EXHIBIT 10.12
FLEXTRONICS INTERNATIONAL USA, INC.
CONTINGENT SHARE AWARD AGREEMENT
This CONTINGENT SHARE AWARD AGREEMENT (the "AGREEMENT"), dated May 18,
2004, is entered into by and between Xxxxxxx X. Xxxxx ("EXECUTIVE") and
Flextronics International USA, Inc. (the "COMPANY").
WHEREAS, Executive is currently employed by the Company as its Chief
Executive Officer; and
WHEREAS, Executive has provided service to the Company for over ten
years; and
WHEREAS, the Company currently does not provide any pension plan
benefits to Executive other than a 401(k) plan; and
WHEREAS, the Company has engaged consultants to assess the
competitiveness of its executive compensation and to provide an overview of
nonqualified pension benefits; and
WHEREAS, the Company desires to provide Executive with a deferred
compensation arrangement as a supplemental executive pension benefit that
provides cash benefits following Executive's employment to retain, incent and
reward Executive for his service to the Company; and
WHEREAS, the Company and Executive desire to enter into an agreement to
provide for such supplemental executive pension benefits being earned by
Executive upon the achievement of certain Company share performance targets.
NOW, THEREFORE, in consideration of the mutual promises made herein,
the Company and Executive hereby agree as follows:
1. GRANT OF CONTINGENT SHARE AWARD. Subject to all of the terms of this
Agreement, the Company hereby grants to Executive a Deferred Compensation
Contingent Share Award for 1,000,000 shares of the Company's Ordinary Shares at
an exercise price equal to a 10% premium above the $15.82 closing price of the
Company's Ordinary Shares on the Nasdaq Stock Market on the date this pension
arrangement was adopted and approved by the Board, which is equal to $17.40 per
share (the "EXERCISE PRICE"). This Contingent Share Award shall entitle the
Account of the Executive to be credited with Deferred Compensation as set forth
in Section 2 below; provided that in no event shall this Deferred Compensation
Contingent Share Award require the Company to make credits to the Executive's
Account in excess of $7,500,000 (the "TOTAL AWARD AMOUNT").
2. CREDITING OF AWARD AMOUNT. Within two (2) business days following
the relevant Measurement Date, the Company will credit Executive's Account with
Deferred Compensation in an amount equal to (a)(i) the excess of the Average
Share Price as of such Measurement Data over the Exercise Price, multiplied by
(ii) 1,000,000, less (b) the amounts credited to the Executive's Account as
Deferred Compensation on all prior Measurement Dates (the "PRIOR CREDITS").
Credits to the Executive's Account under this Section 2 will continue until the
earlier of (a) the date on which the Total Award Amount has been credited to the
Executive's Account or (b) the termination date of Executive's employment with
the Company and/or any subsidiary of the Company. All amounts credited to
Executive's Account shall be fully vested and nonforfeitable.
3. ACCELERATION OF PAYMENT. Notwithstanding the foregoing, in the event
of (a) Executive's death or Disability or (b) a Change of Control, then the
Company shall immediately credit Executive's Account with an amount equal to the
Total Award Amount less the sum of all Prior Credits. All amounts credited to
Executive's Account shall be fully vested and nonforfeitable.
4. CONDITIONS TO PAYMENT OF AWARD AMOUNT. Unless otherwise set forth in
Sections 2 or 3, Executive must be employed by the Company on the applicable
Measurement Date in order to be credited with an Award Amount, if any, for the
Measurement Date.
5. ADJUSTMENTS TO ORDINARY SHARES. In the event that the number of
outstanding shares of the Company's Ordinary Shares is changed by a stock
dividend, recapitalization, stock split, reverse stock split, subdivision,
combination, reclassification, or similar change in the capital structure of the
Company without consideration, then the number and kind of shares subject to
this Contingent Share Award and the Exercise Price will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities law.
6. DEFINITIONS. Capitalized terms used here but not defined above will
have the following definitions for purposes of this Agreement:
(a) "ACCOUNT" means the account established on behalf of
Executive under the Deferred Compensation Plan.
(b) "AVERAGE SHARE PRICE" means the sum of the closing prices
of the Company's Ordinary Shares on the Nasdaq Stock Market as reported in The
Wall Street Journal during the thirty (30) day period immediately preceding the
applicable Measurement Date, divided by the number of days in which the
Company's Ordinary Shares traded during such period.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CHANGE OF CONTROL" means (i) a merger or consolidation of
the Company in which its voting securities immediately prior to the merger or
consolidation do not represent, or are not converted into securities that
represent, a majority of the voting power of all voting securities of the
surviving entity immediately after the merger or consolidation, (ii) the sale,
lease, conveyance or other disposition of all or substantially all of the
Company's assets as an entirety or substantially as an entirety to any person,
entity or group acting in concert; (iii) any transaction or series of
transactions (as a result of a tender offer, merger, consolidation or otherwise)
that results in, or that is in connection with, any person, entity or group
acting in concert becoming the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) directly or indirectly, of more than
50% of the aggregate voting power of all classes of shares of the Company; or
(iv) a liquidation and winding up of the business of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as
amended.
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(f) "DEFERRED COMPENSATION" means the aggregate amounts
credited to the Executive's Account as cash pursuant to Sections 2 and 3 of this
Agreement.
(g) "DEFERRED COMPENSATION CONTINGENT SHARE AWARD" means a
contingent award of Ordinary Shares granted pursuant to Section 1 of the
Agreement.
(h) "DEFERRED COMPENSATION PLAN" means the Flextronics
International USA, Inc. Special Deferred Compensation Plan established by the
Company to hold the Deferred Compensation credited to the Executive's Account
under this Agreement.
(i) "DISABILITY" means the Executive's mental or physical
disability that prevents Executive from performing his duties as Chief Executive
Officer of the Company and is expected to last for more than twelve months, as
determined by a physician acceptable to the Company and the Executive.
(j) "FISCAL QUARTER" means the Company's fiscal quarters
beginning on each April 1, July 1, October 1 and January 1 and ending on each
June 30, September 30, December 31 and March 31 of each year.
(k) "MEASUREMENT DATE" means the last day of each of the
Company's Fiscal Quarters and the date of the Executive's termination of
employment with the Company.
(l) "ORDINARY SHARES" means the Company's ordinary shares.
7. UNSECURED FUNDS. All payments of Deferred Compensation shall be paid
in cash from the general funds of the Company and no special or separate fund,
other than the Deferred Compensation Plan (or any rabbi trust under such
Deferred Compensation Plan), shall be established and no other segregation of
assets shall be made to assure the payment of any Deferred Compensation. The
Executive shall have no right, title or interest whatever in or to any
investment which the Company may make to aid it in meeting its obligations
hereunder, including, but not limited to, deemed investment. Nothing contained
in this Agreement, and no action taken pursuant to its provisions, shall create
or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and the Executive or any other person. To the extent that
any person acquires a right to receive payments from the Company hereunder such
right shall be no greater than the right of an unsecured creditor of the
Company.
8. OTHER BENEFITS. This Agreement shall be in addition to any rights of
the Executive under any other agreement with the Company, if any, and shall not
affect or reduce any benefit or compensation during the Executive of a kind not
expressly provided for in this Agreement.
9. WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all Federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
10. EMPLOYMENT AND BENEFITS RIGHTS. Any benefit payable under this
Agreement shall not be deemed salary or other compensation for the purpose of
computing benefits under any employee benefit plan or other arrangement of the
Company for the benefit of its employees. Neither this Agreement nor any action
taken hereunder shall be construed as giving to any
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employee the right to be retained in the employ of the Company or as affecting
the right of the Company to dismiss any employee.
11. BINDING EFFECT; NONASSIGNABILITY. This Agreement shall be binding
upon and insure to the benefit of the Company and its successors and assigns and
the Executive or the Executive's designee or estate shall commute, encumber,
sell or otherwise dispose of the right to receive the payments provided for in
this Agreement, which payments and the rights thereto are expressly declared to
be nontransferable and nonassignable.
12. AMENDMENT. This Agreement may not be amended, suspended or
terminated, in whole or in part without the written consent of Executive and the
Company.
13. GENERAL PROVISIONS.
(a) EMPLOYMENT STATUS. This Agreement does not constitute a
contract of employment or impose on Executive any obligation to remain as an
employee, or impose on the Company any obligation (i) to retain Executive as an
employee, (ii) to change the status of Executive as an "at-will" employee, or
(iii) to change the Company's policies regarding termination of employment.
(b) COMPLETE AGREEMENT. This Agreement and the Deferred
Compensation Plan constitute the entire agreement between Executive and the
Company and are the complete, final, and exclusive embodiment of their agreement
with regard to this subject matter.
(c) INTERPRETATION. Any dispute regarding the interpretation
of this Agreement shall be submitted by Executive to the Board for review. The
resolution of such a dispute by the Board shall be final and binding on the
Company and Executive.
(d) NO RIGHTS OF STOCKHOLDER. Executive shall have no rights
as a stockholder by reason of the award of the Contingent Share Award.
(e) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of California.
IN WITNESS HEREOF, the parties have executed this Agreement on the date
first above written.
FLEXTRONICS INTERNATIONAL USA, INC. EXECUTIVE
By: /s/ Xxx Xxxxx /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Name: Xxx Xxxxx
--------------------------------
Title: SVP of Finance
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FLEXTRONICS INTERNATIONAL USA, INC.
SPECIAL DEFERRED COMPENSATION PLAN
1. PURPOSE.
The purpose of this Plan is to provide the terms of an unfunded
deferred compensation plan for a select group of management, highly compensated
employees, directors and persons who have been part of a select group of
management, highly compensated employees or directors of Flextronics
International USA, Inc. (the "Company") who may agree, pursuant to the Deferral
Agreements, to defer certain compensation otherwise due to them. It is intended
that the Plan constitute an unfunded "top hat plan" for purposes of the Employee
Retirement Income Security Act of 1974, as amended.
2. DEFINITIONS.
The following terms used in the Plan shall have the meanings set
forth below:
(a) "Affiliate" means, with respect to the Company, any entity
directly or indirectly controlling, controlled by or under common control with,
the Company or any other entity designated by the Board in which the Company or
an Affiliate has an interest.
(b) "Agreement Date" shall mean May 18, 2004, or such other date
designated as the Agreement Date in the applicable Deferral Agreement.
(c) "Beneficiary" shall mean any person, persons, trust or other
entity designated by a Participant to receive benefits, if any, under the Plan
upon such Participant's death. No designation or change in designation of a
Beneficiary shall be effective until received and acknowledged in writing by the
Committee or Plan Administrator.
(d) "Board" shall mean the Board of Directors of Flextronics
International Ltd.
(e) "Change of Control" shall mean (i) a merger or consolidation
of the Flextronics International Ltd. in which its voting securities immediately
prior to the merger or consolidation do not represent, or are not converted into
securities that represent, a majority of the voting power of all voting
securities of the surviving entity immediately after the merger or
consolidation, (ii) the sale, lease, conveyance or other disposition of all or
substantially all of the Flextronics International Lid's assets as an entirety
or substantially as an entirety to any person, entity or group acting in
concert; (iii) any transaction or series of transactions (as a result of a
tender offer, merger, consolidation or otherwise) that results in, or that is in
connection with, any person, entity or group acting in concert becoming the
"beneficial owner" (as defined in Rule Bd-3 under the Securities Exchange Act of
1934) directly or indirectly of more than 50% of the aggregate voting power of
all classes of shares of Flextronics International Ltd; or (iv) a liquidation
and winding up of the business of Flextronics International Ltd.
(f) "Claimant" shall have the meaning set forth in Section 9(a).
(g) "Code" shall mean the Internal Revenue Code of 1986 as
amended.
(h) "Committee" shall mean the Compensation Committee appointed by
the Board.
(i) "Company" shall mean Flextronics International USA. Inc. and
its successors.
(j) "Deferral Account" shall mean the recordkeeping account
established and maintained by the Company in the name of a Participant as
provided in Section 4(c) for compensation payable to a Participant pursuant to a
Deferral Agreement.
(k) "Deferral Agreement" shall mean an agreement executed by the
Participant and the Company, in such form as approved by the Committee or the
Plan Administrator, and as may be revised from time to time with respect to any
one or more Participants by or at the direction of the Committee or Plan
Administrator, whereby (A) the Participant (i) agrees to receive certain types
of compensation in the future pursuant to the provisions of this Plan, (ii)
elects to defer future compensation such Participant would otherwise be entitled
to receive in cash from the Company, including an amount or percentage of
compensation to be deferred, and/or (iii) makes such other elections as are
permitted and provides such other information as is required under the Plan, and
(B) the Participant specifies a schedule according to which the Participant will
receive payout of his or her compensation that is payable in the future under
this Plan. Each Deferral Agreement shall incorporate by its terms the provisions
of this Plan.
(l) "Disability" shall mean a mental condition (i) that qualifies
the Participant (or would qualify the Participant, were he or she an employee of
the Company) as being disabled for purposes of any of the plans or programs of
the Company under which benefits, compensation, or awards are contingent upon a
finding of disability, or (ii) as a result of which, in the opinion of the
Committee or Plan Administrator, the Participant would be unable to perform the
usual duties performed by the Participant for the Company or its Affiliates.
(m) "Fair Market Value" shall mean, on a given date of valuation,
(i) with respect to any mutual fund, the closing net asset value as reported in
The Wall Street Journal with respect to the date of valuation and (ii) with
respect to a security traded on a national securities exchange or the NASDAQ
National Market, the closing price on the date of valuation as reported in The
Wall Street Journal.
(n) "Hypothetical Investments" shall have the meaning set forth in
Section 4(d).
(o) "Manager" shall have the meaning set forth in Section 4(d).
(p) "Officers" shall have the meaning set forth in Section
8(b)(ii).
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(q) "Participant" shall mean a present or former employee or
director of the Company who participates in this Plan and any other present or
former employee or director designated from time to time by the Committee.
(r) "Pay Day" shall mean, for each Participant, the day on which
the Company is required, by the terms of the applicable Deferral Agreement form
or any other agreement between the Participant and the Company, to credit an
amount to the Participant's Deferral Account under this Plan.
(s) "Plan" shall mean this Flextronics International USA, Inc.,
Special Deferred Compensation Plan.
(t) "Plan Administrator" shall mean the Plan Administrator, if
any, appointed pursuant to Section 3(a).
(u) "Plan Effective Date" shall mean May 18, 2004.
(v) "Released Party" shall have the meaning set forth in Section
8(b)(iii).
(w) "Trust" shall mean any trust or trusts established or
designated by the Company pursuant to Section 5(a) to hold assets in connection
with the Plan.
(x) "Trustee" shall have the meaning set forth in Section 5(a).
3. AUTHORITY AND ADMINISTRATION OF THE COMMITTEE AND PLAN
ADMINISTRATOR.
(a) Authorization of Committee or Plan Administrator. The
Committee shall administer the Plan and may select one or more persons to serve
as the Plan Administrator. The Plan Administrator shall have authority to
perform any act that the Committee is entitled to perform under this Plan,
except to the extent that the Committee specifies limitations on the Plan
Administrator's authority. The initial Plan Administrator shall be the Company's
Treasurer. Any person selected to serve as the Plan Administrator may, but need
not, be a Committee member or an officer or employee of the Company. However, if
a person serving as Plan Administrator or a member of the Committee is a
Participant, such person may not decide or vote on a matter affecting his
interest as a Participant.
(b) Administration by Committee or Plan Administrator. The
Committee or Plan Administrator shall administer the Plan in accordance with its
terms, and shall have all powers necessary to accomplish such purpose, including
the power and authority to reasonably construe and interpret the Plan, to
reasonably define the terms used herein, to reasonably prescribe, amend and
rescind rules and regulations, agreements, forms, and notices relating to the
administration of the Plan, and to make all other determinations reasonably
necessary or advisable for the administration of the Plan. The Committee or Plan
Administrator may appoint additional agents and delegate thereto powers and
duties under the Plan.
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4. DEFERRAL AGREEMENTS AND DEFERRAL ACCOUNTS.
(a) Deferral Agreement. The Company and any Participant may agree
to defer all or a portion of his or her compensation, under the terms provided
in any Deferral Agreement form provided to the Participant in accordance with
the Plan, by executing a completed Deferral Agreement on or before the relevant
Agreement Date. The Deferral Agreement form shall establish for each Participant
the amount and type of compensation (including bonuses and/or salary) that may
be deferred pursuant to the Plan and such determination will be reflected on the
relevant Deferral Agreement form, and may establish maximum or minimum amounts
of aggregate deferrals that may be elected for a Participant. A Participant
shall not be entitled to vary any term that is set forth in the Deferral
Agreement form except to the extent that the form of Deferral Agreement itself
permits variations.
(b) Conclusion of Deferrals in the Event of Certain Law Changes.
If a change in law that occurs after the Plan Effective Date would, in the
judgment of the Committee or Plan Administrator, likely accelerate the taxation
of amounts that would be credited to a Participant's Deferral Account in the
future under a Deferral Agreement previously entered into by the Participant and
the Company, the Committee or Plan Administrator and the affected Participants
shall endeavor to amend the affected Deferral Agreements and/or the Plan to
satisfy the requirements of the change in law and, unless and until such an
amendment is agreed to, Company shall, upon written request by the Participant,
distribute to the Participant amounts credited to the Participant's Deferral
Account (together with any hypothetical earnings thereon) pursuant to the
Deferral Agreement to the extent that such amounts are currently taxable to the
Participant as a result of such change in law.
(c) Establishment of Deferral Accounts. The Committee or Plan
Administrator shall establish a Deferral Account for each Deferral Agreement.
Each Deferral Account shall be maintained for the Participant solely as a
bookkeeping entry by the Company to evidence unfunded obligations of the
Company. The Participant shall be 100% vested in the Participant's Deferral
Account at all times, except to the extent otherwise specified in the applicable
Deferral Agreement. A Participant's Deferral Account shall be credited with the
amounts required to be credited to the Participant's Deferral Account pursuant
to the Participant's initial Deferral Agreement or pursuant to any subsequent
Deferral Agreement entered into by that Participant and the Company, in each
case, less the amount of federal, state or local tax required by law to be
withheld with respect to the such amounts, unless such withholding is provided
from another source, and shall be adjusted for Hypothetical Investment results
as described herein.
(d) Hypothetical Investments and Managers. Subject to the
provisions of Section 4(g), amounts credited to a Deferral Account shall be
deemed to be invested, at the Participant's direction from time to time, in one
or more hypothetical investments selected from a list established by the
Committee or Plan Administrator ("Hypothetical Investments"). A Participant may
select Hypothetical Investments or may select an investment manager (a
"Manager") from a list established by the Committee or Plan Administrator, and
the Manager will then select Hypothetical Investments on behalf of the
Participant. The Committee or Plan Administrator shall be liberal and shall
include Hypothetical Investments and Managers representing a wide variety of
investment alternative. Hypothetical Investments shall include
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only mutual funds and publicly traded stocks and bonds. The Committee or Plan
Administrator shall consider requests from any Participant to add to the initial
list of Hypothetical Investments and Managers and shall satisfy such requests if
they are reasonably acceptable to the Committee or Plan Administrator. The
Committee or Plan Administrator may change or discontinue any Hypothetical
Investment or Manager if reasonably necessary to satisfy business objectives of
the Company or its Affiliates: provided that, following a Change of Control,
neither the Committee nor the Plan Administrator may change or modify the
investment options existing immediately prior to such Change of Control in any
manner that is adverse to the Participants. No Hypothetical Investments may be
made in any debt or equity issued by Flextronics International Ltd. or its
Affiliates.
(e) List of Hypothetical Investments and Managers. An initial list
of Hypothetical Investments and Managers shall be established by the Board, the
Committee or the Plan Administrator and the list, as it may be changed and exist
from time to time, shall be provided to each Participant in connection with the
initial Deferral Agreement.
(f) Investment of Deferral Accounts. As provided in Sections 4(d)
and 5(b). each Deferral Account shall be deemed to be invested in one or more
Hypothetical Investments as of the date of the deferral or credit, as the case
may be. The amounts of hypothetical income, appreciation and depreciation in
value of the Hypothetical Investments shall be credited and debited to, or
otherwise reflected in, such Deferral Account from time to time in accordance
with procedures established by the Committee or Plan Administrator. Unless
otherwise determined by the Committee or Plan Administrator, amounts credited to
a Deferral Account shall be deemed invested in Hypothetical Investments as of
the date so credited.
(g) Allocation and Reallocation of Hypothetical Investments. A
Participant may allocate and reallocate amounts credited to his or her Deferral
Account to one or more of the Hypothetical Investments or Managers authorized
under the Plan. Subject to the rules established by the Committee or Plan
Administrator, a Participant may reallocate amounts credited to his or her
Deferral Account to other Hypothetical Investments or other Managers by filing
with the Committee or Plan Administrator a notice, in such form as may be
specified by the Committee or Plan Administrator; provided that such
reallocation shall not be permitted more than once per calendar month without
the written consent of the Committee or Plan Administrator; provided further
that the Committee or Plan Administrator shall be reasonable in accommodating
requests for mid-month allocations. The Committee or Plan Administrator may
direct the Managers accordingly; provided, however, that a Manager may
reallocate amounts credited to a Deferral Account for which it has
responsibility at any time without limitation. No Participant shall have the
right, at any time, to direct a Manager to enter into specific transactions in
connection with his or her Deferral Account; provided that this provision shall
not prohibit the Participant from communicating with the Manager regarding
Hypothetical Investments, including communication regarding preferred
Hypothetical Investment objectives. Each Manager shall have the power to acquire
and dispose of such Hypothetical Investments as the Manager determines necessary
in connection with its portfolio. The Committee or Plan Administrator may
restrict or prohibit reallocation of amounts deemed invested in specified
Hypothetical Investments or invested by specified Managers to comply with
applicable law or regulation.
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(h) No Actual Investment. Notwithstanding any other provision of
this Plan that may be interpreted to the contrary, the Hypothetical Investments
are to be used for measurement purposes only. A Participant's election of any
such Hypothetical Investments, the allocation of such Hypothetical Investments
to his or her Deferral Account, the calculation of additional amounts and the
crediting or debiting of such amounts to a Participant's Deferral Account shall
not be considered or construed in any manner as an actual investment of his or
her Deferral Account in any such Hypothetical Investments. In the event that the
Company or the Trustee, in its own discretion, decides to invest funds in any or
all of the Hypothetical Investments, no Participant shall have any rights in or
to such investments themselves. Without limiting the foregoing, a Participant's
Deferral Account shall at all times be a bookkeeping entry only and shall not
represent any investment made on his or her behalf by the Company or the Trust.
The Participant shall at all times remain an unsecured creditor of the Company.
5. ESTABLISHMENT OF TRUST.
(a) The Trust Agreement. The Company shall enter into a Trust
Agreement, in substantially the form attached hereto as Exhibit A, providing for
the establishment of a trust to be held and administered by a trustee (the
"Trustee") designated in the Trust Agreement (the "Trust"). The Trustee shall be
the agent for purposes of such duties delegated to the Trustee by the Committee
or Plan Administrator as set forth in the Trust Agreement. The Trust shall be
irrevocable.
(b) Funding the Trust. On the relevant Pay Day, the Company shall
deposit into the Trust cash or other assets, as specified in the applicable
Deferral Agreement, equal to the aggregate amount required to be credited to the
Participant's Deferral Account for that Pay Day, less applicable taxes required
to be withheld, if any. The assets of the Trust shall remain subject to the
claims of the general creditors of the Company in the event of an insolvency of
the Company.
(c) Taxes and Expenses of the Trust. The Committee and the Plan
Administrator shall make all investment decisions for the Trust, and no
Participant shall be entitlement to direct any investments of the Trust. All
taxes on any gains and losses from the investment of the assets of the Trust
shall be recognized by the Company and the taxes thereon shall be paid by the
Company and shall not be recovered from the Deferral Accounts or the Trust. The
third-party administrative and investment expenses of the Plan and the Trust,
including expenses charged by the Trustee to establish the Trust and the
Trustee's annual fee per Deferral Account, shall be paid by the Company, and
shall neither be payable by Trustee from the Trust nor reduce any Deferral
Accounts; provided that any Managers' fees or other expenses incurred with
respect to particular Hypothetical Investment or any asset of the Trust which
corresponds to a particular Hypothetical Investment shall be charged to the
Deferral Account that is deemed invested in such Hypothetical Investment. No
part of the Company's internal expenses to administer the Plan, including
overhead expenses, shall be charged to the Trust or the Deferral Accounts.
6. SETTLEMENT OF DEFERRAL ACCOUNTS.
The Company shall pay or direct the Trustee to pay the net amount credited
to a Deferral
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Account as elected by the Participant in the Participant's Deferral Agreement.
Except for payouts due to the death, Disability or termination of employment of
the Participant, no payout of amounts credited to a Participant's Deferral
Account shall occur prior to the first anniversary of the Deferral Agreement.
Except as otherwise provided in the a the applicable Deferral Agreement, a
Participant may redefer the payout of his Deferral Account one or more times;
provided, that such redeferral is made at least 12 months prior to the first
scheduled payout date of the payouts to be deferred, according to the schedule
in effect prior to the election to redefer. An election to redefer shall be
invalid, and shall not be given effect, with respect to any distribution that
would (but for the election to redefer) be paid within 12 months of the date
that the redeferral election is made.
(a) Payment in Cash or Securities. The Company shall settle a
Participant's Deferral Account, and discharge all of its obligations to pay
deferred compensation under the Plan with respect to such Deferral Account, by
payment of cash in an amount equal to or, at the option of the Committee or Plan
Administrator, in marketable securities selected by the Committee or Plan
Administrator with a Fair Market Value equal to the net amount credited to the
applicable Deferral Account. Any such distributions to a Participant shall
reduce the Company's obligations under the Plan to such Participant. The
Company's obligation under the Plan may be satisfied by distributions from the
Trust.
(b) Timing of Payments.
(i) Payments in settlement of a Deferral Account shall be
made as soon as practicable after the date or dates (including upon the
occurrence of specified events), and in such number of installments, as directed
by the Participant in the Participant's Deferral Agreement, unless otherwise
provided in this Section 6. All amounts needed for a payment shall be deemed
withdrawn from the Hypothetical Investments as close in time as is practicable
to the requested payment date. If a Participant has elected to receive
installment payments, the amount of the distribution payable is based upon the
value of the Deferral Account at the time of the installment payment date and
shall act to reduce Hypothetical Investments in the following order: (A) cash
and money market accounts, and (B) each other Hypothetical Investment on a pro
rata basis, based on the value of the Participant's Deferral Account. If a
Participant has elected to receive partial payments of the amount in his or her
Deferral Account, unpaid balances shall continue to be deemed to be invested in
the Hypothetical Investments that such Participant has designated pursuant to
Section 4(d) or 4(f).
(ii) Except as provided otherwise in the applicable Deferral
Agreement, in the event of a Participant's death prior to the payment of all net
amounts credited to this or her Deferral Account, such amounts shall be paid to
the Participant's designated Beneficiary in a single lump sum as soon as
practicable after the Participant's death. If a Participant fails to designate a
Beneficiary or if all designated Beneficiaries predecease the Participant or die
prior to complete distribution of the Participant's benefits, the Participant's
designated Beneficiary shall be the executor or personal representative of the
Participant's estate, if a probate proceeding is open at the time for the
distribution(s), and otherwise shall be the person(s) who would be entitled to
the distribution(s) under the Participant's last will and /or revocable trust
(if such will distributes the residuary estate to such trust) and otherwise to
the person(s) who would inherit the Participant's property under the law of the
Participant's last
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domicile. If the Committee or Plan Administrator has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee or Plan
Administrator shall have the right, exercisable in its discretion, to withhold
such payments until this matter is resolved to the Committee's or Plan
Administrator's satisfaction. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge the Company from all further
obligations under this Plan with respect to the Participant, and such
Participant's interest in the Plan shall terminate upon such full payment of
benefits.
(iii) Irrespective of any elections made by a Participant, the
Committee or Plan Administrator may provide, subject to the applicable Deferral
Agreement, that the net amount credited to a Participant's Deferral Account may
be paid out in a single lump sum to the Participant in the event of the
Participant's Disability.
(c) Financial Emergency. Other provisions of the Plan
notwithstanding, if the Committee or Plan Administrator determines that the
Participant has an unforeseen financial emergency of such a substantial nature
and beyond the Participant's control that payment of amounts previously deferred
under the Plan is warranted, the Committee or Plan Administrator may direct the
immediate lump sum payment to the Participant of the applicable portion of the
Participant's Deferral Account, upon thirty (30) days advance written notice
from a Participant.
(d) Special Election for Early Distribution. Other provisions of
the Plan notwithstanding, the Participant may withdraw amounts from the
Participant's Deferral Account on ten (10) days advance written notice to the
Committee or Plan Administrator in accordance with approval procedures as the
Committee or Plan Administrator, in its sole discretion, may establish. Such
withdrawn amounts shall be made in a single lump sum, provided, that ten percent
(10%) of the amount withdrawn shall be forfeited to the Company prior to the
payment to the Participant. The minimum withdrawal a Participant may request
shall equal the lesser of (i) $25.000 or (ii) the total amount in the
Participant's Deferral Account.
(e) Distribution in the Event of Taxation. If, for any reason, all
or any portion of a Participant's benefits under this Plan becomes taxable to
the Participant prior to receipt, a Participant may petition the Committee or
Plan Administrator in writing for a distribution of that portion of his or her
benefit that has become taxable. Upon the grant of such a petition, which grant
shall not be unreasonably withheld, the Company shall distribute to the
Participant immediately available funds in an amount equal to the taxable
portion of his or her benefit which amount shall not exceed a Participant's
Deferral Account under the Plan. If the petition is granted, the tax liability
distribution shall be made within thirty (30) days of the date when the
Participant's petition is granted.
(f) Effect on Deferral Account. A Participant's Deferral Account
shall be debited to the extent of any distributions to the Participant pursuant
to this Section 6.
7. AMENDMENT/TERMINATION.
(a) The Committee, Plan Administrator or the Board may, with
prospective or retroactive effect, amend, alter, suspend, discontinue, or
terminate the Plan (i) if there is a change in law or regulatory authority that
reasonably would be expected to result in an increase in the
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cost to the Company of at least $200.000 to maintain the Plan (other than an
increase resulting from taxes on any gains from investment of the assets of the
Trust), (ii) if the Internal Revenue Service determines that any amounts
deferred under the Plan are includible in the Participant's gross income prior
to being paid out to the Participant, or (iii) no Participant is materially
adversely affected by such action with respect to amounts required to be
credited to the Participant's Deferral Account under any previously executed
Deferral Agreement; provided that, upon an event described in clauses (i) or
(ii), the Company may accelerate distributions under this Plan but may not
otherwise alter any Participant's rights under this Plan; and provided further
that, following a Change of Control, the Plan will not be subject to amendment,
alteration, suspension, discontinuation or termination without the prior written
consent of each Participant who would be materially adversely affected by such
action.
(b) Notwithstanding any other provision to the contrary and except
as may otherwise be provided by the Committee or Plan Administrator, the Plan
shall terminate as soon as possible following the payment of all amounts in
respect of all Deferral Accounts.
8. GENERAL PROVISIONS.
(a) Limits on Transfer of Awards. Other than by will, the laws of
descent and distribution, or by appointing a Beneficiary, no right, title or
interest of any kind in the Plan shall be transferable or assignable by a
Participant (or the Participant's Beneficiary) or be subject to alienation,
anticipation, encumbrance, garnishment, attachment, levy, execution or other
legal or equitable process, nor subject to the debts, contracts, liabilities or
engagements, or torts of any Participant or the Participant's Beneficiary. Any
attempt to alienate, sell, transfer, assign, pledge, garnish, attach or take any
other action subject to legal or equitable process or encumber or dispose of any
interest in the Plan shall be void.
(b) Waiver, Receipt and Release.
(i) As between the Participant and the Company, a
Participant and the Participant's Beneficiary shall assume all risk (other than
gross negligence of the Company or the Committee or Plan Administrator, or
breach by the Company of the terms of this Plan) in connection with the Plan.
Trust design, implementation or administration, Hypothetical Investment
decisions made by the Participant and the resulting value of the Participant's
Deferral Account, the selection and actions of the Trustee or any other third
party providing services to the Company or the Trust in connection with the Plan
or Trust (including their administrative and investment expenses), including any
income taxes of the Participant or Participant's Beneficiary relating to or
arising out of his or her participation in the Plan, and neither the Company nor
the Committee or Plan Administrator shall be liable or responsible therefor
other than as provided in Section 5(c).
(ii) As a condition of being a Participant in the Plan, each
Participant must sign a waiver (which may be a part of the Deferral Agreement)
releasing the Company and its Affiliates, the Committee, the Plan Administrator,
officers of the Company or its Affiliates (the "Officers") and the Board from
any claims and liabilities regarding the matters to which the Participant has
assumed the risk as set forth in this Section. Payments (in any form) to any
Participant or Beneficiary in accordance with the provisions of the Plan shall,
to the extent
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thereof, be in full satisfaction of all claims for compensation deferred and
relating to the Deferral Account to which the payments relate against the
Company or any Affiliate or the Committee or Plan Administrator and the
Committee or Plan Administrator may require such Participant or Beneficiary, as
a condition to such payments, to execute a waiver, receipt and release to such
effect.
(iii) As a condition of being a Participant in the Plan, each
Participant must sign a waiver releasing the Trustee and each of its Affiliates
(each, a "Released Party") against any and all loss, claims, liability and
expenses imposed on or incurred by any Released Party as a result of any acts
taken or any failure to act by the Trustee, where such act or failure to act is
in accordance with the directions from the Committee or Plan Administrator or
any designee of the Committee or Plan Administrator.
(iv) Each Participant agrees to pay any taxes, penalties and
interest such Participant or Beneficiary may incur in connection with his or her
participation in this Plan, and further agrees to indemnify the Company and its
Affiliates, the Committee, the Plan Administrator, Officers and the Board for
such taxes, penalties and interest the Participant or Participant's Beneficiary
incurs and fails to pay and for which the Company is made liable by the
appropriate tax authority.
(c) Unfunded Status of Awards, Creation of Trusts. The Plan is
intended to constitute an unfunded plan for deferred compensation and each
Participant shall rely solely on the unsecured promise of the Company for
payment hereunder. With respect to any payment not yet made to a Participant
under the Plan, nothing contained in the Plan shall give a Participant any
rights that are greater than those of a general unsecured creditor of the
Company.
(d) Participant Rights. No provision of the Plan or transaction
hereunder shall confer upon any Participant any right or impose upon any
Participant any obligation to be employed by the Company or an Affiliate, or to
interfere in any way with the right of the Company or an Affiliate to increase
or decrease the amount of any compensation payable to such Participant. Subject
to the limitations set forth in Section 8(c) hereof, the Plan shall inure to the
benefit of and be binding upon, the parties hereto and their successors and
assigns.
(e) Tax Withholding. The Company shall have the right to deduct
from amounts otherwise credited to or paid from a Deferral Account any sums that
federal, state, local or foreign tax law requires to be withheld.
(f) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws to the extent not preempted by federal law.
(g) Limitation. A Participant and the Participant's Beneficiary
shall assume all risk in connection with (i) the performance of the Managers,
(ii) the performance of the Hypothetical Investments and (iii) the tax treatment
of amounts deferred under or paid pursuant to the Plan, and the Company, the
Committee, the Plan Administrator, and the Board shall not be liable or
responsible therefor.
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(h) Construction. The captions and numbers preceding the sections
of the Plan are included solely as a matter of convenience of reference and are
not to be taken as limiting or extending the meaning of any of the terms and
provisions of the Plan. Whenever appropriate, words used in the singular shall
include the plural or the plural may be read as the singular.
(i) Severability. In the event that any provision of the Plan
shall be declared illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if said illegal
or invalid provision had never been inserted herein.
(j) Status. The establishment and maintenance of, or allocations
and credits to, the Deferral Account of any Participant shall not vest in any
Participant any right, title or interest in or to any Plan or Company assets or
benefits except at the time or times and upon the terms and conditions and to
the extent expressly set forth in the Plan and in accordance with the terms of
any Trust.
(k) Spouse's Interest. The interest in the benefits hereunder of a
Participant's spouse who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in any
manner, including but not limited to such spouse's will nor shall such interest
pass under the laws of intestate succession.
(l) Successors. The provisions of the Plan shall bind the Company
and its successors.
9. CLAIMS PROCEDURES.
(a) Presentation of Claim. If any person (a "Claimant") does not
believe that he or she will receive the benefits to which the person is entitled
or believes that fiduciaries of the Plan have breached their duties or that the
Plan is not being operated properly or that his or her legal rights have been or
are being violated with respect to the Plan, the Claimant must file a formal
claim with the Committee or Plan Administrator under the procedures set forth in
this Article. The procedures in this Article shall apply to all claims that any
person has with respect to the Plan, including claims against fiduciaries and
former fiduciaries, unless the Committee or Plan Administrator determines, in
its sole discretion, that it does not have the power to grant, in substance, all
relief reasonably being sought by the Claimant. If such a claim relates to the
contents of a notice received by the Claimant, the claim must be made within
sixty (60) days after such notice was received by the Claimant. All other claims
must be made within one hundred eighty (180) days of the date on which the event
that caused the claim to arise occurred. The claim must state with particularity
the determination desired by the Claimant.
(b) Notification of Decision. The Committee or Plan Administrator
shall consider a Claimant's claim within ten (10) days of receipt of the claim
and shall notify the Claimant in writing:
(i) that the Claimant's requested determination has been
made, and that the claim has been allowed in full; or
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(ii) that the Committee or Plan Administrator has reached a
conclusion contrary, in whole or in part to the Claimant's requested
determination, and such notice must set forth in a manner reasonably believed to
be understood by the Claimant:
(A) a description of any additional material or
information necessary for the Claimant to perfect the claim,
and an explanation of why such material or information is
necessary, and
(B) an explanation of the claim review procedure set
forth below.
(c) Review of a Denied Claim. Within sixty (60) days after
receiving a notice from the Committee or Plan Administrator that a claim has
been denied in whole or in part, a Claimant (or the Claimant's duly authorized
representative) may file with the Committee or Plan Administrator a written
request for a review of the denial of the claim. Thereafter, but not later than
thirty (30) days after the review procedure begins, the Claimant (or the
Claimant's duly authorized representative):
(i) may review pertinent documents;
(ii) will be provided specific reference(s) to the pertinent
Plan provisions upon which the decision was based; and
(iii) will be informed of such other matters as the Committee
or Plan Administrator deems relevant.
(d) Arbitration. If a Claimant's claim described in Section 9(a)
(an "Arbitrable Dispute") is denied pursuant to Section 9(b) and 9(c), the
Claimant's only further recourse shall be to submit the claim to final and
binding arbitration in the city of San Xxxx, State of California, before an
experienced employment arbitrator selected in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association. Except as
otherwise provided in this Section 9(d) or Section 9(f), each party shall pay
the fees of their respective attorneys, the expenses of their witnesses and any
other expenses connected with the arbitration, but all other costs of the
arbitration, including the fees of the arbitrator, costs of any record or
transcript of the arbitration, administrative fees and other fees and costs
shall be paid in equal shares by each party (or, if applicable, each group of
parties) to the arbitration. Except as otherwise provided in Section 9(f), in
any dispute involving a Claimant in which the Claimant prevails, the Company
shall reimburse the Claimant's reasonable attorneys fees and related expenses.
Arbitration in this manner shall be the exclusive remedy for any Arbitrable
Dispute. The arbitrator's decision or award shall be fully enforceable and
subject to an entry of judgment by a court of competent jurisdiction. Should any
party attempt to resolve an Arbitrable Dispute by any method other than
arbitration pursuant to this Section, the responding party shall be entitled to
recover from the initiating party all damages, expenses and attorneys fees
incurred as a result.
(e) Legal Action. Prior to a Change of Control, except to enforce
an arbitrator's award, no actions may be brought by a Claimant in any court with
respect to an Arbitrable Dispute.
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(f) Following a Change of Control. Upon the occurrence of a Change
of Control, an independent party selected jointly by the Participants in the
Plan prior to the Change in the Control and the Committee or the Plan
Administrator or other appropriate person shall assume all duties and
responsibilities of the Committee or Plan Administrator under this Article 9 and
actions may be brought by a Claimant in any appropriate court with respect to an
Arbitrable Dispute. After a Change of Control, if any person or entity has
failed to comply (or is threatening not to comply) with any of its obligations
under the Plan, or takes or threatens to take any action to deny, diminish or to
recover from any Participant the benefits intended to be provided thereunder,
the Company shall reimburse the Participant for reasonable attorneys fees and
related costs incurred in the successful pursuance or defense of the
Participant's rights. If the Participant does not prevail, attorneys fees shall
also be payable under the preceding sentence to the extent the Participant had
reasonable justification for pursuing its claim, but only to the extent that the
scope of such representation was reasonable
10. EFFECTIVE DATE.
The Plan shall be effective as of May 18, 2004.
Flextronics International USA, Inc.
By: /s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
SVP of Finance
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EXHIBIT A - TRUST AGREEMENT
(TO BE ATTACHED)
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Non-Qualified Deferred
Compensation Plan Trust Agreement
TRUST UNDER:
FLEXTRONICS INTERNATIONAL USA, INC.
SPECIAL DEFERRED COMPENSATION PLAN
This Trust Agreement made May 18, 2004, by and between Flextronics
International USA, Inc. ("the Company") and Xxxxxx Xxxxxxx Trust (the "the
Trustee").
WHEREAS, the Company has adopted the non-qualified deferred compensation
plan identified, to which the form of this Trust Agreement is attached as
Exhibit A (the "Plan").
WHEREAS, the Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan.
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's creditors in the event of the Company's Insolvency, as defined
herein, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purpose of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in meeting its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) DEPOSIT OF FUNDS. The Company hereby deposits with the Trustee in
trust the amount of $100, which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) IRREVOCABILITY. The Trust hereby established shall be irrevocable,
except as provided in Section 13(a).
(c) GRANTOR TRUST. The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E. Part I, subchapter
J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly. Because the income of the Trust may be applied
to discharge the legal obligations of the Company under the Plan, or to third
party creditors, all gains and losses from the investments of the assets of the
Trust shall be recognized by the Company, and the taxes thereon shall be paid by
the Company and shall not be recovered from the assets of the Trust.
(d) TRUST ASSETS. The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company and shall be
used exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan and this Trust Agreement shall
be mere unsecured contractual rights of Plan participants and their
beneficiaries against the Company. Any assets held by the Trust will be subject
to the claims of the Company's general creditors under federal and state law in
the event of the Company's Insolvency, as defined in Section 6(a) hereof.
(e) ADDITIONAL DEPOSITS. The Company may, in its sole discretion at any
time or from time to time, make additional deposits of cash or other property in
trust with the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement. Neither the
Trustee nor any Plan participant or beneficiary shall have any right to compel
such additional deposits.
(f) ACCEPTANCE OF ADDITIONAL DEPOSITS. The Trustee shall not be
obligated to receive such cash and/or property unless prior thereto the Trustee
has agreed that such cash and/or property is acceptable to the Trustee and the
Trustee has received such reconciliation, allocation, investment or other
information concerning, or representation with respect to, the cash and/or
property as the Trustee may require. The Trustee shall have no duty or authority
to (a) require any deposits to be made under the Plan or to the Trustee; (b)
compute any amount to be deposited under the Plan to the Trustee; or (c)
determine whether amounts received by the Trustee comply with the Plan. Assets
of the Trust may, in the Trustee's discretion, be held in an account with an
affiliate of the Trustee.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
(a) PAYMENT OF BENEFITS BY TRUSTEE. The Company shall deliver to the
Trustee the Deferral Agreement of each Plan participant, setting forth the
amount to be deferred and a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of the participant (and his or her beneficiaries),
that provides a formula or other instructions acceptable to the Trustee for
determining the amounts so payable, the form in which such amounts are to be
paid (as provided for or available under the Plan), and the time of commencement
for payment of such amounts. The Payment Schedule shall be delivered to the
Trustee not more than thirty (30) business days nor fewer than fifteen (15)
business days prior to the first date on which a payment is to be made to the
Plan participant. Any change to a Payment Schedule shall be delivered to the
Trustee not more than thirty (30) days nor fewer than fifteen (15) days prior to
the date on which the first payment is to be made in accordance with the changed
Payment Schedule. Except as otherwise provided herein, the Trustee shall make
payments to Plan participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provisions for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid by the
Company, it being understood among the parties hereto that (1) the Company shall
on a timely basis provide the Trustee specific information as to the amount of
taxes to be withheld and (2) unless the Trustee shall have paid and reported
such amounts, the Company shall be obligated to receive such withheld taxes from
the Trustee and property pay and report such amounts to the appropriate taxing
authorities.
(b) ENTITLEMENT TO BENEFITS. The entitlement of a Plan participant or
his or her beneficiaries to benefits under the Plan shall be determined by a
committee appointed by the Company as provided for in the Plan ("Committee"),
and any claim for such benefits shall be considered and reviewed under the
procedures set out in the Plan.
2
(c) PAYMENT OF BENEFITS BY TRUSTEE. Pursuant to Section 6(a) of the
Plan, the Trustee is hereby directed and agrees to pay benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan; provided, however, that such Plan participant or his or her beneficiary is
entitled to benefits under the Plan in accordance with Section 2(b) of this
Trust Agreement. If the principal of the Trust and any earnings thereon are not
sufficient to pay benefits in accordance with the terms of the Plan, the Trustee
shall notify the Company prior to the time payments are due and the Company
shall be responsible for payment of any outstanding amounts due.
(d) NO DUTY TO DETERMINE SUFFICIENCY. The Trustee shall have no
responsibility to determine whether the Trust is sufficient to meet the
liabilities under the Plan, and shall not be liable for payments or Plan
liabilities in excess of the value of the Trust's assets.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN
THE COMPANY IS INSOLVENT
(a) INSOLVENCY. The Trustee shall cease paying benefits to Plan
participants and their beneficiaries if the Company is Insolvent. The Company
shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the
Company is unable to pay its debts as they become due, or (ii) the Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
(b) NOTICE OF INSOLVENCY. At all times during the continuance of this
Trust, as provided in Section 1(d) hereof, the principal and income of the Trust
shall be subject to claims of general creditors of the Company under federal and
state law as set forth below.
(i) The Board of Directors and the Chief Executive Officer of the
Company (or, if there is no Chief Executive Officer, the highest ranking
officer) shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent,
the Trustee shall determine whether the Company is Insolvent and, pending
such determination, the Trustee shall discontinue payment of benefits to
Plan participants and their beneficiaries.
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming
to be a creditor alleging that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. The Trustee may
in all events rely on such evidence concerning the Company's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Company's
solvency.
(iii) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit
of the Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants and their
beneficiaries to pursue their rights as general creditors of the Company
with respect to benefits due under the Plan or otherwise.
(iv) The Trustee shall resume the payment of benefits to Plan
participants and their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(c) AMOUNT OF PAYMENTS AFTER INSOLVENCY. Provided that there are
sufficient assets, if the Trustee discontinues paying benefits from the Trust
pursuant to Section 3(a) hereof and subsequently
3
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Plan participants and their
beneficiaries under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants and their beneficiaries provided for hereunder during any such
period of discontinuance; provided that the Company has given the Trustee the
information with respect to such payments made during the period of
discontinuance prior to resumption of payments by the Trustee.
SECTION 4. PAYMENTS TO THE COMPANY
Except as provided in Section 3(a), 13(b) or 13(c) hereof, because the
Trust is irrevocable as provided in Section 1(b) hereof, the Company shall have
no right or power to direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all benefits have been paid to Plan
participants and their beneficiaries pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY
(a) INVESTMENT OF PRINCIPAL AND INTEREST. The Trustee shall invest and
reinvest the principal and income of the Trust as directed by the Committee or
the Plan Administrator as determined pursuant to the Plan ("Plan Administrator")
(including directions that the Trustee follow Plan participants' deemed
investment elections made in accordance with the terms of the Plan), which
directions may be changed from time to time, all in accordance with procedures
established by the Trustee.
(b) VOTING RIGHTS. The Trustee may, if so directed by the Committee or
Plan Administrator, invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company or Plan Administrator. All rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercised by or rest
with Plan participants, except that voting rights with respect to Trust assets
shall be exercised by the Company, unless an investment adviser has been
appointed pursuant to Section 5(c) and voting authority has been delegated to
such investment adviser.
(c) APPOINTMENT OF INVESTMENT MANAGER. The Committee or Plan
Administrator shall have the power to appoint one or more investment
managers, including any entities affiliated with the Trustee, who shall have the
power to manage, acquire, or dispose of such portion of the assets of the Trust
as the Committee shall determine, subject to the following:
(i) An investment manager shall act in accordance with the
provisions of an investment management agreement entered into between it
and the Company the, an executed copy of which investment management
agreement shall be filed with the Trustee;
(ii) Each such investment manager must be registered as an
investment adviser under the Investment Advisers Act of 1940, and shall
provide investment advice on a discretionary or non-discretionary basis
with respect to that portion of the assets of the Trust as the Committee
or Plan Administrator shall specify from time to time by written
direction(s) to the Trustee;
(iii) The indicia of ownership of the assets of the Trust shall be
held by the Trustee at all times;
(iv) Any entity affiliated with the Trustee may act as broker or
dealer to execute transactions, including the purchase of any securities
directly distributed, underwritten, or issued
4
by an entity affiliated with the Trustee, at standard commission rates,
xxxx-ups or concessions and to provide other management or investment
services with respect to such trust, including the custody of assets;
(v) Any direction given to the Trustee by an investment manager
shall be given in writing or given orally and confirmed in writing as soon
as practicable. Alternatively, an investment manager may provide
investment instructions directly to the broker or dealer and receipt by
the Trustee of a confirmation of the transaction from the broker or dealer
shall be conclusive evidence of such transactions. In either case, the
Trustee shall have the authority within 24 hours of receipt of such
direction from the investment manager or confirmation of a transaction to
instruct the investment manager to rescind the transaction if the Trustee
finds that the investment is inconsistent with its operational or
administrative requirements; and
(vi) The Trustee may pay any such investment manager for any such
services from the assets of the Trust without reduction of any fees or
compensation paid to the Trustee for its services as trustee.
Notwithstanding any other provision of this Trust Agreement, with respect
to the investment of the assets of the Trust managed by an investment manager,
the Trustee shall have only the duty to follow the directions of the investment
manager and the Trustee shall not be liable to anyone:
(I) for any act or omission of the investment manager with
respect to the investment of such assets; or
(II) for failing to act with respect to the investment of
such assets absent direction from the investment manager.
In the event the Company is Insolvent or the Committee or Plan
Administrator fails to provide effective investment instructions to the Trustee
as provided in Section 5(a), the Trustee may appoint one or more investment
advisers who are registered as investment advisers under the Investment Advisers
Act of 1940. and who may be affiliates of the Trustee, to provide investment
advice on a discretionary or non-discretionary basis with respect to all or a
specified portion of the assets of the Trust.
(d) POWERS OF TRUSTEE. Subject to Section 5(a), the Trustee, or the
Trustee's designee, is authorized and empowered:
(i) To invest and reinvest Trust assets, together with the income
therefrom, in common stock, preferred stock, convertible preferred stock,
bonds, debentures, convertible debentures and bonds, mortgages, notes,
commercial paper and other evidences of indebtedness (including those
issued by the Trustee), shares of mutual funds (which funds may be
sponsored, managed or offered by an affiliate of the Trustee), guaranteed
investment contracts, bank investment contracts, other securities,
policies of life insurance, annuity contracts, options, options to buy or
sell securities or other assets, and ail other property of any type
(personal, real or mixed, and tangible or intangible);
(ii) To deposit or invest all or any part of the assets of the
Trust in savings accounts or certificates of deposit or other deposits in
a bank or savings and loan association or other depository institution,
including the Trustee or any of its affiliates, provided with respect to
such deposits with the Trustee or an affiliate the deposits bear a
reasonable interest rate;
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(iii) To hold, manage, improve, repair and control all property,
real or personal, forming pan of the Trust: to sell, convey, transfer,
exchange, partition, lease for any term, even extending beyond the
duration of this Trust, and otherwise dispose of the same from time to
time;
(iv) To hold in cash, without liability for interest, such portion
of the Trust as is pending investment, or payment of expenses, or the
distribution of benefits;
(v) To take such actions as may be necessary or desirable to
protect the Trust from loss due to the default on mortgages held in the
Trust including the appointment of agents or trustees in such other
jurisdictions as may seem desirable, to transfer property to such agents
or trustees, to grant to such agents such powers as are necessary or
desirable to protect the Trust, to direct such agent or trustee, or to
delegate such power to direct, and to remove such agent or trustee;
(vi) To settle, compromise or abandon all claims and demands in
favor of or against the Trust;
(vii) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under
the laws of the state in which the Trustee has its principal place of
business so that the powers conferred upon the Trustee herein shall not be
in limitation of any authority conferred by law, but shall be in addition
thereto;
(viii) To borrow money from any source and to execute promissory
notes, mortgages or other obligations and to pledge or mortgage any Trust
assets as security; and
(ix) To maintain accounts at, execute transactions through, and
lend on an adequately secured basis stocks, bonds or other securities to,
any brokerage or other firm, including any firm which is an affiliate of
the Trustee.
SECTION 6. ADDITIONAL POWERS OF THE TRUSTEE
To the extent necessary or which it deems appropriate to implement its
powers under Section 5 or otherwise to fulfill any of its duties and
responsibilities as the Trustee of the Trust, the Trustee shall have the
following additional powers and authority:
(a) To register securities, or any other property, in its name or in the
name of any nominee, including the name of any affiliate or the nominee name
designated by any affiliate, with or without indication of the capacity in which
properly shall be held, or to hold securities in bearer form and to deposit any
securities or other property in a depository or clearing corporation;
(b) To designate and engage the services of, and to delegate powers and
responsibilities to, such agents, representatives, advisers, counsel and
accountants as the Trustee considers necessary or appropriate, any of whom may
be an affiliate of the Trustee or a person who renders services to such an
affiliate, and, as part of its expenses under this Trust Agreement, to pay their
reasonable expenses and compensation;
(c) To make, execute and deliver, as the Trustee, any and all deeds,
leases, mortgages, conveyances, waivers, releases or other instruments in
writing necessary or appropriate for the accomplishment of any of the powers
listed in this Trust Agreement; and
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(d) Generally to do all other acts which the Trustee deems necessary or
appropriate for the protection of the Trust.
SECTION 7. DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust, net of
expenses us provided in Section 10, shall be accumulated and reinvested.
SECTION 8. ACCOUNTING BY THE TRUSTEE
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements and all other transactions required to be made,
including records of Deferral Accounts and such other specific records as
required to carry out its duties under Section 5(e) and such other records as
shall be agreed upon in writing between the Committee or Plan Administrator on
behalf of the Company and the Trustee. Within 90 days following the close of
each calendar year and within 90 days after removal or resignation of the
Trustee, the Trustee shall deliver to the Committee (a) a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be and (b) any information the
Company requires in order to comply with any financial, tax or other reporting
obligations it has with respect to the Plan under federal, state or local law.
SECTION 9. RESPONSIBILITY AND INDEMNITY OF THE TRUSTEE
(a) FIDUCIARY STANDARD. The Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, provided,
however, that the Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the Company which is
contemplated by, and in conformity with, the terms of the Plan and this Trust
and is given in writing by the Company or in such other manner prescribed by the
Trustee. The Trustee shall also incur no liability to any person for any failure
to act in the absence of direction, request or approval from the Company which
is contemplated by, and in conformity with, the terms of this Trust. In the
event of a dispute between the Company and a party, the Trustee may apply to a
court of competent jurisdiction to resolve the dispute.
(b) INDEMNIFICATION OF THE TRUSTEE. The Company hereby indemnifies the
Trustee and each of its affiliates (collectively, the "Indemnified Parties")
against, and shall hold them harmless from, any and all loss, claims, liability,
and expenses, including reasonable attorneys' fees, imposed upon or incurred by
any Indemnified Party as a result of any acts taken or any failure to act, where
such act or failure to act is in accordance with the directions from the
Committee or any designee of the Committee. The Company's obligations in the
foregoing regard shall be satisfied promptly by the Company, provided that in
the event the loss, claim, liability or expense involved is determined by a no
longer appealable final judgment entered in a lawsuit or proceeding to have
resulted from the gross negligence or willful misconduct of the Trustee, the
Trustee shall promptly return to the Company any amount previously received by
the Trustee under this Section with respect to such loss, claim, liability or
expense. If the Company does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from the Trust without
direction from the Company.
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(c) LEGAL COUNSEL. The Trustee may consult with legal counsel (who may
also be counsel for the Company) with respect to any of its duties or
obligations hereunder.
(d) OTHER ADVISERS. The Trustee may hire agents, accountants, actuaries,
investment advisers, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder.
(e) AUTHORITY OF TRUSTEE. The Trustee shall have, without exclusion, all
powers conferred on the Trustee by applicable law, unless expressly provided
otherwise herein.
(f) LIMITATION ON TRUSTEE. Notwithstanding any powers granted to the
Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall
not have the power to start, to enter into or otherwise engage in any business
enterprise, or to continue to operate any business interest that becomes part of
the trust estate, if such activity constitutes carrying on business as referred
to in Section 301.7701-1 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.
SECTION 10. COMPENSATION AND EXPENSES OF THE TRUSTEE
The Trustee is authorized, unless otherwise agreed by the Trustee, to
withdraw from the Trust without direction from the Company the amount of its
fees in accordance with the fee schedule agreed to by the Company and the
Trustee. The expenses charged for third party administrative and investment
expenses of the Plan and the Trust, including expenses charged by the Trustee to
establish the Trust and the Trustee's annual fee per Deferral Account, shall be
paid by the Company rather than the Trust and shall not reduce the Deferral
Accounts: provided that any expenses incurred with respect to a particular
Hypothetical Investment (as defined in the Plan) shall be paid by the Trust and
charged to the Deferral Account that is deemed invested in such Hypothetical
Investment. No part of the Company's internal expense to administer the Plan,
including overhead expenses, shall be paid by the Trust or charged to the Trust
or Deferral Accounts.
SECTION 11. RESIGNATION AND REMOVAL OF THE TRUSTEE
(a) RESIGNATION OF TRUSTEE. The Trustee may resign at any time by
written notice to the Company, which shall be effective 30 days after receipt of
such notice unless the Company and the Trustee agree otherwise.
(b) REMOVAL OF TRUSTEE. The Trustee may be removed by the Company on 30
days' notice or upon shorter notice accepted by the Trustee.
(c) TRANSFER OF ASSETS TO SUCCESSOR.
(i) Upon resignation or removal of the Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee . The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless the Company
extends the time limit, provided that the Trustee is provided assurance by
the Company satisfactory to the Trustee that all fees and expenses
reasonably anticipated will be paid.
(ii) Upon settlement of the account and transfer of the Trust
assets to the successor Trustee, all rights and privileges under this
Trust Agreement shall vest in the successor Trustee and all responsibility
and liability of the Trustee with respect to the Trust and assets thereof
shall
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terminate subject only to the requirement that the Trustee execute all
necessary documents to transfer the Trust assets to the successor Trustee.
SECTION 12. APPOINTMENT OF SUCCESSOR
(a) COMPANY APPOINTMENT OF SUCCESSOR. If the Trustee resigns or is
removed in accordance with Section 11(a) or Section 11(b), the Company may
appoint any third party, such as a bank trust department or other party that may
be granted corporate trustee powers under state law, as a successor to replace
the Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the successor Trustee, who shall have all of the rights
and powers of the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the transfer.
(b) COURT APPOINTMENT OF SUCCESSOR. If the Trustee resigns or is
removed, a successor Trustee shall be appointed, in accordance with Section
12(a) hereof, by the effective date of resignation or removal under Section 11
(a) or Section 11(b). If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Company and the Trustee in connection with the
proceeding shall be paid by the Company and not by the Trust.
(c) DUTY OF SUCCESSOR TRUSTEE. The successor Trustee need not examine
the records and acts of any prior Trustee and may retain or dispose of existing
Trust assets, consistent with this Trust Agreement and the Plan. The successor
Trustee shall not be responsible for and the Company shall indemnify and defend
the successor Trustee from any claim or liability resulting from any action or
inaction of any prior Trustee or from any other past event or any condition
existing at the time it becomes successor Trustee.
SECTION 13. AMENDMENT OR TERMINATION
(a) AMENDMENT. This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company solely as deemed necessary or
appropriate by the Trustee or the Committee to meet the requirements of any
change of law affecting the intended treatment of the Plan and the Trust.
Notwithstanding the foregoing, no such amendment shall conflict with the terms
of the Plan or shall make the Trust revocable.
(b) TERMINATION BY COMPANY. Subject to Section 13(c), the Trust shall
terminate as soon as practicable after the Plan participants and their
beneficiaries are no longer entitled to benefits pursuant to the terms of the
Plan. All assets remaining in the Trust at such time shall be returned to the
Company.
(c) TERMINATION WITH PARTICIPANT APPROVAL. Upon written approval of all
participants or beneficiaries entitled to payment of benefits pursuant to the
terms of the Plan, the Company may terminate this Trust prior to the time all
benefits have been paid under the Plan. All assets remaining in the Trust at
such time shall be returned to the Company.
SECTION 14. MISCELLANEOUS
(a) SEVERABILITY. Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
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(b) NO ASSIGNMENT OF BENEFITS. Benefits payable to Plan participants and
their beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
(c) GOVERNING LAW. This Trust Agreement and its enforcement shall be
governed by and construed in accordance with the laws of the state in which the
Trustee has its principal place of business.
(d) SURVIVAL. The provisions of Sections 2(d), 3(b)(iii), 9(b) and 15 of
this Trust Agreement shall survive termination of this Trust Agreement.
(e) CONFLICT WITH PLAN DOCUMENT. The rights, duties, responsibilities,
obligations and liabilities of the Trustee are as set forth in this Trust
Agreement, and no provision of the Plan or any other document shall affect such
rights, responsibilities, obligations and liabilities. If there is a conflict
between provisions of the Plan and this Trust Agreement with respect to any
subject involving the Trustee, including but not limited to the responsibility,
authority or powers of the Trustee, the provisions of this Trust Agreement shall
be controlling.
SECTION 15. ARBITRATION
(a) The Company agrees that all controversies that may arise between the
Company and the Trustee in connection with the Trust, including, but not limited
to, those involving any transactions, or the construction, performance, or
breach of this or any other agreement between the Company and the Trustee,
whether entered into prior to, on, or subsequent to the date hereof, shall be
determined by arbitration. Any arbitration under this Trust Agreement shall be
conducted before the American Arbitration Association in San Jose, California,
and in accordance with its arbitration rules then in force. Judgment upon the
award of arbitrators may be entered in any federal or state court having
jurisdiction.
(b) The parties understand and agree:
(i) Arbitration is final and binding on the parties;
(ii) The parties waive their right to seek remedies in court,
including the right to jury trial;
(iii) Pre-arbitration discovery is generally more limited than and
different from court proceedings;
(iv) The arbitrators' award is not required to include factual
findings or legal reasoning and any party's right to appeal or seek
modification of rulings by the arbitrators is strictly limited;
(v) The panel of arbitrators will consist of individuals who have
familiarity with rabbi trusts and nonqualified deferred compensation
plans.
SECTION 16. EFFECTIVE DATE
The effective date of this Trust Agreement shall be June 1, 2004.
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IN WITNESS WHEREOF, the Company and the Trustee have executed this Trust
Agreement each by action of a duly authorized person.
By signing this Trust Agreement, the undersigned Company acknowledges (1)
that, in accordance with Section 15 of this Trust Agreement, the Company is
agreeing in advance to arbitrate any controversies that may arise with the
Trustee, and (2) receipt of a copy of this Trust Agreement.
XXXXXX XXXXXXX TRUST FLEXTRONICS INTERNATIONAL USA, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X Xxxxx
--------------------- -------------------
(Signature)
Name/Title: Xxxxxx X. Xxxxxxx VP Name/Title: Xxxxxx X Xxxxx
SVP Finance
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