enforceable obligation of Seller, or any Obligor
shall directly or indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability, provided, that such occurrence is a direct or
indirect result of an action or inaction on the part of a Seller Party or one of
their respective Affiliates or the Agent for the benefit of the Purchasers shall
cease to have a valid and perfected first priority security interest in the
Receivables, the Related Security and the Collections with respect thereto and
the Collection Accounts.
(k) Jabil shall fail to perform any of its covenants
described in Sections 5.2(a), (b) or (c) of the Jabil Loan Agreement, as in
effect on the date hereof.
(l) Jabil shall fail to perform or observe any term,
covenant or agreement required to be performed by it under the Performance
Undertaking, or the Performance Undertaking shall cease to be effective or to be
the legally valid, binding and enforceable obligation of Jabil, or Jabil shall
directly or indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability.
Section 9.2 Remedies. Upon the occurrence and during the
continuation of an Amortization Event, the Agent may, or upon the direction of
the Required Financial Institutions shall, take any of the following actions:
(i) replace the Person then acting as Servicer or Sub-Servicer, (ii) declare the
Amortization Date to have occurred, whereupon the Amortization Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by each Seller Party; provided, however, that
upon the occurrence of an Amortization Event described in Section 9.1(d), or of
an actual or deemed entry of an order for relief with respect to any Seller
Party under the Federal Bankruptcy Code, the Amortization Date shall
automatically occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by each Seller Party, (iii) to the fullest
extent permitted by applicable
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law, declare that the Default Fee shall accrue with respect to any of the
Aggregate Unpaids outstanding at such time, (iv) deliver the Collection Notices
to the Collection Banks, and (v) notify Obligors of the Purchasers' interest in
the Receivables. The aforementioned rights and remedies shall be without
limitation, and shall be in addition to all other rights and remedies of the
Agent and the Purchasers otherwise available under any other provision of this
Agreement, by operation of law, at equity or otherwise, all of which are hereby
expressly preserved, including, without limitation, all rights and remedies
provided under the UCC, all of which rights shall be cumulative.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnities by The Seller Parties. Without
limiting any other rights that the Agent or any Purchaser may have hereunder or
under applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand
to) the Agent and each Purchaser and their respective assigns, officers,
directors, agents and employees (each an "Indemnified Party") from and against
any and all damages, losses, claims, taxes, liabilities, costs, expenses and for
all other amounts payable, including reasonable attorneys' fees (which attorneys
may be employees of the Agent or such Purchaser) and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, by a Purchaser of
an interest in the Receivables, and (B) each of the Servicer and the
Sub-Servicer hereby agrees to indemnify (and pay upon demand to) each
Indemnified Party for Indemnified Amounts awarded against or incurred by any of
them arising out of its activities as Servicer or Sub-Servicer (as applicable)
hereunder excluding, however, in all of the foregoing instances under the
preceding clauses (A) and (B):
(i) Indemnified Amounts to the extent a final judgment of
a court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes
losses in respect of Receivables that are uncollectible on account of
the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
(iii) taxes imposed by the United States, by the
jurisdiction in which such Indemnified Party's principal executive
office is located, or by any other jurisdiction in the United States
where such Indemnified Party has established a taxable nexus other than
in connection with the transactions contemplated by this Agreement, on
or measured by the overall net income of such Indemnified Party to the
extent that the computation of such taxes is consistent with the
characterization for income tax purposes of the acquisition by the
Purchasers of Purchaser Interests as a loan or loans by the Purchasers
to Seller secured by the Receivables, the Related Security, the
Collection Accounts and
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the Collections, but not including any such taxes resulting from the
adoption after the date hereof of any law or any amendment or change in
the interpretation of any existing or future law that subjects such
Indemnified Party to taxes that would not be imposed by any law or the
interpretation thereof existing on the date hereof (except for changes
in the rate of such taxes);
provided, however, that nothing contained in this sentence shall limit the
liability of any Seller Party or limit the recourse of the Purchasers to any
Seller Party for amounts otherwise specifically provided to be paid by such
Seller Party under the terms of this Agreement. Without limiting the generality
of the foregoing indemnification, Seller shall indemnify the Agent and the
Purchasers for Indemnified Amounts (including, without limitation, losses in
respect of uncollectible receivables, regardless of whether reimbursement
therefor would constitute recourse to Seller, the Servicer or the Sub-Servicer)
relating to or resulting from:
(i) any representation or warranty made by any Seller
Party or either Originator (or any officers of any such Person) under
or in connection with this Agreement, any other Transaction Document or
any other information or report delivered by any such Person pursuant
hereto or thereto, which shall have been false or incorrect when made
or deemed made;
(ii) the failure by Seller, the Servicer, the Sub-Servicer
or either Originator to comply with any applicable law, rule or
regulation with respect to any Receivable, Contract or Invoice related
thereto, or the nonconformity of any Receivable, Contract or Invoice
included therein with any such applicable law, rule or regulation or
any failure of either Originator to keep or perform any of its
obligations, express or implied, with respect to any Contract or
Invoice;
(iii) any failure of Seller, the Servicer, the Sub-Servicer
or either Originator to perform its duties, covenants or other
obligations in accordance with the provisions of this Agreement or any
other Transaction Document;
(iv) any products liability, personal injury or damage
suit, or other similar claim arising out of or in connection with
merchandise, insurance or services that are the subject of any
Contract, Invoice or any Receivable;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (including, without limitation, a defense based on
such Receivable or the related Invoice or Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections of Receivables at any
time with other funds;
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(vii) any investigation, litigation or proceeding related
to or arising from this Agreement or any other Transaction Document,
the transactions contemplated hereby, the use of the proceeds of an
Incremental Purchase or a Reinvestment, the ownership of the Purchaser
Interests or any other investigation, litigation or proceeding relating
to Seller, the Servicer, the Sub-Servicer or either Originator in which
any Indemnified Party becomes involved as a result of any of the
transactions contemplated hereby;
(viii) any inability to litigate any claim against any
Obligor in respect of any Receivable as a result of such Obligor being
immune from civil and commercial law and suit on the grounds of
sovereignty or otherwise from any legal action, suit or proceeding;
(ix) any Amortization Event described in Section 9.1(d);
(x) any failure of Seller to acquire and maintain legal
and equitable title to, and ownership of any Receivable and the Related
Security and Collections with respect thereto from the applicable
Originator, free and clear of any Adverse Claim (other than as created
hereunder); or any failure of Seller to give reasonably equivalent
value to either Originator under the Receivables Sale Agreement in
consideration of the transfer by either Originator of any Receivable,
or any attempt by any Person to void such transfer under statutory
provisions or common law or equitable action;
(xi) any failure to vest and maintain vested in the Agent
for the benefit of the Purchasers, or to transfer to the Agent for the
benefit of the Purchasers, legal and equitable title to, and ownership
of, a first priority perfected undivided percentage ownership interest
(to the extent of the Purchaser Interests contemplated hereunder) or
security interest in the Receivables, the Related Security and the
Collections, free and clear of any Adverse Claim (except as created by
the Transaction Documents);
(xii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws or the
failure to stamp each Contract constituting "chattel paper" within the
meaning of Section 9-105 of the UCC with a notation describing the
assignments to the Seller and the Agent with respect to any Receivable,
the Related Security and Collections with respect thereto, and the
proceeds of any thereof, whether at the time of any Incremental
Purchase or Reinvestment or at any subsequent time;
(xiii) any action or omission by any Seller Party which
reduces or impairs the rights of the Agent or the Purchasers with
respect to any Receivable or the value of any such Receivable;
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(xiv) any attempt by any Person to void any Incremental
Purchase or Reinvestment hereunder under statutory provisions or common
law or equitable action;
(xv) the operations of Jabil Mexico and the enforcement of
the Agent's and the Purchasers' rights under the Estoppel Letter; and
(xvi) the failure of any Receivable included in the
calculation of the Net Receivables Balance as an Eligible Receivable to
be an Eligible Receivable at the time so included.
Section 10.2 Increased Cost and Reduced Return. If after
the date hereof, any Funding Source shall be charged any fee, expense or
increased cost on account of the adoption of any applicable law, rule or
regulation (including any applicable law, rule or regulation regarding capital
adequacy) or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency (a "Regulatory Change"): (i)
that subjects any Funding Source to any charge or withholding on or with respect
to any Funding Agreement or a Funding Source's obligations under a Funding
Agreement, or on or with respect to the Receivables, or changes the basis of
taxation of payments to any Funding Source of any amounts payable under any
Funding Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source or taxes excluded by Section 10.1) or (ii) that
imposes, modifies or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for
the account of a Funding Source, or credit extended by a Funding Source pursuant
to a Funding Agreement or (iii) that imposes any other condition the result of
which is to increase the cost to a Funding Source of performing its obligations
under a Funding Agreement, or to reduce the rate of return on a Funding Source's
capital as a consequence of its obligations under a Funding Agreement, or to
reduce the amount of any sum received or receivable by a Funding Source under a
Funding Agreement or to require any payment calculated by reference to the
amount of interests or loans held or interest received by it, then, upon demand
by the Agent, Seller shall pay to the Agent, for the benefit of the relevant
Funding Source, such amounts charged to such Funding Source or such amounts to
otherwise compensate such Funding Source for such increased cost or such
reduction.
Section 10.3 Other Costs and Expenses. Seller shall pay
to the Agent and Falcon on demand all costs and out-of-pocket expenses in
connection with the preparation, execution, delivery and administration of this
Agreement, the transactions contemplated hereby and the other documents to be
delivered hereunder, including without limitation, the cost of Falcon's auditors
auditing the books, records and procedures of Seller, reasonable fees and
out-of-pocket expenses of legal counsel for Falcon and the Agent (which such
counsel may be employees of Falcon or the Agent) with respect thereto and with
respect to advising Falcon and the Agent as to their respective rights and
remedies under this Agreement. Seller shall pay to the Agent on demand any and
all costs and expenses of the Agent and the Purchasers, if any, including
reasonable counsel fees and expenses in connection with the enforcement of this
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Agreement and the other documents delivered hereunder and in connection with any
restructuring or workout of this Agreement or such documents, or the
administration of this Agreement following an Amortization Event. Seller shall
reimburse Falcon on demand for all other costs and expenses incurred by Falcon
("Other Costs"), including, without limitation, the cost of auditing Falcon's
books by certified public accountants, the cost of rating the Commercial Paper
by independent financial rating agencies, and the reasonable fees and
out-of-pocket expenses of counsel for Falcon or any counsel for any shareholder
of Falcon with respect to advising Falcon or such shareholder as to matters
relating to Falcon's operations.
Section 10.4 Allocations. Falcon shall allocate the
liability for Other Costs among Seller and other Persons with whom Falcon has
entered into agreements to purchase interests in receivables ("Other Sellers").
If any Other Costs are attributable to Seller and not attributable to any Other
Seller, Seller shall be solely liable for such Other Costs. However, if Other
Costs are attributable to Other Sellers and not attributable to Seller, such
Other Sellers shall be solely liable for such Other Costs. All allocations to be
made pursuant to the foregoing provisions of this Article X shall be made by
Falcon in its sole discretion and shall be binding on Seller, the Servicer and
the Sub-Servicer.
ARTICLE XI
THE AGENT
Section 11.1 Authorization and Action. Each Purchaser
hereby designates and appoints Bank One to act as its agent hereunder and under
each other Transaction Document, and authorizes the Agent to take such actions
as agent on its behalf and to exercise such powers as are delegated to the Agent
by the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth herein or in any
other Transaction Document, or any fiduciary relationship with any Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other Transaction Documents, the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for any Seller Party or any of such Seller Party's successors or assigns. The
Agent shall not be required to take any action that exposes the Agent to
personal liability or that is contrary to this Agreement, any other Transaction
Document or applicable law. The appointment and authority of the Agent hereunder
shall terminate upon the indefeasible payment in full of all Aggregate Unpaids.
Each Purchaser hereby authorizes the Agent to execute each of the Uniform
Commercial Code financing statements, the Collection Account Agreements, the
Estoppel Letter, the Demand Note Pledge Agreement and the Concentration Limit
Letter Agreement on behalf of such Purchaser (the terms of which shall be
binding on such Purchaser).
Section 11.2 Delegation of Duties. The Agent may execute
any of its duties under this Agreement and each other Transaction Document by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.
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The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
Section 11.3 Exculpatory Provisions. Neither the Agent
nor any of its directors, officers, agents or employees shall be (i) liable for
any action lawfully taken or omitted to be taken by it or them under or in
connection with this Agreement or any other Transaction Document (except for
its, their or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by any Seller Party contained in this
Agreement, any other Transaction Document or any certificate, report, statement
or other document referred to or provided for in, or received under or in
connection with, this Agreement, or any other Transaction Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, or any other Transaction Document or any other document
furnished in connection herewith or therewith, or for any failure of any Seller
Party to perform its obligations hereunder or thereunder, or for the
satisfaction of any condition specified in Article VI, or for the perfection,
priority, condition, value or sufficiency of any collateral pledged in
connection herewith. The Agent shall not be under any obligation to any
Purchaser to ascertain or to inquire as to the observance or performance of any
of the agreements or covenants contained in, or conditions of, this Agreement or
any other Transaction Document, or to inspect the properties, books or records
of the Seller Parties. The Agent shall not be deemed to have knowledge of any
Amortization Event or Potential Amortization Event unless the Agent has received
notice from Seller or a Purchaser.
Section 11.4 Reliance by Agent. The Agent shall in all
cases be entitled to rely, and shall be fully protected in relying, upon any
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to Seller),
independent accountants and other experts selected by the Agent. The Agent shall
in all cases be fully justified in failing or refusing to take any action under
this Agreement or any other Transaction Document unless it shall first receive
such advice or concurrence of Falcon or the Required Financial Institutions or
all of the Purchasers, as applicable, as it deems appropriate and it shall first
be indemnified to its satisfaction by the Purchasers, provided that unless and
until the Agent shall have received such advice, the Agent may take or refrain
from taking any action, as the Agent shall deem advisable and in the best
interests of the Purchasers. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of Falcon or
the Required Financial Institutions or all of the Purchasers, as applicable, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Purchasers.
Section 11.5 Non-Reliance on Agent and Other Purchasers.
Each Purchaser expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Seller
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Purchaser represents and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as
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it has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, prospects, financial and other conditions and
creditworthiness of Seller and made its own decision to enter into this
Agreement, the other Transaction Documents and all other documents related
hereto or thereto.
Section 11.6 Reimbursement and Indemnification. The
Financial Institutions agree to reimburse and indemnify the Agent and its
officers, directors, employees, representatives and agents ratably according to
their Pro Rata Shares, to the extent not paid or reimbursed by the Seller
Parties (i) for any amounts for which the Agent, acting in its capacity as
Agent, is entitled to reimbursement by the Seller Parties hereunder and (ii) for
any other expenses incurred by the Agent, in its capacity as Agent and acting on
behalf of the Purchasers, in connection with the administration and enforcement
of this Agreement and the other Transaction Documents.
Section 11.7 Agent in its Individual Capacity. The Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with Seller or any Affiliate of Seller as though the
Agent were not the Agent hereunder. With respect to the acquisition of Purchaser
Interests pursuant to this Agreement, the Agent shall have the same rights and
powers under this Agreement in its individual capacity as any Purchaser and may
exercise the same as though it were not the Agent, and the terms "Financial
Institution," "Purchaser," "Financial Institutions" and "Purchasers" shall
include the Agent in its individual capacity.
Section 11.8 Successor Agent. The Agent may, upon five
days' notice to Seller and the Purchasers, and the Agent will, upon the
direction of all of the Purchasers (other than the Agent, in its individual
capacity) resign as Agent. If the Agent shall resign, then the Required
Financial Institutions during such five-day period shall appoint from among the
Purchasers a successor agent. If for any reason no successor Agent is appointed
by the Required Financial Institutions during such five-day period, then
effective upon the termination of such five day period, the Purchasers shall
perform all of the duties of the Agent hereunder and under the other Transaction
Documents and Seller and the Servicer (as applicable) shall make all payments in
respect of the Aggregate Unpaids directly to the applicable Purchasers and for
all purposes shall deal directly with the Purchasers. After the effectiveness of
any retiring Agent's resignation hereunder as Agent, the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other
Transaction Documents and the provisions of this Article XI and Article X shall
continue in effect for its benefit with respect to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and under the other
Transaction Documents.
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS
Section 12.1 Assignments.
(a) Seller and each Financial Institution hereby agree
and consent to the complete or partial assignment by Falcon of all or any
portion of its rights under, interest in, title
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to and obligations under this Agreement to the Financial Institutions pursuant
to Section 13.1 or to any other Person, and upon such assignment, Falcon shall
be released from its obligations so assigned. Further, Seller and each Financial
Institution hereby agree that any assignee of Falcon of this Agreement or all or
any of the Purchaser Interests of Falcon shall have all of the rights and
benefits under this Agreement as if the term "Falcon" explicitly referred to
such party, and no such assignment shall in any way impair the rights and
benefits of Falcon hereunder. None of the Seller, the Servicer or the
Sub-Servicer shall have the right to assign its rights or obligations under this
Agreement.
(b) Any Financial Institution may at any time and from
time to time assign to one or more Persons ("Purchasing Financial Institutions")
all or any part of its rights and obligations under this Agreement pursuant to
an assignment agreement, substantially in the form set forth in Exhibit VII
hereto (the "Assignment Agreement") executed by such Purchasing Financial
Institution and such selling Financial Institution. The consent of Falcon shall
be required prior to the effectiveness of any such assignment. Each assignee of
a Financial Institution must (i) have a short-term debt rating of A-1 or better
by Standard & Poor's Ratings Group and P-1 by Moody's Investor Service, Inc. and
(ii) agree to deliver to the Agent, promptly following any request therefor by
the Agent or Falcon, an enforceability opinion in form and substance
satisfactory to the Agent and Falcon. Upon delivery of the executed Assignment
Agreement to the Agent, such selling Financial Institution shall be released
from its obligations hereunder to the extent of such assignment. Thereafter the
Purchasing Financial Institution shall for all purposes be a Financial
Institution party to this Agreement and shall have all the rights and
obligations of a Financial Institution under this Agreement to the same extent
as if it were an original party hereto and no further consent or action by
Seller, the Purchasers or the Agent shall be required.
(c) Each of the Financial Institutions agrees that in the
event that it shall cease to have a short-term debt rating of A-1 or better by
Standard & Poor's Ratings Group and P-1 by Moody's Investor Service, Inc. (an
"Affected Financial Institution"), such Affected Financial Institution shall be
obliged, at the request of Falcon or the Agent, to assign all of its rights and
obligations hereunder to (x) another Financial Institution or (y) another
funding entity nominated by the Agent and acceptable to Falcon, and willing to
participate in this Agreement through the Liquidity Termination Date in the
place of such Affected Financial Institution; provided that the Affected
Financial Institution receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such Financial Institution's Pro Rata Share of
the Aggregate Capital and Yield owing to the Financial Institutions and all
accrued but unpaid fees and other costs and expenses payable in respect of its
Pro Rata Share of the Purchaser Interests of the Financial Institutions.
Section 12.2 Participations. Any Financial Institution
may, in the ordinary course of its business at any time sell to one or more
Persons (each a "Participant") participating interests in its Pro Rata Share of
the Purchaser Interests of the Financial Institutions, its obligation to pay
Falcon its Acquisition Amounts or any other interest of such Financial
Institution hereunder. Notwithstanding any such sale by a Financial Institution
of a participating interest to a Participant, such Financial Institution's
rights and obligations under this Agreement shall remain unchanged, such
Financial Institution shall remain solely responsible for the
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performance of its obligations hereunder, and Seller, Falcon and the Agent shall
continue to deal solely and directly with such Financial Institution in
connection with such Financial Institution's rights and obligations under this
Agreement. Each Financial Institution agrees that any agreement between such
Financial Institution and any such Participant in respect of such participating
interest shall not restrict such Financial Institution's right to agree to any
amendment, supplement, waiver or modification to this Agreement, except for any
amendment, supplement, waiver or modification described in Section 14.1(b)(i).
ARTICLE XIII
LIQUIDITY FACILITY
Section 13.1 Transfer to Financial Institutions. Each
Financial Institution hereby agrees, subject to Section 13.4, that immediately
upon written notice from Falcon delivered on or prior to the Liquidity
Termination Date, it shall acquire by assignment from Falcon, without recourse
or warranty, its Pro Rata Share of one or more of the Purchaser Interests of
Falcon as specified by Falcon. Each such assignment by Falcon shall be made pro
rata among all of the Financial Institutions, except for pro rata assignments to
one or more Terminating Financial Institutions pursuant to Section 13.6. Each
such Financial Institution shall, no later than 1:00 p.m. (Chicago time) on the
date of such assignment, pay in immediately available funds (unless another form
of payment is otherwise agreed between Falcon and any Financial Institution) to
the Agent at an account designated by the Agent, for the benefit of Falcon, its
Acquisition Amount. Unless a Financial Institution has notified the Agent that
it does not intend to pay its Acquisition Amount, the Agent may assume that such
payment has been made and may, but shall not be obligated to, make the amount of
such payment available to Falcon in reliance upon such assumption. Falcon hereby
sells and assigns to the Agent for the ratable benefit of the Financial
Institutions, and the Agent hereby purchases and assumes from Falcon, effective
upon the receipt by Falcon of the Falcon Transfer Price, the Purchaser Interests
of Falcon which are the subject of any transfer pursuant to this Article XIII.
Section 13.2 Transfer Price Reduction Yield. If the
Adjusted Funded Amount is included in the calculation of the Falcon Transfer
Price for any Purchaser Interest, each Financial Institution agrees that the
Agent shall pay to Falcon the Reduction Percentage of any Yield received by the
Agent with respect to such Purchaser Interest.
Section 13.3 Payments to Falcon. In consideration for the
reduction of the Falcon Transfer Prices by the Falcon Transfer Price Reductions,
effective only at such time as the aggregate amount of the Capital of the
Purchaser Interests of the Financial Institutions equals the Falcon Residual,
each Financial Institution hereby agrees that the Agent shall not distribute to
the Financial Institutions and shall immediately remit to Falcon any Yield,
Collections or other payments received by it to be applied pursuant to the terms
hereof or otherwise to reduce the Capital of the Purchaser Interests of the
Financial Institutions.
Section 13.4 Limitation on Commitment to Purchase from
Falcon. Notwithstanding anything to the contrary in this Agreement, no Financial
Institution shall have
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any obligation to purchase any Purchaser Interest from Falcon, pursuant to
Section 13.1 or otherwise, if:
(i) Falcon shall have voluntarily commenced any
proceeding or filed any petition under any bankruptcy, insolvency or
similar law seeking the dissolution, liquidation or reorganization of
Falcon or taken any corporate action for the purpose of effectuating
any of the foregoing; or
(ii) involuntary proceedings or an involuntary petition
shall have been commenced or filed against Falcon by any Person under
any bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of Falcon and such proceeding or petition
shall have not been dismissed.
Section 13.5 Defaulting Financial Institutions. If one or
more Financial Institutions defaults in its obligation to pay its Acquisition
Amount pursuant to Section 13.1 (each such Financial Institution shall be called
a "Defaulting Financial Institution" and the aggregate amount of such defaulted
obligations being herein called the "Falcon Transfer Price Deficit"), then upon
notice from the Agent, each Financial Institution other than the Defaulting
Financial Institutions (a "Non-Defaulting Financial Institution") shall promptly
pay to the Agent, in immediately available funds, an amount equal to the lesser
of (x) such Non-Defaulting Financial Institution's proportionate share (based
upon the relative Commitments of the Non-Defaulting Financial Institutions,
after excluding the Commitment of any Approved Unconditional Liquidity
Providers) of the Falcon Transfer Price Deficit and (y) the unused portion of
such Non-Defaulting Financial Institution's Commitment; provided, however, that
if an Approved Unconditional Liquidity Provider is the Defaulting Financial
Institution, the Non-Defaulting Financial Institutions shall have no obligation
to pay any amount to the Agent pursuant to this Section 13.5 as a result of a
default by such Approved Unconditional Liquidity Provider; provided, further,
that in no event shall any Approved Unconditional Liquidity Provider be required
to make any payment as a Non-Defaulting Financial Institution pursuant to this
Section 13.5. A Defaulting Financial Institution shall forthwith upon demand pay
to the Agent for the account of the Non-Defaulting Financial Institutions all
amounts paid by each Non-Defaulting Financial Institution on behalf of such
Defaulting Financial Institution, together with interest thereon, for each day
from the date a payment was made by a Non-Defaulting Financial Institution until
the date such Non-Defaulting Financial Institution has been paid such amounts in
full, at a rate per annum equal to the Federal Funds Effective Rate plus two
percent (2%). In addition, without prejudice to any other rights that Falcon may
have under applicable law, each Defaulting Financial Institution shall pay to
Falcon forthwith upon demand, the difference between such Defaulting Financial
Institution's unpaid Acquisition Amount and the amount paid with respect thereto
by the Non-Defaulting Financial Institutions, together with interest thereon,
for each day from the date of the Agent's request for such Defaulting Financial
Institution's Acquisition Amount pursuant to Section 13.1 until the date the
requisite amount is paid to Falcon in full, at a rate per annum equal to the
Federal Funds Effective Rate plus two percent (2%).
Section 13.6 Terminating Financial Institutions.
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(a) Each Financial Institution hereby agrees to deliver
written notice to the Agent not more than 30 Business Days and not less than 5
Business Days prior to the Liquidity Termination Date indicating whether such
Financial Institution intends to renew its Commitment hereunder. If any
Financial Institution fails to deliver such notice on or prior to the date that
is 5 Business Days prior to the Liquidity Termination Date, such Financial
Institution will be deemed to have declined to renew its Commitment (each
Financial Institution which has declined or has been deemed to have declined to
renew its Commitment hereunder, a "Non-Renewing Financial Institution"). The
Agent shall promptly notify Falcon of each Non-Renewing Financial Institution
and Falcon, in its sole discretion, may (A) to the extent of Commitment
Availability, declare that such Non-Renewing Financial Institution's Commitment
shall, to such extent, automatically terminate on a date specified by Falcon on
or before the Liquidity Termination Date or (B) upon one (1) Business Days'
notice to such Non-Renewing Financial Institution assign to such Non-Renewing
Financial Institution on a date specified by Falcon its Pro Rata Share of the
aggregate Purchaser Interests then held by Falcon, subject to, and in accordance
with, Section 13.1. In addition, Falcon may, in its sole discretion, at any time
(x) to the extent of Commitment Availability, declare that any Affected
Financial Institution's Commitment shall automatically terminate on a date
specified by Falcon or (y) assign to any Affected Financial Institution on a
date specified by Falcon its Pro Rata Share of the aggregate Purchaser Interests
then held by Falcon, subject to, and in accordance with, Section 13.1 (each
Affected Financial Institution or each Non-Renewing Financial Institution is
hereinafter referred to as a "Terminating Financial Institution"). The parties
hereto expressly acknowledge that any declaration of the termination of any
Commitment, any assignment pursuant to this Section 13.6 and the order of
priority of any such termination or assignment among Terminating Financial
Institutions shall be made by Falcon in its sole and absolute discretion.
(b) Upon any assignment to a Terminating Financial
Institution as provided in this Section 13.6, any remaining Commitment of such
Terminating Financial Institution shall automatically terminate. Upon reduction
to zero of the Capital of all of the Purchaser Interests of a Terminating
Financial Institution (after application of Collections thereto pursuant to
Sections 2.2 and 2.3) all rights and obligations of such Terminating Financial
Institution hereunder shall be terminated and such Terminating Financial
Institution shall no longer be a "Financial Institution" hereunder; provided,
however, that the provisions of Article X shall continue in effect for its
benefit with respect to Purchaser Interests held by such Terminating Financial
Institution prior to its termination as a Financial Institution.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Waivers and Amendments. (a) No failure or
delay on the part of the Agent or any Purchaser in exercising any power, right
or remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
further exercise thereof or the exercise of any other power, right or remedy.
The rights and remedies herein provided shall be cumulative and nonexclusive of
any rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.
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(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing in accordance with the
provisions of this Section 14.1(b). Falcon, Seller and the Agent, (at the
direction or with the consent of the Required Financial Institutions), may enter
into written modifications or waivers of any provisions of this Agreement,
provided, however, that no such modification or waiver shall:
(i) without the consent of each affected Purchaser, (A)
extend the Liquidity Termination Date or the date of any payment or
deposit of Collections by Seller or the Servicer, (B) reduce the rate
or extend the time of payment of Yield or any CP Costs (or any
component of Yield or CP Costs), (C) reduce any fee payable to the
Agent for the benefit of the Purchasers, (D) except pursuant to Article
XII hereof, change the amount of the Capital of any Purchaser, any
Financial Institution's Pro Rata Share (except pursuant to Sections
13.1 or 13.5) or any Financial Institution's Commitment, (E) amend,
modify or waive any provision of the definition of Required Financial
Institutions or this Section 14.1(b), (F) consent to or permit the
assignment or transfer by Seller of any of its rights and obligations
under this Agreement, (G) change the definition of "Eligible
Receivable," "Concentration Limit," "Aggregate Reserve," "Yield and
Servicer Reserve," "Dilution Reserve," "Loss Reserve," "Loss
Percentage," "Delinquency Ratio," "Dilution Ratio," or "Default Ratio"
or amend the Concentration Limit Letter Agreement or (H) amend or
modify any defined term (or any defined term used directly or
indirectly in such defined term) used in clauses (A) through (G) above
in a manner that would circumvent the intention of the restrictions set
forth in such clauses; or
(ii) without the written consent of the then Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Financial
Institutions, but with the consent of Seller, the Agent may amend this Agreement
solely to add additional Persons as Financial Institutions hereunder and (ii)
the Agent, the Required Financial Institutions and Falcon may enter into
amendments to modify any of the terms or provisions of Article XI, Article XII,
Section 14.13 or any other provision of this Agreement without the consent of
Seller, provided that such amendment has no negative impact upon Seller. Any
modification or waiver made in accordance with this Section 14.1 shall apply to
each of the Purchasers equally and shall be binding upon Seller, the Purchasers
and the Agent.
Section 14.2 Notices. Except as provided in this Section
14.2, all communications and notices provided for hereunder shall be in writing
(including bank wire, telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other parties hereto at their respective
addresses or telecopy numbers set forth on the signature pages hereof or at such
other address or telecopy number as such Person may hereafter specify for the
purpose of notice to each of the other parties hereto. Each such notice or other
communication shall be effective if given by telecopy, upon the receipt thereof,
if given by mail, three (3) Business Days after the time such communication is
deposited in the mail with first class postage prepaid or if given by any other
means, when received at the address specified in this Section 14.2. Seller
hereby authorizes the Agent to effect purchases and Tranche Period and Discount
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Rate selections based on telephonic notices made by any Person whom the Agent in
good faith believes to be acting on behalf of Seller. Seller agrees to deliver
promptly to the Agent a written confirmation of each telephonic notice signed by
an authorized officer of Seller; provided, however, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs from the action taken by the Agent, the records of the
Agent shall govern absent manifest error.
Section 14.3 Ratable Payments. If any Purchaser, whether
by setoff or otherwise, has payment made to it with respect to any portion of
the Aggregate Unpaids owing to such Purchaser (other than payments received
pursuant to Section 10.2 or 10.3) in a greater proportion than that received by
any other Purchaser entitled to receive a ratable share of such Aggregate
Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash
without recourse or warranty a portion of such Aggregate Unpaids held by the
other Purchasers so that after such purchase each Purchaser will hold its
ratable proportion of such Aggregate Unpaids; provided that if all or any
portion of such excess amount is thereafter recovered from such Purchaser, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
Section 14.4 Protection of Ownership Interests of the
Purchasers.
(a) Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that the Agent may request, to
perfect, protect or more fully evidence the Purchaser Interests, or to enable
the Agent or the Purchasers to exercise and enforce their rights and remedies
hereunder. At any time, the Agent may, or the Agent may direct Seller, the
Servicer or the Sub-Servicer to, notify the Obligors of Receivables, at Seller's
expense, of the ownership or security interests of the Purchasers under this
Agreement and may also direct that payments of all amounts due or that become
due under any or all Receivables be made directly to the Agent or its designee.
Seller, the Servicer or the Sub-Servicer (as applicable) shall, at any
Purchaser's request, withhold the identity of such Purchaser in any such
notification.
(b) If any Seller Party fails to perform any of its
obligations hereunder, the Agent or any Purchaser may (but shall not be required
to) perform, or cause performance of, such obligations, and the Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be payable
by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes
the Agent at any time and from time to time in the sole discretion of the Agent,
and appoints the Agent as its attorney-in-fact, to act on behalf of such Seller
Party (i) to execute on behalf of Seller as debtor and to file financing
statements necessary or desirable in the Agent's sole discretion to perfect and
to maintain the perfection and priority of the interest of the Purchasers in the
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the interests of the Purchasers in the Receivables. This appointment is coupled
with an interest and is irrevocable.
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Section 14.5 Confidentiality. (a) Each Seller Party and
each Purchaser shall maintain and shall cause each of its employees and officers
to maintain the confidentiality of this Agreement and the other confidential or
proprietary information with respect to the Agent and Falcon and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
(i) such Seller Party and such Purchaser and its officers and employees may
disclose such information to such Seller Party's and such Purchaser's external
accountants and attorneys and as required by any applicable law or order of any
judicial or administrative proceeding and (ii) such Seller Party and its
officers and employees may disclose the Transaction Documents, other than the
Fee Letter and the Concentration Limit Letter Agreement (or any information
contained in the Fee Letter or the Concentration Limit Letter Agreement that may
also be contained in any other Transaction Document), to any institution
providing financial services to such Seller Party, pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
the Agent.
(b) Anything herein to the contrary notwithstanding, each
Seller Party hereby consents to the disclosure of any nonpublic information with
respect to it (i) to the Agent, the Financial Institutions or Falcon by each
other, (ii) by the Agent or the Purchasers to any prospective or actual assignee
or participant of any of them and (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Falcon or any entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which Bank One acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided each such Person is
informed of the confidential nature of such information. In addition, the
Purchasers and the Agent may disclose any such nonpublic information pursuant to
any law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
Section 14.6 Bankruptcy Petition. Seller, the Servicer,
the Sub-Servicer, the Agent and each Financial Institution hereby covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all outstanding senior indebtedness of Falcon or any Unconditional
Liquidity Provider, it will not institute against, or join any other Person in
instituting against, Falcon or any such entity any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
Section 14.7 Limitation of Liability. Except with respect
to any claim arising out of the willful misconduct or gross negligence of
Falcon, the Agent or any Financial Institution, no claim may be made by any
Seller Party or any other Person against Falcon, the Agent or any Financial
Institution or their respective Affiliates, directors, officers, employees,
attorneys or agents for any special, indirect, consequential or punitive damages
in respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement, or
any act, omission or event occurring in connection therewith; and each Seller
Party hereby waives, releases, and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
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Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS.
Section 14.9 CONSENT TO JURISDICTION. EACH SELLER PARTY
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER
PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE
AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR ANY PURCHASER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY
PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
Section 14.11 Integration; Binding Effect; Survival of
Terms.
(a) This Agreement and each other Transaction Document
contain the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof superseding all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns (including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by any Seller
Party pursuant to Article V, (ii)
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the indemnification and payment provisions of Article X, and Sections 14.5 and
14.6 shall be continuing and shall survive any termination of this Agreement.
Section 14.12 Counterparts; Severability; Section
References. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to "Article," "Section," "Schedule"
or "Exhibit" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.
Section 14.13 Bank One Roles. Each of the Financial
Institutions acknowledges that Bank One acts, or may in the future act, (i) as
administrative agent for Falcon or any Financial Institution, (ii) as issuing
and paying agent for the Commercial Paper, (iii) to provide credit or liquidity
enhancement for the timely payment for the Commercial Paper and (iv) to provide
other services from time to time for Falcon or any Financial Institution
(collectively, the "Bank One Roles"). Without limiting the generality of this
Section 14.13, each Financial Institution hereby acknowledges and consents to
any and all Bank One Roles and agrees that in connection with any Bank One Role,
Bank One may take, or refrain from taking, any action that it, in its
discretion, deems appropriate, including, without limitation, in its role as
administrative agent for Falcon, and the giving of notice to the Agent of a
mandatory purchase pursuant to Section 13.1.
Section 14.14 Characterization. It is the intention of the
parties hereto that each purchase hereunder shall constitute and be treated as
an absolute and irrevocable sale, which purchase shall provide the applicable
Purchaser with the full benefits of ownership of the applicable Purchaser
Interest. Except as specifically provided in this Agreement, each sale of a
Purchaser Interest hereunder is made without recourse to Seller; provided,
however, that (i) Seller shall be liable to each Purchaser and the Agent for all
representations, warranties, covenants and indemnities made by Seller pursuant
to the terms of this Agreement, and (ii) such sale does not constitute and is
not intended to result in an assumption by any Purchaser or the Agent or any
assignee thereof of any obligation of Seller or either Originator or any other
person arising in connection with the Receivables, the Related Security, or the
related Contracts or Invoices, or any other obligations of Seller or either
Originator.
(a) In addition to any ownership interest which the Agent
may from time to time acquire pursuant hereto, Seller hereby grants to the Agent
for the ratable benefit of the Purchasers a valid and perfected security
interest in all of Seller's right, title and interest in, to and under the
following assets, now existing or hereafter arising: (i) all Receivables, (ii)
the Collections, (iii) each Lock-Box, (iv) each Collection Account, (v) all
Related Security, (vi) all other rights and payments relating to such
Receivables, (vii) all proceeds of any of the foregoing, and (viii) all other
assets in which the Agent has acquired, may hereafter acquire and/or purports to
have acquired an interest hereunder prior to all other liens on and security
interests therein to
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secure the prompt and complete payment of the Aggregate Unpaids. The Agent and
the Purchasers shall have, in addition to the rights and remedies that they may
have under this Agreement, all other rights and remedies provided to a secured
creditor under the UCC and other applicable law, which rights and remedies shall
be cumulative.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
JABIL CIRCUIT FINANCIAL, INC.,
as Seller and as Servicer
By:
--------------------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 12119
Wilmington, DE 19801
Attn: Linda S. Bubacz, Assistant Treasurer
Fax: (302)552-3128
with a copy to:
JABIL CIRCUIT, INC.,
as Sub-Servicer
By:
--------------------------------------------------
Name:
Title:
Address: 10560 9th Street North
St. Petersburg, FL 33716
Attn: Forbes Alexander
cc: General Counsel
Fax: (727) 579-8529
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<PAGE> 53
FALCON ASSET SECURITIZATION CORPORATION
By:
--------------------------------------------------
Authorized Signatory
Address: c/o Bank One, NA (Main Office Chicago),
as Agent
Asset Backed Finance
Suite IL1-0079, 1-19
1 Bank One Plaza
Chicago, Illinois 60670-0079
Fax: (312) 732-1844
BANK ONE, NA (MAIN OFFICE CHICAGO),
as a Financial Institution and as Agent
By:
-----------------------------------------------
Name: Julie C. Benda
Title: Vice President
Address: Bank One, NA (Main Office Chicago)
Asset Backed Finance
Suite IL1-0596, 1-21
1 Bank One Plaza
Chicago, Illinois 60670-0596
Fax: (312) 732-4487
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<PAGE> 54
EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Accrual Period" means each calendar month, provided that the initial
Accrual Period hereunder means the period from (and including) the date of the
initial purchase hereunder to (and including) the last day of the calendar month
thereafter.
"Acquisition Amount" means, on the date of any purchase from Falcon of
one or more Purchaser Interests pursuant to Section 13.1, (a) with respect to
each Financial Institution (other than any Unconditional Liquidity Provider),
the lesser of (i) such Financial Institution's Pro Rata Share of the sum of (A)
the lesser of (1) the Adjusted Liquidity Price of each such Purchaser Interest
and (2) the Capital of each such Purchaser Interest and (B) all accrued and
unpaid CP Costs for each such Purchaser Interest and (ii) such Financial
Institution's unused Commitment and (b) with respect to each Unconditional
Liquidity Provider, the lesser of (x) such Unconditional Liquidity Provider's
Pro Rata Share of the sum of (1) the Capital of each such Purchaser Interest and
(2) all accrued and unpaid CP Costs for each such Purchaser Interest and (y)
such Unconditional Liquidity Provider's unused Commitment.
"Adjusted Funded Amount" means, in determining the Falcon Transfer
Price for any Purchaser Interest, an amount equal to the sum of (a) the Adjusted
Liquidity Price of each such Purchaser Interest and (b) an amount equal to each
Unconditional Liquidity Provider's Pro Rata Share of the difference between (i)
the Adjusted Liquidity Price of each such Purchaser Interest and (ii) the
Capital of each such Purchaser Interest.
"Adjusted Liquidity Price" means an amount equal to:
RI * [(i) DC + (ii) (NDR / 1.075)]
where:
RI = the undivided percentage interest
evidenced by such Purchaser Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all
Receivables as to which any payment,
or part thereof, has not remained
unpaid for 121 days or more from the
original invoice date for such
payment.
Each of the foregoing shall be determined from the most recent
Monthly Report received by the Agent.
Exh. I-1
<PAGE> 55
"Adverse Claim" means a lien, security interest, charge or encumbrance,
or other right or claim in, of or on any Person's assets or properties in favor
of any other Person.
"Affected Financial Institution" has the meaning specified in Section
12.1(c).
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person or any Subsidiary of such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.
"Agent" has the meaning set forth in the preamble to this Agreement.
"Aggregate Capital" means, on any date of determination, the aggregate
amount of Capital of all Purchaser Interests outstanding on such date.
"Aggregate Reduction" has the meaning specified in Section 1.3.
"Aggregate Reserves" means, on any date of determination, the sum of
the Loss Reserve, the Yield and Servicer Reserve and the Dilution Reserve.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of
Aggregate Capital and all other unpaid Obligations (whether due or accrued) at
such time.
"Agreement" means this Receivables Purchase Agreement, as it may be
amended or modified and in effect from time to time.
"Amortization Date" means the earliest to occur of (i) the day on which
any of the conditions precedent set forth in Section 6.2 are not satisfied, (ii)
the Business Day immediately prior to the occurrence of an Amortization Event
set forth in Section 9.1(d)(ii), (iii) the Business Day specified in a written
notice from the Agent following the occurrence of any other Amortization Event,
and (iv) the date which is fifteen (15) Business Days after the Agent's receipt
of written notice from Seller that it wishes to terminate the facility evidenced
by this Agreement.
"Amortization Event" has the meaning specified in Article IX.
"Approved Unconditional Liquidity Provider" means an Unconditional
Liquidity Provider which has received approval from Standard & Poor's Ratings
Group and Moody's Investors Service, Inc. to be relieved from any obligation to
pay amounts as a Non-Defaulting Financial Institution pursuant to Section 13.5
hereof.
"Assignment Agreement" has the meaning set forth in Section 12.1(b).
"Authorized Officer" means, with respect to any Person, its president,
corporate controller, treasurer or chief financial officer.
Exh. I-2
<PAGE> 56
"Bank One" means Bank One, NA (Main Office Chicago) in its individual
capacity and its successors.
"Base Rate" means a rate per annum equal to the corporate base rate,
prime rate or base rate of interest, as applicable, announced by Bank One or
Bank One Corporation from time to time, changing when and as such rate changes.
"Broken Funding Costs" means for any Purchaser Interest which: (i) has
its Capital reduced without compliance by Seller with the notice requirements
hereunder or (ii) does not become subject to an Aggregate Reduction following
the delivery of any Reduction Notice or (iii) is assigned under Article XIII or
terminated prior to the date on which it was originally scheduled to end; an
amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable)
that would have accrued during the remainder of the Tranche Periods or the
tranche periods for Commercial Paper determined by the Agent to relate to such
Purchaser Interest (as applicable) subsequent to the date of such reduction,
assignment or termination (or in respect of clause (ii) above, the date such
Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of
the Capital of such Purchaser Interest if such reduction, assignment or
termination had not occurred or such Reduction Notice had not been delivered,
over (B) the sum of (x) to the extent all or a portion of such Capital is
allocated to another Purchaser I