Document:

<PAGE>   1
                                                                   EXHIBIT 10.27

                                                               EXECUTION VERSION
================================================================================

                                CREDIT AGREEMENT

                                      AMONG

                      FLEXTRONICS INTERNATIONAL USA, INC.,

                                       AND

                                  THE DII GROUP

                                       AND

                            THE LENDERS NAMED HEREIN

                                       AND

                               ABN AMRO BANK N.V.,
                              AS AGENT FOR LENDERS

                                       AND

                               FLEET NATIONAL BANK
                             AS DOCUMENTATION AGENT

                                       AND

                      BANK OF AMERICA, NATIONAL ASSOCIATION
                                       AND
                               CITICORP USA, INC.
                               AS MANAGING AGENTS

                                       AND

                             THE BANK OF NOVA SCOTIA
                                   AS CO-AGENT

                                  APRIL 3, 2000

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<PAGE>   2
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE
<S>                                                                      <C>
SECTION I.        INTERPRETATION.........................................  1

        1.01.  Definitions...............................................  1

        1.02.  GAAP...................................................... 16

        1.03.  Headings.................................................. 16

        1.04.  Plural Terms.............................................. 16

        1.05.  Governing Law............................................. 16

        1.06.  English Language.......................................... 16

        1.07.  Construction.............................................. 16

        1.08.  Entire Agreement.......................................... 16

        1.09.  Calculation of Interest and Fees.......................... 16

        1.10.  References................................................ 16

        1.11.  Other Interpretive Provisions............................. 17

SECTION II.       CREDIT FACILITIES...................................... 17

        2.01.  Loans..................................................... 17

        2.02.  Notice of Borrowing....................................... 18

        2.03.  Interest.................................................. 20

        2.04.  Purpose................................................... 21

        2.05.  Amount Limitations, Commitment Reductions, Etc............ 21

        2.06.  Fees...................................................... 22

        2.07.  Prepayments............................................... 22

        2.08.  Other Payment Terms....................................... 23

        2.09.  Loan Accounts; Notes...................................... 25

        2.10.  Loan Funding.............................................. 25

        2.11.  Pro Rata Treatment........................................ 26

        2.12.  Change of Circumstances................................... 27

        2.13.  Taxes on Payments......................................... 28

        2.14.  Funding Loss Indemnification.............................. 29

        2.15.  Security.................................................. 30

        2.16.  Replacement of Lenders.................................... 31
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                               TABLE OF CONTENTS

                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                               PAGE
<S>                                                                            <C>
SECTION III.      CONDITIONS PRECEDENT......................................    31

        3.01.  Initial Conditions Precedent.................................    31

        3.02.  Conditions Precedent to Term Loan Borrowing..................    31

        3.03.  Conditions Precedent to Each Credit Event....................    32

        3.04.  Covenant to Deliver..........................................    32

SECTION IV.       REPRESENTATIONS AND WARRANTIES............................    32

        4.01.  Borrowers' Representations and Warranties....................    32

        4.02.  Reaffirmation................................................    36

SECTION V.        COVENANTS.................................................    36

        5.01.  Affirmative Covenants........................................    36

        5.02.  Negative Covenants...........................................    39

SECTION VI.       DEFAULT...................................................    43

        6.01.  Events of Default............................................    43

        6.02.  Remedies.....................................................    45

        6.03.  Lender Rate Contract Remedies................................    45

SECTION VII.      THE AGENT AND RELATIONS AMONG LENDERS.....................    45

        7.01.  Appointment, Powers and Immunities...........................    45

        7.02.  Reliance by Agent............................................    45

        7.03.  Defaults.....................................................    46

        7.04.  Indemnification..............................................    46

        7.05.  Non-Reliance.................................................    46

        7.06.  Resignation or Removal of Agent..............................    46

        7.07.  Agent in its Individual Capacity.............................    47

        7.08.  Documentation Agent, Managing Agents and Co-Agent............    47

SECTION VIII.     MISCELLANEOUS.............................................    47

        8.01.  Notices......................................................    47

        8.02.  Expenses.....................................................    48

        8.03.  Indemnification..............................................    48

        8.04.  Waivers; Amendments..........................................    48

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                               TABLE OF CONTENTS
                                  (CONTINUED)

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<CAPTION>
                                                                                          PAGE
<S>                                                                                        <C>
        8.05.  Successors and Assigns..................................................... 49

        8.06.  Setoff; Security Interest.................................................. 51

        8.07.  No Third Party Rights...................................................... 52

        8.08.  Partial Invalidity......................................................... 52

        8.09.  Jury Trial................................................................. 52

        8.10.  Counterparts............................................................... 52

        8.11.  Borrowers' Liabilities..................................................... 52

        8.12.  Confidentiality............................................................ 52

        8.13.  Consent to Jurisdiction.................................................... 53

        8.14.  Usury...................................................................... 53

        8.15.  Effect..................................................................... 53
</TABLE>

<TABLE>
<CAPTION>
SCHEDULES

<S>            <C>
I              Lenders
II             Pricing Grid
3.01           Initial Conditions Precedent
4.01(o)        Subsidiaries
5.02(a)        Existing Secured Indebtedness
5.02(e)        Existing Investments

EXHIBITS

A              Notice of Revolving Loan Borrowing (2.02(a))
B              Notice of Term Loan Borrowing (2.02(b))
C(1)           Revolving Loan Note (2.09(b))
C(2)           Term Loan Note (2.09(b))
D              Guaranty (2.15(a))
E              Pledge Agreement (2.15(a))
F              Assignment Agreement (8.05(c))

</TABLE>
                                      iii

<PAGE>   5
                                CREDIT AGREEMENT

        THIS CREDIT AGREEMENT, dated as of April 3, 2000, is entered into by and
among:

               (1) FLEXTRONICS INTERNATIONAL USA, INC., a California corporation
        ("FIUI") and THE DII GROUP, INC., a Delaware corporation ("DII" and
        together with FIUI, each a "Borrower" and collectively, the
        "Borrowers");

               (2) Each of the financial institutions from time to time listed
        in Schedule I hereto, as amended from time to time (such financial
        institutions to be referred to herein collectively as "Lenders");

               (3) ABN AMRO BANK N.V., as agent for Lenders (in such capacity,
        "Agent");

               (4) Fleet National Bank, as documentation agent for Lenders (in
        such capacity, "Documentation Agent");

               (5) Bank of America, National Association and Citicorp USA, Inc.,
        as managing agents (collectively, in such capacity, the "Managing
        Agents"); and

               (6) The Bank of Nova Scotia, as co-agent (in such capacity, the
        "Co-Agent").

                                    RECITALS

        A. Borrowers have requested Lenders to provide certain credit facilities
to Borrowers.

        B. Lenders are willing to provide such credit facilities upon the terms
and subject to the conditions set forth herein.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:

SECTION I.  INTERPRETATION.

        1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth below, when used in this Agreement or
any other Credit Document, shall have the respective meaning given to that term
below or in the provision of this Agreement or other document, instrument or
agreement referenced below.

               "ABN AMRO" shall mean ABN AMRO Bank N.V.

               "Affiliate" shall mean, with respect to any Person, each other
        Person that (a) directly or indirectly, owns or controls, whether
        beneficially or as a trustee, guardian or other fiduciary, ten percent
        (10%) or more of any class of Equity Securities of such Person or (b)
        that controls, is controlled by or is under common control with such
        Person or any Affiliate of such Person; provided, however, that in no
        case shall Agent or any Lender be deemed to be an Affiliate of either
        Borrower or any of its Subsidiaries for purposes of this Agreement. For
        the purpose of this definition, "control" of a Person shall mean the
        possession, directly or indirectly, of the power to direct or cause the
        direction of its management or policies, whether through the ownership
        of voting securities, by contract or otherwise.

<PAGE>   6

               "Agent" shall have the meaning given to that term in clause (3)
        of the introductory paragraph hereof.

               "Agent's Fee Letter" shall mean the letter agreement dated as of
        February 28, 2000 between FIL and Agent.

               "Agreement" shall mean this Credit Agreement.

               "Applicable Lending Office" shall mean, with respect to any
        Lender and any Borrowing, (i) in the case of any Base Rate Loan or Base
        Rate Portion, such Lender's Domestic Lending Office, and (ii) in the
        case of any LIBOR Loan or LIBOR Portion, such Lender's Euro-Dollar
        Lending Office.

               "Applicable Margin" shall mean, with respect to any Borrowing or
        Borrowing Portion at any time, the per annum margin which is determined
        pursuant to the Pricing Grid and added to the Base Rate or LIBO Rate, as
        the case may be, for such Borrowing or Portion; provided, however, that
        each Applicable Margin determined pursuant to the Pricing Grid shall be
        increased by two percent (2.00%) per annum on the date an Event of
        Default occurs and shall continue at such increased rate unless and
        until such Event of Default is cured or waived in accordance with this
        Agreement. The Applicable Margins shall be determined as provided in the
        Pricing Grid (subject to the proviso in the preceding sentence) and may
        change for each Pricing Period.

               "Applicable Payment Office" shall mean Borrowers' offices located
        at 2090 Fortune Drive, San Jose, California.

               "Applicable Rate Page" shall mean the applicable Telerate Page on
        which appears the London Interbank Offered Rate for deposits in Dollars
        at such time or, if no such page is then available, the applicable
        Reuters Screen Page on which such information then appears.

               "Assignee Lender" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Assignment" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Assignment Agreement" shall have the meaning given to that term
        in Subparagraph 8.05(c).

               "Assignment Effective Date" shall have, with respect to each
        Assignment Agreement, the meaning set forth therein.

               "Assignor Lender" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Base Rate" shall mean, on any day, the greater of (a) the Prime
        Rate in effect on such date and (b) the Federal Funds Rate for such day
        plus one-half percent (0.50%).

               "Base Rate Borrowing" shall mean any Revolving Loan Borrowing
        consisting of Base Rate Loans.

               "Base Rate Loan" shall mean any Revolving Loan bearing interest
        based upon the Base Rate.

               "Base Rate Portion" shall mean a portion of a Term Loan Borrowing
        or a Term Loan bearing interest based upon the Base Rate.

               "Borrowers" shall have the meaning given to that term in clause
        (1) of the introductory paragraph hereof.

               "Borrowing" shall mean any Facility A Revolving Loan Borrowing,
        any Facility B Revolving Loan Borrowing or any Term Loan Borrowing.

                                       2
<PAGE>   7

               "Business Day" shall mean any day on which commercial banks are
        not authorized or required to close in San Francisco, California, New
        York, New York or Chicago, Illinois, other than Saturday or Sunday, and
        if such Business Day is related to a Revolving Loan Borrowing consisting
        of LIBOR Loans or a LIBOR Portion of the Term Loan Borrowing, dealings
        in Dollar deposits are carried out in the London interbank market and
        commercial banks are open for business in London.

               "Capital Adequacy Requirement" shall have the meaning given to
        that term in Subparagraph 2.12(d).

               "Capital Leases" shall mean any and all lease obligations that,
        in accordance with GAAP, are required to be capitalized on the books of
        a lessee.

               "Change of Control" shall mean, with respect to FIL (i) the
        acquisition after the date hereof by any person or group of persons
        (within the meaning of Section 13 or 14 of the Securities Exchange Act
        of 1934 (as amended, the "Exchange Act")) of (A) beneficial ownership
        (within the meaning of Rule 13d-3 promulgated by the Securities and
        Exchange Commission under the Exchange Act) of fifty percent (50%) or
        more of the outstanding Equity Securities of FIL entitled to vote for
        members of the board of directors, or (B) all or substantially all of
        the assets of FIL; (ii) during any period of twelve (12) consecutive
        calendar months, individuals who are directors of FIL on the first day
        of such period ("Initial Directors") and any directors of FIL who are
        specifically approved by two-thirds of the Initial Directors and
        previously-approved Directors shall cease to constitute a majority of
        the Board of Directors of FIL before the end of such period; or (iii)
        any other event or condition constituting a "Change of Control" (or
        similar defined term) under the Subordinated Indenture shall occur or
        exist.

               "Change of Law" shall have the meaning given to that term in
        Subparagraph 2.12(b).

               "Closing Date" shall mean April 3, 2000.

               "Co-Agent" shall have the meaning given to that term in clause
        (6) of the introductory paragraph hereof.

               "Collateral" shall mean all property in which Agent or any Lender
        has a Lien to secure the Obligations.

               "Commitment Fee Percentage" shall mean the per annum percentage
        which is used to calculate the Commitment Fees. The Commitment Fee
        Percentage shall be determined as provided in the Pricing Grid and may
        change for each Pricing Period.

               "Commitment Fees" shall mean, collectively, the Facility A
        Commitment Fees and the Facility B Commitment Fees.

               "Commitments" shall mean, collectively, the Facility A
        Commitments and the Facility B Commitments.

               "Compliance Certificate" shall have the meaning given to that
        term in Subparagraph 5.01(a).

               "Contingent Obligation" shall mean, with respect to any Person,
        (a) any Guaranty Obligation of that Person; and (b) any direct or
        indirect obligation or liability, contingent or otherwise, of that
        Person (i) in respect of any Surety Instrument issued for the account of
        that Person or as to which that Person is otherwise liable for
        reimbursement of drawings or payments or (ii) in respect to any Rate
        Contract that is not entered into in connection with a bona fide hedging
        operation that provides offsetting benefits to such Person. The amount
        of any Contingent Obligation shall (subject, in the case of Guaranty
        Obligations, to the last sentence of the definition of "Guaranty
        Obligation") be deemed equal to the maximum reasonably anticipated
        liability in respect thereof, and shall, with respect to item (b)(ii) of
        this definition be marked to market on a current basis.

                                       3
<PAGE>   8

               "Contractual Obligation" of any Person shall mean, any indenture,
        note, lease, loan agreement, security, deed of trust, mortgage, security
        agreement, guaranty, instrument, contract, agreement or other form of
        contractual obligation or undertaking to which such Person is a party or
        by which such Person or any of its property is bound.

               "Credit Documents" shall mean and include this Agreement, the
        Notes, the Security Documents, Lender Rate Contracts and the Agent's Fee
        Letter, the FIL Credit Documents, all other documents, instruments and
        agreements delivered to Agent or any Lender pursuant to Section III; and
        all other documents, instruments and agreements delivered by either
        Borrower or any of its Guarantors or Subsidiaries to Agent or any Lender
        in connection with this Agreement on or after the date of this
        Agreement.

               "Credit Event" shall mean (a) the making of any Loan, (b) the
        conversion of any Portion of a Term Loan Borrowing into a LIBOR Portion,
        (c) the selection of a new Interest Period exceeding one (1) month for
        any LIBOR Portion of a Term Loan Borrowing, or (d) the selection of a
        new Interest Period exceeding one (1) month for any LIBOR Borrowing.

               "Debt/EBITDA Ratio" shall mean, with respect to FIL for any
        period, the ratio, determined on a consolidated basis in accordance with
        GAAP, of:

                      (a) The total Indebtedness of FIL and its Subsidiaries on
               the last day of such period; provided, however, that in computing
               the foregoing sum, there shall be excluded therefrom any
               Indebtedness to the extent the proceeds of which are (i) legally
               segregated from FIL's or such Subsidiaries' other assets and (ii)
               either (A) only held in the form of cash or cash equivalents or
               (B) used by FIL or its Subsidiaries for any such purpose as may
               be approved in advance from time to time by the Required Lenders;

                                       to

                      (b)  The EBITDA of FIL and its Subsidiaries for such
               period.

               "Default" shall mean an Event of Default or any event or
        circumstance not yet constituting an Event of Default which, with the
        giving of any notice or the lapse of any period of time or both, would
        become an Event of Default.

               "Defaulting Lender" shall mean a Lender which has failed to fund
        its portion of any Borrowing which it is required to fund under this
        Agreement and has continued in such failure for three (3) Business Days
        after written notice from Agent.

               "DII" shall mean The DII Group, Inc., a Delaware corporation.

               "DII Acquisition" shall mean the merger of DII with a
        wholly-owned Subsidiary of Borrower as a result of which the outstanding
        capital stock of DII shall be converted into the right to receive
        ordinary shares in Borrower.

               "Documentation Agent" shall have the meaning given to that term
        in clause (4) of the introductory paragraph hereof.

               "Dollars" and "$" shall mean, unless otherwise indicated, the
        lawful currency of the United States of America and, in relation to any
        payment under this Agreement, same day or immediately available funds.

               "Domestic Lending Office" shall mean, with respect to any Lender
        and its Base Rate Loans and Base Rate Portion, (a) initially, its office
        designated as such in Part B of Schedule I (or, in the case of any
        Lender which becomes a Lender by an assignment pursuant to Subparagraph
        8.05(c), its office designated

                                       4
<PAGE>   9

        as such in the applicable Assignment Agreement) and (b) subsequently,
        such other office or offices as such Lender may designate to Agent as
        the office at which such Lender's Base Rate Loans and Base Rate Portion
        will thereafter be maintained and for the account of which all payments
        of principal of, and interest on, such Lender's Base Rate Loans and Base
        Rate Portion will thereafter be made.

               "EBITDA" shall mean, with respect to FIL for any period, the sum,
        determined on a consolidated basis in accordance with GAAP, of the
        following:

                      (a) The net income or net loss of FIL and its Subsidiaries
        for such period before provision for income taxes;

                                      plus

                      (b) The sum (to the extent deducted in calculating net
               income or loss in clause (a) above) of (i) all Interest Expenses
               of FIL and its Subsidiaries accruing during such period, (ii) all
               depreciation and amortization expenses of FIL and its
               Subsidiaries accruing during such period and (iii) other noncash
               charges for such period.

               "Eligible Assignee" shall mean (a) a commercial bank, (b) a
        subsidiary, affiliate or branch of a Lender, or (c) any other financial
        institution that makes or purchases commercial loans in the ordinary
        course of business, in each case having a combined capital and surplus
        of at least $100,000,000.

               "Eligible Material Subsidiary" shall mean, at any time, any
        Material Subsidiary that is not then an Ineligible Material Subsidiary.

               "Employee Benefit Plan" shall mean any employee benefit plan
        within the meaning of section 3(3) of ERISA maintained or contributed to
        by either Borrower, any Material Subsidiary or any ERISA Affiliate,
        other than a Multiemployer Plan.

               "Environmental Laws" shall mean all the Governmental Rules
        relating to the protection of human health and the environment,
        including all Governmental Rules pertaining to the reporting, licensing,
        permitting, transportation, storage, disposal, investigation or
        remediation of emissions, discharges, releases, or threatened releases
        of Hazardous Materials into the air, surface water, groundwater, or
        land, or relating to the manufacture, processing, distribution, use,
        treatment, storage, disposal, transportation or handling of Hazardous
        Materials.

               "Equity Securities" of any Person shall mean (a) all common
        stock, preferred stock, participations, shares, partnership interests or
        other equity interests in and of such Person (regardless of how
        designated and whether or not voting or non-voting) and (b) all
        warrants, options and other rights to acquire any of the foregoing.

               "ERISA" shall mean the Employee Retirement Income Security Act of
        1974, as the same may from time to time be amended or supplemented,
        including any rules or regulations issued in connection therewith.

               "ERISA Affiliate" shall mean any Person which is treated as a
        single employer with either Borrower or any Material Subsidiary under
        Section 414 of the IRC.

               "Euro-Dollar Lending Office" shall mean, with respect to any
        Lender and LIBOR Loans and LIBOR Portions, (a) initially, such Lender's
        office designated as such in Part B of Schedule I (or, in the case of
        any Lender which becomes a Lender by an assignment pursuant to
        Subparagraph 8.05(c), its office designated as such in the applicable
        Assignment Agreement) and (b) subsequently, such other office or offices
        as such Lender may designate to Agent as the office at which such
        Lender's LIBOR Loans and LIBOR Portions will thereafter be maintained
        and for the account of which all payments of principal of, and interest
        on, such Lender's LIBOR Loans and LIBOR Portions will thereafter be
        made.

                                       5
<PAGE>   10

               "Event of Default" shall have the meaning given to that term in
Paragraph 6.01.

               "Existing Secured Indebtedness" shall mean the secured
        Indebtedness existing on the Closing Date specified on Schedule 5.02(a).

               "Excluded Taxes" shall mean all Taxes measured by or imposed upon
        the overall net income of any Lender or one of its Applicable Lending
        Offices and all franchise taxes imposed upon any Lender, in each case
        imposed (i) by the jurisdiction under the laws of which such Lender or
        one of its Applicable Lending Offices is organized or is located, or in
        which its principal executive office is located, or any nation within
        which such jurisdiction is located or any political subdivision thereof
        or (ii) by reason of any connection between the jurisdiction imposing
        such tax and such Lender or one of its Applicable Lending Offices other
        than a connection arising solely from such Lender having executed,
        delivered or performed its obligations under, or received payment under
        or enforced, this Agreement or any of the other Credit Documents.

               "Existing FIUI Credit Agreement" shall mean the Credit Agreement
        dated as of October 27, 1999, among FIUI, ABN AMRO and other lending
        institutions, and ABN AMRO, as agent for itself and such other lending
        institutions.

               "Existing FIUI Credit Documents" shall mean the "Credit
        Documents" as defined in the Existing FIUI Credit Agreement.

               "Facility" shall mean Facility A or Facility B.

               "Facility A" shall mean the revolving credit facility provided to
        Borrowers pursuant to Subparagraph 2.01(a).

               "Facility A Commitment" shall mean, with respect to each Lender,
        the Dollar amount set forth under the caption "Facility A Commitment"
        opposite such Lender's name on Part A of Schedule I, or, if changed,
        such Dollar amount as may be set forth for such Lender in the Register.

               "Facility A Commitment Fees" shall have the meaning given to that
        term in clause (i) of Subparagraph 2.06(b).

               "Facility A Lender" shall mean, at any time, any Lender then
        having a Facility A Commitment or a Facility A Revolving Loan
        outstanding.

               "Facility A Maturity Date" shall mean April 3, 2003.

               "Facility A Proportionate Share" shall mean:

                      (a) With respect to any Facility A Lender at any time
               prior to the termination of the Facility A Commitments, the ratio
               (expressed as a percentage rounded to the eighth digit to the
               right of the decimal point) of (i) such Lender's Facility A
               Commitment at such time to (ii) the Total Facility A Commitment
               at such time; and

                      (b) With respect to any Facility A Lender at any time
               after the termination of the Facility A Commitments, the ratio
               (expressed as a percentage rounded to the eighth digit to the
               right of the decimal point) of (i) the aggregate principal amount
               of such Lender's Facility A Revolving Loans outstanding at such
               time to (ii) the sum of the aggregate principal amount of all
               Facility A Revolving Loans outstanding at such time.

               "Facility A Revolving Loan" shall have the meaning given to that
        term in clause (i) of Subparagraph 2.01(a).

                                       6
<PAGE>   11

               "Facility A Revolving Loan Borrowing" shall mean a borrowing
        consisting of all the Facility A Revolving Loans of the same Type (and
        same Interest Period if LIBOR Loans) made by Facility A Lenders on the
        same date pursuant to the same Notice of Revolving Loan Borrowing. Any
        reference to a Facility A Revolving Loan Borrowing shall include all of
        the Facility A Revolving Loans constituting such Facility A Revolving
        Loan Borrowing.

               "Facility B" shall mean the revolving credit facility and term
        loan credit facility provided to Borrowers pursuant to Subparagraph
        2.01(b) and Subparagraph 2.01(c).

               "Facility B Commitment" shall mean, with respect to each Lender,
        the Dollar amount set forth under the caption "Facility B Commitment"
        opposite such Lender's name on Part A of Schedule I, or, if changed,
        such Dollar amount as may be set forth for such Lender in the Register.

               "Facility B Commitment Fees" shall have the meaning given to that
        term in clause (ii) of Subparagraph 2.06(b).

               "Facility B Lender" shall mean, at any time, any Lender then
        having a Facility B Commitment or a Facility B Loan outstanding.

               "Facility B Loan" shall mean a Facility B Revolving Loan or a
        Term Loan.

               "Facility B Proportionate Share" shall mean:

                      (a) With respect to any Facility B Lender at any time
               prior to the termination of the Facility B Commitments, the ratio
               (expressed as a percentage rounded to the eighth digit to the
               right of the decimal point) of (i) such Lender's Facility B
               Commitment at such time to (ii) the Total Facility B Commitment
               at such time; and

                      (b) With respect to any Facility B Lender at any time
               after the termination of the Facility B Commitments, the ratio
               (expressed as a percentage rounded to the eighth digit to the
               right of the decimal point) of (i) the aggregate principal amount
               of such Lender's Facility B Loans outstanding at such time to
               (ii) the sum of the aggregate principal amount of all Facility B
               Loans outstanding at such time.

               "Facility B Revolving Loan" shall have the meaning given to that
        term in clause (i) of Subparagraph 2.01(b).

               "Facility B Revolving Loan Borrowing" shall mean a borrowing
        consisting of all the Facility B Revolving Loans of the same Type (and
        same Interest Period if LIBOR Loans) made by Facility B Lenders on the
        same date pursuant to the same Notice of Revolving Loan Borrowing. Any
        reference to a Facility B Revolving Loan Borrowing shall include all of
        the Facility B Revolving Loans constituting such Facility B Revolving
        Loan Borrowing.

               "Facility B Revolving Loan Maturity Date" shall mean the date 364
        days after the date of this Agreement.

               "Federal Funds Rate" shall mean, for any day, the rate per annum
        set forth in the weekly statistical release designated as H.15(519), or
        any successor publication, published by the Federal Reserve Board
        (including any such successor publication, "H.15 (519)") for such day
        opposite the caption "Federal Funds (Effective)". If on any relevant
        day, such rate is not yet published in H.15 (519), the rate for such day
        shall be the rate set forth in the daily statistical release designated
        as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or
        any successor publication, published by the Federal Reserve Bank of New
        York (including any such successor publication, the "Composite 3:30 p.m.
        Quotations") for such day under the caption "Federal Funds Effective
        Rate". If on any relevant day, such rate is not yet published in either
        H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day
        shall be the arithmetic means, as

                                       7
<PAGE>   12

        determined by Agent, of the rates quoted to Agent for such day by three
        (3) Federal funds brokers of recognized standing selected by Agent for
        overnight federal funds transactions.

               "Federal Reserve Board" shall mean the Board of Governors of the
        Federal Reserve System.

               "FIL" shall mean Flextronics International Ltd., a Singapore
        corporation.

               "FIL Credit Agreement" shall mean the Credit Agreement dated the
        date hereof among FIL, the designated borrowers from time to time party
        thereto, each of the financial institutions from time to time party
        thereto, ABN AMRO Bank N.V., as agent, Fleet National Bank, as
        documentation agent, Bank of America, National Association and Citicorp
        USA, Inc., as managing agents, and The Bank of Nova Scotia, as co-agent,
        as amended or restated from time to time.

               "FIL Credit Documents" shall mean the FIL Credit Agreement and
        all agreements, documents and instruments delivered to the agent or any
        Lender under the FIL Credit Agreement.

               "FIUI" shall have the meaning given to that term in clause (1) of
        the introductory paragraph hereof.

               "Financial Statements" shall mean, with respect to any accounting
        period for any Person, statements of income, shareholders' equity and
        cash flows of such Person for such period, and a balance sheet of such
        Person as of the end of such period, setting forth in each case in
        comparative form figures for the corresponding period in the preceding
        fiscal year if such period is less than a full fiscal year or, if such
        period is a full fiscal year, corresponding figures from the preceding
        annual audit, all prepared in reasonable detail and in accordance with
        GAAP.

               "Foreign Plan" shall mean any employee benefit plan maintained by
        either Borrower or any of its Subsidiaries which is mandated or governed
        by any Governmental Rule of any Governmental Authority other than the
        United States.

               "Foreign Subsidiary" shall mean any Subsidiary of FIL that is
        organized under the laws of a jurisdiction other than the United States
        or a state thereof.

               "GAAP" shall mean generally accepted accounting principles and
        practices as in effect in the United States of America from time to
        time, consistently applied, subject to Paragraph 1.02 hereof.

               "Governmental Authority" shall mean any domestic or foreign
        national, state or local government, any political subdivision thereof,
        any department, agency, authority or bureau of any of the foregoing, or
        any other entity exercising executive, legislative, judicial, regulatory
        or administrative functions of or pertaining to government, including,
        without limitation, the Federal Deposit Insurance Corporation, the
        Federal Reserve Board, the Comptroller of the Currency, any central bank
        or any comparable authority.

               "Governmental Charges" shall mean, with respect to any Person,
        all levies, assessments, fees, claims or other charges imposed by any
        Governmental Authority upon such Person or any of its property or
        otherwise payable by such Person.

               "Governmental Rule" shall mean any law, rule, regulation,
        ordinance, order, code interpretation, judgment, decree, directive,
        guidelines, policy or similar form of decision of any Governmental
        Authority.

               "Guarantor" shall mean each of the Borrowers and Material
        Subsidiaries that has executed the Guaranty or otherwise become a party
        thereto.

               "Guaranty" shall have the meaning given to that term in
        Subparagraph 2.15(a).

                                       8
<PAGE>   13

               "Guaranty Obligation" shall mean, with respect to any Person, any
        direct or indirect liability of that Person with respect to any
        indebtedness, lease, dividend, letter of credit or other obligation (the
        "primary obligations") of another Person (the "primary obligor"),
        including any obligation of that Person, whether or not contingent, (a)
        to purchase, repurchase or otherwise acquire such primary obligations or
        any property constituting direct or indirect security therefor, or (b)
        to advance or provide funds (i) for the payment or discharge of any such
        primary obligation, or (ii) to maintain working capital or equity
        capital of the primary obligor or otherwise to maintain the net worth or
        solvency or any balance sheet item, level of income or financial
        condition of the primary obligor, or (c) to purchase property,
        securities or services primarily for the purpose of assuring the owner
        of any such primary obligation of the ability of the primary obligor to
        make payment of such primary obligation, or (d) otherwise to assure or
        hold harmless the holder of any such primary obligation against loss in
        respect thereof. The amount of any Guaranty Obligation shall be deemed
        equal to the stated or determinable amount of the primary obligation in
        respect of which such Guaranty Obligation is made or, if not stated or
        if indeterminable, the maximum reasonably anticipated liability in
        respect thereof.

               "Hazardous Materials" shall mean all pollutants, contaminants and
        other materials, substances and wastes which are hazardous, toxic,
        caustic, harmful or dangerous to human health or the environment,
        including petroleum and petroleum and petroleum products and byproducts,
        radioactive materials, asbestos and polychlorinated biphenyls.

               "Indebtedness" of any Person shall mean, without duplication, the
        following (each, unless otherwise noted, calculated in accordance with
        GAAP):

                      (a) All obligations of such Person evidenced by notes,
               bonds, debentures or other similar instruments and all other
               obligations of such Person for borrowed money (including
               obligations to repurchase receivables and other assets sold with
               recourse);

                      (b) All obligations of such Person for the deferred
               purchase price of property or services (including obligations
               under letters of credit and other credit facilities which secure
               or finance such purchase price, and the capitalized amount
               reported for income tax purposes with respect to obligations
               under "synthetic" leases);

                      (c) All obligations of such Person under conditional sale
               or other title retention agreements with respect to property
               acquired by such Person (to the extent of the value of such
               property if the rights and remedies of the seller or lender under
               such agreement in the event of default are limited solely to
               repossession or sale of such property);

                      (d) All obligations of such Person as lessee under or with
               respect to Capital Leases;

                      (e) All Contingent Obligations of such Person; and

                      (f) All obligations of other Persons of the types
               described in clauses (a) - (f) above to the extent secured by (or
               for which any holder of such obligations has an existing right,
               contingent or otherwise, to be secured by) any Lien in any
               property (including accounts and contract rights) of such Person,
               even though such Person has not assumed or become liable for the
               payment of such obligations.

               "Ineligible Material Subsidiary" shall mean, at any time, any
        Material Subsidiary (a) that is then prohibited by any applicable
        Governmental Rule from acting as a Guarantor under the Guaranty, (b)
        that then would incur, or would cause FIL or either Borrower to incur, a
        significant increase in its tax liabilities or similar liabilities or
        obligations as a result of acting as a Guarantor under the Guaranty or
        (c) that is a Foreign Subsidiary as to which the representations and
        warranties set forth in Paragraph 4.01(r) would not be true and correct
        were it to execute the Guaranty.

                                       9
<PAGE>   14

               "Interest Expenses" shall mean, with respect to any Person for
        any period, the sum, determined on a consolidated basis in accordance
        with GAAP, of (a) all interest expenses of such Person during such
        period (including interest attributable to Capital Leases) plus (b) all
        fees in respect of outstanding letters of credit paid, accrued or
        scheduled for payment by such Person during such period.

               "Interest Period" shall mean, with respect to any LIBOR Borrowing
        or any LIBOR Portion of the Term Loan Borrowing, the time period
        selected by the applicable Borrower pursuant to Subparagraph 2.02(a) or
        Subparagraph 2.02(b) which commences on the date of such Borrowing, or
        the effective date of any conversion of a Base Rate Portion to a LIBOR
        Portion, and ends on the last day of such time period, and thereafter,
        each subsequent time period selected by the applicable Borrower pursuant
        to clause (ii) of Subparagraph 2.03(b) which commences on the last day
        of the immediately preceding time period and ends on the last day of
        that time period.

               "Investment" of any Person shall mean any loan or advance of
        funds by such Person to any other Person (other than advances to
        employees of such Person for moving and travel expenses, drawing
        accounts and similar expenditures in the ordinary course of business),
        any purchase or other acquisition of any Equity Securities or
        Indebtedness of any other Person, any capital contribution by such
        Person to or any other investment by such Person in any other Person
        (including any Guaranty Obligations of such Person and any indebtedness
        of such Person of the type described in clause (h) of the definition of
        "Indebtedness" on behalf of any other Person); provided, however, that
        Investments shall not include (a) accounts receivable or other
        indebtedness owed by customers of such Person which are current assets
        and arose from sales of inventory in the ordinary course of such
        Person's business or (b) prepaid expenses of such Person incurred and
        prepaid in the ordinary course of business.

               "IRC" shall mean the Internal Revenue Code of 1986, as amended
        from time to time.

               "Lenders" shall have the meaning given to that term in clause (2)
        of the introductory paragraph hereof.

               "Lender Rate Contract" shall mean any Rate Contract entered into
        by either Borrower or its Subsidiaries with a Lender or its Affiliates
        as permitted by this Agreement.

               "LIBO Rate" shall mean, with respect to any Interest Period for
        any LIBOR Borrowing or any LIBOR Portion of the Term Loan Borrowing, a
        rate per annum equal to the quotient (rounded upward if necessary to the
        nearest 1/100 of one percent) of (a) the arithmetic mean (rounded upward
        if necessary to the nearest 1/16 of one percent) of the rates per annum
        appearing on the Applicable Rate Page for Dollars on the second Business
        Day prior to the first day of such Interest Period at or about 11:00
        A.M. (London time) (for delivery of Dollars on the first day of such
        Interest Period) for a term comparable to such Interest Period, divided
        by (b) one minus any applicable Reserve Requirement in effect from time
        to time. If for any reason rates are not available as provided in clause
        (a) of the preceding sentence, the rate to be used in clause (a) shall
        be, at the Agent's discretion, (i) the rate per annum at which deposits
        in Dollars are offered to Agent in the London interbank market or (ii)
        the rate at which deposits in Dollars are offered to Agent in, or by
        Agent to major banks in, any offshore interbank market selected by
        Agent, in each case on the second Business Day prior to the commencement
        of such Interest Period at or about 10:00 A.M. (New York time) (for
        delivery on the first day of such Interest Period) for a term comparable
        to such Interest Period and in an amount approximately equal to the
        amount of the Loan to be made or funded by Agent as part of such
        Borrowing or the Portion to be made or funded by Agent as part of the
        Term Loan Borrowing, as the case may be. The LIBO Rate shall be adjusted
        automatically as to all LIBOR Loans and LIBOR Portions outstanding as of
        the effective date of any change in the Reserve Requirement.

               "LIBOR Borrowing" shall mean any Revolving Loan Borrowing
        consisting of LIBOR Loans.

               "LIBOR Loan" shall mean any Revolving Loan or Term Loan bearing
        interest based upon the LIBO Rate.

                                       10
<PAGE>   15

               "LIBOR Portion" shall mean a portion of the Term Loan Borrowing
        bearing interest based upon the LIBO Rate.

               "Lien" shall mean, with respect to any property, any security
        interest, mortgage, pledge, lien, charge or other encumbrance in, of, or
        on such property or the income therefrom, including, without limitation,
        the interest of a vendor or lessor under a conditional sale agreement,
        Capital Lease or other title retention agreement, or any agreement to
        provide any of the foregoing.

               "Loan" shall mean a Revolving Loan or Term Loan.

               "Loan Account" shall have the meaning given to that term in
        Subparagraph 2.09(a).

               "Managing Agents" shall have the meaning given to that term in
        clause (5) of the introductory paragraph hereof.

               "Margin Stock" shall have the meaning given to that term in
        Regulation U issued by the Federal Reserve Board.

               "Material Adverse Effect" shall mean a material adverse effect on
        (a) the business, assets, operations or financial condition of FIL and
        its Subsidiaries, taken as a whole, or either Borrower and its
        Subsidiaries, taken as a whole; (b) the ability of either Borrower to
        pay or perform its Obligations in accordance with the terms of this
        Agreement and the other Credit Documents or the ability of FIL to pay or
        perform its obligations in accordance with the terms of the FIL Credit
        Documents; (c) the ability of the Guarantors (taken as a whole) to pay
        or perform the Obligations in accordance with the terms of this
        Agreement and the other Credit Documents; (d) the rights and remedies of
        Agent or any Lender under this Agreement, the other Credit Documents or
        any related document, instrument or agreement; or (e) the value of the
        Collateral, Agent's or any Lender's security interest in the Collateral
        or the perfection or priority of such security interests.

               "Material Subsidiary" shall mean, at any time during any fiscal
        year of FIL, any Subsidiary of FIL that (i) (A) had revenues during the
        immediately preceding fiscal year equal to or greater than five percent
        (5.0%) of the consolidated total revenues of FIL and all of its
        Subsidiaries during such preceding year or (B) held assets, excluding
        investments in Subsidiaries, on the last day of the immediately
        preceding fiscal year equal to or greater than ten percent (10%) of the
        consolidated total assets of FIL and all of its Subsidiaries on such
        date, in each case as set forth or reflected in the audited Financial
        Statements provided pursuant to clause (i) of Subparagraph 5.01(a)
        hereof or (ii) with respect to any Subsidiary added or created during
        such year, (A) had revenues, determined on a pro forma basis as of the
        most recent twelve months for which financial statements are available,
        greater than five percent (5%) of the consolidated total revenues of FIL
        and all of its Subsidiaries during such preceding year or (B) held
        assets, excluding investments in Subsidiaries, on the last day of the
        immediately preceding month equal to or greater than ten percent (10%)
        of the consolidated total assets of FIL and all of its Subsidiaries on
        such date of the consolidated total revenues of FIL and its Subsidiaries
        (including such added or created Subsidiary or Subsidiaries) determined
        on a pro forma basis during such year.

               "maturity" shall mean, with respect to any Loan, interest, fee or
        other amount payable by either Borrower under this Agreement or the
        other Credit Documents, the date such Loan, interest, fee or other
        amount becomes due, whether upon the stated maturity or due date, upon
        acceleration or otherwise.

               "Moody's" shall mean Moody's Investors Service, Inc. and any
        successor thereto that is a nationally recognized rating agency.

               "Multiemployer Plan" shall mean any multiemployer plan within the
        meaning of section 3(37) of ERISA maintained or contributed to by FIL,
        either Borrower, any Material Subsidiary or any ERISA Affiliate.

                                       11
<PAGE>   16

               "Non-Excluded Taxes" shall mean all Taxes other than Excluded
        Taxes.

               "Note" shall mean a Revolving Loan Note or Term Loan Note.

               "Notice of Borrowing" shall mean a Notice of Revolving Loan
        Borrowing or the Notice of Term Loan Borrowing.

               "Notice of Interest Period Selection" shall have the meaning
        given to that term in clause (ii) of Subparagraph 2.03(b).

               "Notice of Revolving Loan Borrowing" shall have the meaning given
        to that term in Subparagraph 2.02(a).

               "Notice of Term Loan Borrowing" shall have the meaning given to
        that term in Subparagraph 2.02(b).

               "Notice of Term Loan Conversion" shall have the meaning given to
        that term in clause (iii) of Subparagraph 2.03(b).

               "Obligations" shall mean and include all loans, advances, debts,
        liabilities, and obligations, howsoever arising, owed by either Borrower
        individually or both of the Borrowers jointly and severally to Agent or
        any Lender of every kind and description (whether or not evidenced by
        any note or instrument and whether or not for the payment of money),
        direct or indirect, absolute or contingent, due or to become due, now
        existing or hereafter arising pursuant to the terms of this Agreement or
        any of the other Credit Documents, including all interest, fees,
        charges, expenses, attorneys' fees and accountants' fees chargeable to
        Borrowers or payable by Borrowers thereunder.

               "Participant" shall have the meaning given to that term in
        Subparagraph 8.05(b).

               "PBGC" shall mean the Pension Benefit Guaranty Corporation, or
        any successor thereto.

               "Permitted Indebtedness" shall have the meaning given to that
        term in Subparagraph 5.02(a).

               "Permitted Liens" shall have the meaning given to that term in
        Subparagraph 5.02(b).

               "Person" shall mean and include an individual, a partnership, a
        corporation (including a business trust), a joint stock company, an
        unincorporated association, a limited liability company, a joint
        venture, a trust or other entity or a Governmental Authority.

               "Pledge Agreement" shall have the meaning given to that term in
        Subparagraph 2.15(a).

               "Portion" shall mean a portion of the principal amount of the
        Term Loan Borrowing or any Term Loan. The Term Loan Borrowing shall
        consist of one or more Portions, and each Term Loan comprising the Term
        Loan Borrowing shall consist of the same number of Portions, with each
        such Loan Portion corresponding pro rata to a Borrowing Portion. Any
        reference to a Portion of the Term Loan Borrowing shall include the
        corresponding Portion of each Term Loan comprising the Term Loan
        Borrowing.

               "Pricing Grid" shall mean Schedule II.

               "Pricing Period" shall mean (a) the period commencing on the date
        of this Agreement and ending 45 days after the quarter ended June 30,
        2000 and (b) thereafter each period commencing 45 days after the last
        day of the immediately preceding calendar quarter and ending 45 days
        after the last day of the next applicable calendar quarter, as explained
        in the Pricing Grid.

                                       12
<PAGE>   17

               "Pricing Period Level" shall mean either a Level 1 Period, Level
        2 Period, Level 3 Period, Level 4 Period, Level 5 Period or Level 6
        Period, which shall be determined based upon FIL's corresponding
        Debt/EBITDA Ratio for the consecutive four-quarter period ending on the
        last day of the immediately preceding quarter as set forth in the
        Pricing Grid; provided that, Level 2 Period pricing, as set forth in the
        Pricing Grid, will apply during any Pricing Period (other than FIL's
        first Pricing Period) in which FIL's senior unsecured long-term debt
        rating from S&P or Moody's is equal to or better than either BBB- or
        Baa3. Such pricing adjustment (if any) occurring as a result of such
        debt rating will take place when FIL notifies Agent that such debt
        rating has been achieved, and will continue until such debt rating drops
        below BBB- or Baa3 in which case the pricing will be calculated as set
        forth in the Pricing Grid.

               "Prime Rate" shall mean the per annum rate publicly announced by
        ABN AMRO from time to time at its Chicago office as its "prime rate."
        The Prime Rate is determined by ABN AMRO from time to time as a means of
        pricing credit extensions to some customers and is neither directly tied
        to any external rate of interest or index nor necessarily the lowest
        rate of interest charged by ABN AMRO at any given time for any
        particular class of customers or credit extensions. Any change in the
        Base Rate resulting from a change in the Prime Rate shall become
        effective on the Business Day on which each change in the Prime Rate
        occurs.

               "Proportionate Share" shall mean:

                      (a) With respect to any Lender and Facility A at any time,
               such Lender's Facility A Proportionate Share at such time;

                      (b) With respect to any Lender and Facility B at any time,
               such Lender's Facility B Proportionate Share at such time;

                      (c) With respect to any Lender without reference to either
               Facility:

                             (i) At any time prior to the termination of the
                      Facility B Commitments, the ratio (expressed as a
                      percentage rounded to the eighth digit to the right of the
                      decimal point) of (i) the sum of such Lender's Facility A
                      Commitment and Facility B Commitment at such time to (ii)
                      the sum of the Total Facility A Commitment and Total
                      Facility B Commitment at such time;

                             (ii) With respect to any Lender at any time after
                      the termination of the Facility B Commitments and prior to
                      the termination of the Facility A Commitments, the ratio
                      (expressed as a percentage rounded to the eighth digit to
                      the right of the decimal point) of (i) the sum of such
                      Lender's Facility A Commitment and the principal amount of
                      such Lender's Term Loan outstanding at such time to (ii)
                      the sum of the Total Facility A Commitment and the
                      aggregate principal amount of all Term Loans outstanding
                      at such time; and

                             (iii) With respect to any Lender at any time after
                      the termination of both the Facility A Commitments and the
                      Facility B Commitments, the ratio (expressed as a
                      percentage rounded to the eighth digit to the right of the
                      decimal point) of (i) the aggregate principal amount of
                      all of such Lender's Loans outstanding at such time to
                      (ii) the aggregate principal amount of all Lenders' Loans
                      outstanding at such time.

               "Rate Contracts" shall mean swap agreements (as that term is
        defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as
        amended) and any other agreements or arrangements designed to provide
        protection against fluctuations in interest rates, currency exchange
        rates or commodity prices.

               "Register" shall have the meaning given to that term in
Subparagraph 8.05(d).

                                       13
<PAGE>   18

               "Reportable Event" shall have the meaning given to that term in
        ERISA and applicable regulations thereunder.

               "Required Lenders" shall mean, at any time, Lenders whose
        Proportionate Shares equal or exceed fifty-one percent (51%) at such
        time, except at any time any Lender is a Defaulting Lender. (For the
        purposes of determining "Required Lenders" at any time any Lender is a
        Defaulting Lender, the "Proportionate Shares" of non-defaulting Lenders
        shall be determined excluding from the Total Facility A Commitment, the
        Total Facility B Commitment and the aggregate principal amount of all
        Term Loans the aggregate amounts of the Defaulting Lenders' Facility A
        Commitments, Facility B Commitments and Term Loans; and "Required
        Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as
        so determined then equal or exceed fifty-one percent (51%).)

               "Requirement of Law" applicable to any Person shall mean (a) the
        Articles or Certificate of Incorporation and By-laws, Partnership
        Agreement or other organizational or governing documents of such Person,
        (b) any Governmental Rule applicable to such Person, (c) any license,
        permit, approval or other authorization granted by any Governmental
        Authority to or for the benefit of such Person or (d) any judgment,
        decision or determination of any Governmental Authority or arbitrator,
        in each case applicable to or binding upon such Person or any of its
        property or to which such Person or any of its property is subject.

               "Reserve Requirement" shall mean, with respect to any day in an
        Interest Period for any Revolving Loan Borrowing consisting of LIBOR
        Loans or any LIBOR Portion of the Term Loan Borrowing, the aggregate of
        the reserve requirement rates (expressed as a decimal) in effect on such
        day for eurodollar funding (currently referred to as "Eurocurrency
        liabilities" in Regulation D of the Federal Reserve Board) maintained by
        a member bank of the Federal Reserve System. As used herein, the term
        "reserve requirement" shall include, without limitation, any basic,
        supplemental or emergency reserve requirements imposed on any Lender by
        any Governmental Authority.

               "Revolving Loan" shall mean a Facility A Revolving Loan or a
        Facility B Revolving Loan.

               "Revolving Loan Borrowing" shall mean a Facility A Revolving Loan
        Borrowing or a Facility B Revolving Loan Borrowing.

               "Revolving Loan Note" shall have the meaning given to that term
        in Subparagraph 2.09(b).

               "S&P" shall mean Standard & Poor's Rating Services, and any
        successor thereto that is a nationally recognized rating agency.

               "Security Documents" shall mean and include the Guaranty, the
        Pledge Agreements and all other instruments, agreements, certificates,
        opinions and documents (including Uniform Commercial Code financing
        statements) delivered to Agent or any Lender in connection with any
        Collateral or to secure the Obligations.

               "Solvent" shall mean, with respect to any Person on any date,
        that on such date (a) the fair value of the property of such Person is
        greater than the fair value of the liabilities (including contingent,
        subordinated, matured and unliquidated liabilities) of such Person, (b)
        the present fair saleable value of the assets of such Person is greater
        than the amount that will be required to pay the probable liability of
        such Person on its debts as they become absolute and matured, (c) such
        Person does not intend to, and does not believe that it will, incur
        debts or liabilities beyond such Person's ability to pay as such debts
        and liabilities mature and (d) such Person is not engaged in or about to
        engage in business or transactions for which such Person's property
        would constitute an unreasonably small capital.

               "Subordinated Indenture" shall mean the Indenture dated as of
        October 15, 1997 by and between FIL and State Street Bank and Trust
        Company of California, N.A., as trustee, and any other document,
        instrument or agreement evidencing the subordinating indebtedness
        thereunder.

                                       14
<PAGE>   19

               "Subsidiary" of any Person shall mean (a) any corporation of
        which more than 50% of the issued and outstanding Equity Securities
        having ordinary voting power to elect a majority of the Board of
        Directors of such corporation (irrespective of whether at the time
        capital stock of any other class or classes of such corporation shall or
        might have voting power upon the occurrence of any contingency) is at
        the time directly or indirectly owned or controlled by such Person, by
        such Person and one or more of its other Subsidiaries or by one or more
        of such Person's other Subsidiaries, (b) any partnership, joint venture,
        limited liability company or other association of which more than 50% of
        the equity interest having the power to vote, direct or control the
        management of such partnership, joint venture or other association is at
        the time owned and controlled by such Person, by such Person and one or
        more of the other Subsidiaries or by one or more of such Person's other
        Subsidiaries or (c) any other Person included in the Financial
        Statements of such Person on a consolidated basis.

               "Surety Instruments" shall mean all letters of credit (including
        standby and commercial), banker's acceptances, bank guaranties, shipside
        bonds, surety bonds and similar instruments.

               "Taxes" shall mean all present and future income, stamp,
        documentary and other taxes and duties, and all other levies, imposts,
        charges, fees, deductions and withholdings, now or hereafter imposed,
        levied, collected, withheld or assessed by any Governmental Authority.

               "Term Loan" shall have the meaning given to that term in clause
        (ii) of Subparagraph 2.01(c).

               "Term Loan Borrowing" shall mean a borrowing consisting of all
        the Term Loans of the same Type (and same Interest Period if LIBOR
        Loans) made by Facility B Lenders on the Facility B Revolving Loan
        Maturity Date pursuant to the Notice of Term Loan Borrowing. Any
        reference to a Term Loan Borrowing shall include all the Term Loans
        constituting such Term Loan Borrowing. (One or more Term Loan Borrowings
        may be made on the Facility B Revolving Loan Maturity Date.)

               "Term Loan Maturity Date" shall mean the date that is one (1)
        year after the Facility B Revolving Loan Maturity Date.

               "Term Loan Note" shall have the meaning given to that term in
        Subparagraph 2.09(b).

               "Total Facility A Commitment" shall mean, at any time, the sum at
        such time of Facility A Lenders' Facility A Commitments. The Total
        Facility A Commitment on the date of this Agreement is One Hundred
        Seventy Five Million Dollars ($175,000,000).

               "Total Facility B Commitment" shall mean, at any time, the sum at
        such time of Facility B Lenders' Facility B Commitments. The Total
        Facility B Commitment on the date of this Agreement is One Hundred
        Seventy Five Million Dollars ($175,000,000).

               "Type" shall mean, with respect to any Revolving Loan, any
        Revolving Loan Borrowing or any Portion of any Term Loan or the Term
        Loan Borrowing at any time, the classification of such Loan, Borrowing
        or Portion by the type of interest rate it then bears, whether an
        interest rate based upon the Base Rate or LIBO Rate.

               "Unused" shall mean

                      (a) With respect to the Facility A Commitment at any time,
               the remainder of (i) the Total Facility A Commitment at such time
               minus (ii) the aggregate principal amount of all Facility A
               Revolving Loans outstanding at such time; and

                      (b) With respect to the Facility B Commitment at any time,
               the remainder of (i) the Total Facility B Commitment at such time
               minus (ii) the aggregate principal amount of all Facility B
               Revolving Loans outstanding at such time.

                                       15
<PAGE>   20

        1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, Borrowers, Lenders and Agent agree to negotiate in good faith to
amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating FIL's financial condition to substantially
the same criteria as were effective prior to such change in GAAP; provided,
however, that, until Borrowers, Lenders and Agent so amend this Agreement, all
such covenants shall be calculated in accordance with GAAP as in effect
immediately prior to such change. Any calculations performed under this Credit
Agreement that are based on the total assets or total revenues of FIL and its
Subsidiaries and which contemplate the completion of the DII Acquisition shall
be determined based on the March 31 fiscal year end consolidated pro forma
financial statements of FIL giving effect to the DII Acquisition for such
purposes; except with respect to the definition of "Material Subsidiary" herein,
which shall be calculated based on a nine (9) month pro forma basis.

        1.03. Headings. Headings in this Agreement and each of the other Credit
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.

        1.04. Plural Terms. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and vice versa.

        1.05. Governing Law. Unless otherwise expressly provided in any Credit
Document, this Agreement and each of the other Credit Documents shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.

        1.06. English Language. This Agreement and the other Credit Documents
are executed and shall be construed in the English language. All instruments,
agreements, certificates, opinions and other documents to be furnished or
communications to be given or made under this Agreement or any other Credit
Document shall be in the English language.

        1.07. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrowers, each Lender, Agent and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
either Borrower, any Lender or Agent.

        1.08. Entire Agreement. This Agreement and each of the other Credit
Documents, taken together, constitute and contain the entire agreement of
Borrowers, Lenders and Agent and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter hereof
(excluding the Agent's Fee Letter but including the commitment letter dated as
of February 28, 2000 between FIL and ABN AMRO).

        1.09. Calculation of Interest and Fees. All calculations of interest and
fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any Loan or Portion bears interest
based upon the Prime Rate, such interest shall be calculated on the basis of a
year of 365 or 366 days, as appropriate, for actual days elapsed.

        1.10.  References.

               (a) References in this Agreement to "Recitals," "Sections,"
        "Paragraphs," "Subparagraphs," "Exhibits" and "Schedules" are to
        recitals, sections, paragraphs, subparagraphs, exhibits and schedules
        therein and thereto unless otherwise indicated.

               (b) References in this Agreement or any other Credit Document to
        any document, instrument or agreement (i) shall include all exhibits,
        schedules and other attachments thereto, (ii) shall include all
        documents, instruments or agreements issued or executed in replacement
        thereof if such replacement is

                                       16
<PAGE>   21

        permitted hereby, and (iii) shall mean such document, instrument or
        agreement, or replacement or predecessor thereto, as amended, modified
        and supplemented from time to time and in effect at any given time if
        such amendment, modification or supplement is permitted hereby.

               (c) References in this Agreement or any other Credit Document to
        any Governmental Rule (i) shall include any successor Governmental Rule,
        (ii) shall include all rules and regulations promulgated under such
        Governmental Rule (or any successor Governmental Rule), and (iii) shall
        mean such Governmental Rule (or successor Governmental Rule) and such
        rules and regulations, as amended, modified, codified or reenacted from
        time to time and in effect at any given time.

               (d) References in this Agreement or any other Credit Document to
        any Person in a particular capacity (i) shall include any permitted
        successors to and assigns of such Person in that capacity and (ii) shall
        exclude such Person individually or in any other capacity.

        1.11. Other Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as
the case may be, as a whole and not to any particular provision of this
Agreement or such other Credit Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Credit Document shall not be construed to be limiting or exclusive. In the
event of any inconsistency between the terms of this Agreement and the terms of
any other Credit Document, the terms of this Agreement shall govern.

SECTION II.       CREDIT FACILITIES.

        2.01.  Loans.

               (a)    Facility A Revolving Loans.

                      (i) Availability. Subject to the terms and conditions of
               this Agreement (including the amount limitations set forth in
               Paragraph 2.05), each Facility A Lender severally agrees to
               advance to Borrowers from time to time during the period
               beginning on the Closing Date and ending on the Facility A
               Revolving Loan Maturity Date its pro rata share of such revolving
               loans in Dollars as Borrowers may request under Facility A
               (individually, a "Facility A Revolving Loan"); provided, however,
               that no Lender shall have any obligation to make a requested
               Facility A Revolving Loan if, after giving effect to such Loan,
               the aggregate principal amount of all such Lender's Facility A
               Revolving Loans then outstanding would exceed such Lender's
               Facility A Commitment at such time. All Facility A Revolving
               Loans shall be made on a pro rata basis by Facility A Lenders in
               accordance with their respective Facility A Proportionate Shares,
               with each Facility A Revolving Loan Borrowing to be comprised of
               a Facility A Revolving Loan made by each Facility A Lender equal
               to such Facility A Lender's Proportionate Share of such Facility
               A Revolving Loan Borrowing. Except as otherwise provided herein,
               Borrowers may borrow, repay and reborrow Facility A Revolving
               Loans until the Facility A Revolving Loan Maturity Date.

                      (ii) Scheduled Payments. Borrowers shall repay the
               principal amount of the Facility A Revolving Loans in full on the
               Facility A Revolving Loan Maturity Date. Borrowers shall pay
               accrued interest on the unpaid principal amount of each Facility
               A Revolving Loan in arrears (A) in the case of a Base Rate Loan,
               on the last day of the month of each March, June, September and
               December, (B) in the case of a LIBOR Loan, on the last day of
               each Interest Period therefor (and, if any such Interest Period
               is longer than three (3) months, every three (3) months); and (C)
               in the case of all Facility A Revolving Loans, upon prepayment
               (to the extent thereof) and at maturity.

               (b)    Facility B Revolving Loans.

               (i) Availability. Subject to the terms and conditions of this
        Agreement (including the amount limitations set forth in Paragraph
        2.05), each Facility B Lender severally agrees to

                                       17
<PAGE>   22

               advance to Borrowers from time to time during the period
               beginning on the Closing Date and ending on the Facility B
               Revolving Loan Maturity Date its pro rata share of such revolving
               loans in Dollars as Borrowers may request under Facility B
               (individually, a "Facility B Revolving Loan"); provided, however,
               that no Facility B Lender shall have any obligation to make a
               requested Facility B Revolving Loan if, after giving effect to
               such Loan, the aggregate principal amount of all such Lender's
               Facility B Revolving Loans then outstanding would exceed such
               Lender's Facility B Commitment at such time. All Facility B
               Revolving Loans shall be made on a pro rata basis by Facility B
               Lenders in accordance with their respective Facility B
               Proportionate Shares, with each Facility B Revolving Loan
               Borrowing to be comprised of a Facility B Revolving Loan made by
               each Facility B Lender equal to such Facility B Lender's
               Proportionate Share of such Facility B Revolving Loan Borrowing.
               Except as otherwise provided herein, Borrowers may borrow, repay
               and reborrow Facility B Revolving Loans until the Facility B
               Revolving Loan Maturity Date.

                      (ii) Scheduled Payments. Borrowers shall repay the
               principal amount of the Facility B Revolving Loans in full on the
               Facility B Revolving Loan Maturity Date. Such repayment may be
               effected with the proceeds of the Term Loan Borrowing pursuant to
               Subparagraph 2.02(b). Borrowers shall pay accrued interest on the
               unpaid principal amount of each Facility B Revolving Loan in
               arrears (A) in the case of a Base Rate Loan, on the last day of
               the month of each March, June, September and December, (B) in the
               case of a LIBOR Loan, on the last day of each Interest Period
               therefor (and, if any such Interest Period is longer than three
               (3) months, every three (3) months); and (C) in the case of all
               Facility B Revolving Loans, upon prepayment (to the extent
               thereof) and at maturity.

               (c)    Term Loan.

                      (i) Availability. Subject to the terms and conditions of
               this Agreement (including the amount limitations set forth in
               Paragraph 2.05), each Facility B Lender severally agrees to
               advance, upon the request of Borrowers pursuant to Subparagraph
               2.02(b), to Borrowers on the Facility B Revolving Loan Maturity
               Date its pro rata share of such term loans in Dollars as
               Borrowers shall request under Facility B (individually, a "Term
               Loan"); provided, however, that no Lender shall have any
               obligation to make requested Term Loans if the aggregate
               principal amount thereof would exceed such Lender's Facility B
               Commitment on the Facility B Revolving Loan Maturity Date. The
               Term Loans shall be made on a pro rata basis by Facility B
               Lenders in accordance with their respective Facility B
               Proportionate Shares, with each Term Loan Borrowing to be
               comprised of a Term Loan by each Facility B Lender equal to such
               Facility B Lender's Facility B Proportionate Share of such Term
               Loan Borrowing. Borrowers may not reborrow the principal amount
               of a Term Loan after repayment or prepayment thereof.

                      (ii) Scheduled Payments. Borrowers shall repay the
               principal amount of the Term Loans in full in a single
               installment on the Term Loan Maturity Date. Borrowers shall pay
               accrued interest on the unpaid principal amount of each Term Loan
               in arrears (A) in the case of a Base Rate Portion, on the last
               day of the month of each March, June, September and December, (B)
               in the case of a LIBOR Portion, on the last day of each Interest
               Period (and if any such Interest Period is equal to or longer
               than three (3) months, every three (3) months); and (C) in the
               case of all Term Loans, upon prepayment (to the extent thereof)
               and at maturity.

        2.02.  Notice of Borrowing.

               (a) Notice of Revolving Loan Borrowing. Borrowers shall request
        each Revolving Loan Borrowing by delivering to Agent an irrevocable
        written notice in the form of Exhibit A, appropriately completed (a
        "Notice of Revolving Loan Borrowing"), which specifies, among other
        things:

                      (i)    Whether such Revolving Loan Borrowing is a
        Borrowing under Facility A or Facility B;

                                       18
<PAGE>   23

                      (ii) The principal amount of such Revolving Loan
               Borrowing, which shall be in the minimum amount of $5,000,000 or
               an integral multiple of $1,000,000 in excess thereof;

                      (iii) Whether such requested Revolving Loan Borrowing is
               to consist of Base Rate Loans or LIBOR Loans;

                      (iv) If such Revolving Loan Borrowing is to consist of
               LIBOR Loans, the initial Interest Period selected by the
               applicable Borrower for such Revolving Loan Borrowing in
               accordance with Subparagraph 2.03(b)(i);

                      (v) The date of such Borrowing, which shall be a Business
               Day; and

                      (vi) The applicable Borrower for such Revolving Loan
               Borrowing.

        Borrowers shall give each Notice of Revolving Loan Borrowing to Agent at
        least three (3) Business Days before the date of the requested Revolving
        Loan Borrowing in the case of a Revolving Loan Borrowing consisting of
        LIBOR Loans and at least one (1) Business Day before the date of the
        requested Revolving Loan Borrowing in the case of a Revolving Loan
        Borrowing consisting of Base Rate Loans. Each Notice of Revolving Loan
        Borrowing shall be signed by the applicable Borrower and delivered by
        first-class mail or facsimile to Agent at the office or facsimile number
        and during the hours specified in Paragraph 8.01; provided, however,
        that Borrowers shall promptly deliver to Agent the original of any
        Notice of Revolving Loan Borrowing initially delivered by facsimile.
        Agent shall promptly notify each Lender of the contents of each Notice
        of Revolving Loan Borrowing.

               (b) Notice of Term Loan Borrowing. Borrowers shall request each
        Term Loan Borrowing by delivering to Agent an irrevocable written notice
        in the form of Exhibit B, appropriately completed (a "Notice of Term
        Loan Borrowing"), which specifies, among other things:

                      (i) The principal amount of each Term Loan Borrowing,
               which shall be in the minimum amount of $5,000,000 or an integral
               multiple of approximately $1,000,000 in excess thereof;

                      (ii) (A) The principal portion of such Term Loan Borrowing
               which is to be a Base Rate Portion and (2) the principal
               portion(s) of such Term Loan Borrowing which is (are) to be a
               LIBOR Portion(s);

                      (iii) If any Portion of such Term Loan Borrowing is
               initially to be a LIBOR Portion, the initial Interest Period
               selected by the applicable Borrower for each such Portion in
               accordance with Subparagraph 2.03(b)(i) ; and

                      (iv) The applicable Borrower for each Term Loan Borrowing.

        Borrowers shall give the Notice of Term Loan Borrowing to Agent at least
        three (3) Business Days before the Facility B Revolving Loan Maturity
        Date in the case of a Term Loan Borrowing if any Portion of the Term
        Loan Borrowing is initially to be a LIBOR Portion and at least one (1)
        Business Day before the Facility B Revolving Loan Maturity Date in the
        case of a Term Loan Borrowing if the only Portion of the Term Loan
        Borrowing is initially to be a Base Rate Portion. The Notice of Term
        Loan Borrowing shall be signed by the applicable Borrower(s) and
        delivered by first-class mail or facsimile to Agent at the office or
        facsimile number and during the hours specified in Paragraph 8.01;
        provided, however, that Borrowers shall promptly deliver to Agent the
        original of the Notice of Term Loan Borrowing if initially delivered by
        facsimile. Agent shall promptly notify each Lender of the contents of
        the Notice of Term Loan Borrowing.

                                       19
<PAGE>   24

        2.03.  Interest.

               (a) Interest Rates. Borrowers shall pay interest on the unpaid
        principal amount of each Loan from the date of such Loan until the
        maturity thereof, at one of the following rates per annum:

                      (i) During such periods as any Revolving Loan is a Base
               Rate Loan or any Portion of such Term Loan is a Base Rate
               Portion, at a rate per annum on such Loan or Portion equal to the
               Base Rate plus the Applicable Margin therefor, such rate to
               change from time to time as the Applicable Margin or Base Rate
               shall change; and

                      (ii) During such periods as any Revolving Loan is a LIBOR
               Loan or any Portion of such Term Loan is a LIBOR Portion, at a
               rate per annum on such Loan or Portion equal at all times during
               each Interest Period for such Loan or Portion to the LIBO Rate
               for such Interest Period plus the Applicable Margin therefor,
               such rate to change from time to time as the Applicable Margin
               shall change.

        All Revolving Loans in each Revolving Loan Borrowing shall, at any given
        time prior to maturity, bear interest at one, and only one, of the above
        rates. Each LIBOR Loan Borrowing or LIBOR Portion of the Term Loan
        Borrowing shall be in a minimum amount of $5,000,000 or an integral
        multiple of $1,000,000 in excess thereof.

               (b)    Terms.

                      (i) LIBOR Loan and LIBOR Portion Interest Periods. The
               initial and each subsequent Interest Period selected by a
               Borrower for any Revolving Loan Borrowing consisting of LIBOR
               Loans or any LIBOR Portion of the Term Loan Borrowing shall be
               one (1), two (2), three (3) or six (6) months; provided, however,
               that (A) any Interest Period which would otherwise end on a day
               which is not a Business Day shall be extended to the next
               succeeding Business Day unless such next Business Day falls in
               another calendar month, in which case such Interest Period shall
               end on the immediately preceding Business Day; (B) any Interest
               Period which begins on the last Business Day of a calendar month
               (or on a day for which there is no numerically corresponding day
               in the calendar month at the end of such Interest Period) shall
               end on the last Business Day of a calendar month; (C) no Interest
               Period for a Facility A Revolving Loan Borrowing shall end after
               the Facility A Revolving Loan Maturity Date; (D) no Interest
               Period of a Facility B Revolving Loan Borrowing shall end after
               the Facility B Revolving Loan Maturity Date, and (E) no Interest
               Period for a LIBOR Portion of a Term Loan Borrowing shall end
               after the Term Loan Maturity Date.

                      (ii) Notice of Interest Period Selection. The applicable
               Borrower shall notify Agent by an irrevocable written notice in a
               form acceptable to Agent, appropriately completed (a "Notice of
               Interest Period Selection"), at least three (3) Business Days
               prior to the last day of each Interest Period for a Revolving
               Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of
               a Term Loan Borrowing of the Interest Period selected by such
               Borrower for the next succeeding Interest Period for such
               Borrowing or Portion. Each Notice of Interest Period Selection
               shall be given by first-class mail or facsimile to the office or
               the facsimile number and during the hours specified in Paragraph
               8.01; provided, however, that the applicable Borrower shall
               promptly deliver to Agent the original of any Notice of Interest
               Period Selection initially delivered by facsimile. If either
               Borrower fails to notify Agent of the next Interest Period for a
               Borrowing in accordance with this Subparagraph 2.03(b)(ii), the
               next Interest Period for such Borrowing shall be one (1) month.
               Agent shall promptly notify each Lender of the contents of each
               Notice of Interest Period Selection.

                      (iii) Conversion of Term Loan Portions. Either Borrower
               may convert any Portion of the Term Loan Borrowing from one Type
               of Portion to another Type; provided, however, that any
               conversion of a LIBOR Portion into a Base Rate Portion shall be
               made on, and only on, the last day of an Interest Period for such
               LIBOR Portion. Borrowers shall request such a conversion

                                       20
<PAGE>   25

               by an irrevocable written notice to Agent in a form acceptable
               to Agent, appropriately completed (a "Notice of Term Loan
               Conversion"), which specifies, among other things:

                             (A) The Portion of the Term Loan Borrowing which is
                      to be converted;

                             (B) The amount and Type of each Portion of the Term
                      Loan Borrowing into which it is to be converted;

                             (C) If any Portion of the Term Loan Borrowing is to
                      be converted into a LIBOR Portion, the initial Interest
                      Period selected by the applicable Borrower for such
                      Portion in accordance with Subparagraph 2.03(b)(i); and

                             (D) The date of the requested conversion, which
                      shall be a Business Day.

               Borrowers shall give each Notice of Term Loan Conversion to Agent
               at least three (3) Business Days before the date of the requested
               conversion. Each Notice of Term Loan Conversion shall be
               delivered by first-class mail or facsimile to Agent at the office
               or to the facsimile number and during the hours specified in
               Paragraph 8.01; provided, however, that such Borrower shall
               promptly deliver to Agent the original of any Notice of Term Loan
               Conversion initially delivered by facsimile. Agent shall promptly
               notify each Lender of the contents of each Notice of Term Loan
               Conversion.

        2.04.  Purpose.

               (a) Revolving Loans. Borrowers shall use the proceeds of the
        initial Revolving Loan to repay on the Closing Date all indebtedness
        outstanding under the Existing FIUI Credit Agreement and to fund the DII
        Acquisition (including debt refinancing), and thereafter Borrowers shall
        use the proceeds of the Revolving Loans and for their respective working
        capital and general corporate needs.

               (b) Term Loans. Borrowers shall use the proceeds of the Term
        Loans first to repay all outstanding Facility B Revolving Loans and then
        for their respective working capital and general corporate needs. Any
        Facility B Revolving Loans outstanding at the time of the funding of any
        Term Loan shall be deemed to be converted into Term Loans.

        2.05.  Amount Limitations, Commitment Reductions, Etc.

               (a) Commitment Limitations. The aggregate principal amount of all
        Facility A Revolving Loans outstanding at any time shall not exceed the
        Total Facility A Commitment at such time. The aggregate principal amount
        of all Facility B Revolving Loans outstanding at any time shall not
        exceed the Total Facility B Commitment at such time. The aggregate
        principal amount of all Term Loans outstanding at any time shall not
        exceed the Total Facility B Commitment at such time.

               (b) Reduction or Cancellation of Commitments. Upon four (4)
        Business Days prior written notice to Agent, Borrowers may permanently
        reduce the Total Facility A Commitment and/or the Total Facility B
        Commitment by the amount of Five Million Dollars ($5,000,000) or
        integral multiples in excess thereof or cancel the Total Facility A
        Commitment and/or the Total Facility B Commitment in its entirety;
        provided, however, that:

                             (i) Borrowers may not reduce the Total Facility A
                      Commitment prior to the Facility A Revolving Loan Maturity
                      Date, if, after giving effect to such reduction, the
                      aggregate principal amount of all Facility A Revolving
                      Loans then outstanding would exceed the Total Facility A
                      Commitment;

                             (ii) Borrowers may not reduce the Total Facility B
                      Commitment prior to the Facility B Revolving Loan Maturity
                      Date if, after giving effect to such reduction, the

                                       21
<PAGE>   26

                      aggregate principal amount of all Facility B Revolving
                      Loans then outstanding would exceed the Total Facility B
                      Commitment;

                             (iii) Borrowers may not cancel the Total Facility A
                      Commitment prior to the Facility A Revolving Loan Maturity
                      Date, if, after giving effect to such cancellation, any
                      Facility A Revolving Loan would then remain outstanding;
                      and

                             (iv) Borrowers may not cancel the Total Facility B
                      Commitment prior to the Facility B Revolving Loan Maturity
                      Date, if, after giving effect to such cancellation, any
                      Facility B Revolving Loan would then remain outstanding.

               Unless sooner terminated pursuant to this Agreement, the Facility
               A Commitments shall terminate on the Facility A Revolving Loan
               Maturity Date and the Facility B Commitments shall terminate on
               the Facility B Revolving Loan Maturity Date.

               (c) Effect of Commitment Reductions. From the effective date of
        any reduction of the Total Facility A Commitment or the Total Facility B
        Commitment, the Commitment Fees payable pursuant to Subparagraph 2.06(b)
        shall be computed on the basis of the Total Facility A Commitment and/or
        the Total Facility B Commitment as so reduced. Once reduced or
        cancelled, the Total Facility A Commitment or the Total Facility B
        Commitment may not be increased or reinstated without the prior written
        consent of all Facility A Lenders or Facility B Lenders, as applicable.
        Any reduction of the Total Facility A Commitment pursuant to
        Subparagraph 2.05(b) shall be applied ratably to reduce each Facility A
        Lender's Facility A Commitment in accordance with clause (i) of
        Subparagraph 2.09(a). Any reduction of the Total Facility B Commitment
        pursuant to Subparagraph 2.05(b) shall be applied ratably to reduce each
        Facility B Lender's Facility B Commitment in accordance with clause (ii)
        of Subparagraph 2.11(a).

        2.06.  Fees.

               (a) Agent's Fee. Borrowers shall pay to Agent, for its own
        account, agent's fees and other compensation in the amounts and at the
        times set forth in the Agent's Fee Letter.

               (b) Commitment Fees. Borrowers shall pay to Agent:

                      (i) For the ratable benefit of Facility A Lenders as
               provided in clause (v) of Subparagraph 2.11(a), commitment fees
               in Dollars (the "Facility A Commitment Fees") equal to the
               Commitment Fee Percentage of the daily average Unused amount of
               the Total Facility A Commitment for the period beginning on the
               date of this Agreement and ending on the Facility A Revolving
               Loan Maturity Date; and

                      (ii) For the ratable benefit of Facility B Lenders as
               provided in clause (vi) of Subparagraph 2.11(a), commitment fees
               in Dollars (the "Facility B Commitment Fees") equal to the
               Commitment Fee Percentage of the daily average Unused amount of
               the Total Facility B Commitment for the period beginning on the
               date of this Agreement and ending on the Facility B Revolving
               Loan Maturity Date.

        Borrowers shall pay the Commitment Fees in arrears on the last day of
        each March, June, September and December (commencing June 30, 2000) and
        on the Facility A Revolving Loan Maturity Date and the Facility B
        Revolving Loan Maturity Date, as the case may be (or if the Total
        Facility A Commitment or Total Facility B Commitment is cancelled on a
        date prior to the Facility A Revolving Loan Maturity Date or the
        Facility B Revolving Loan Maturity Date, as the case may be, on such
        prior date).

        2.07.  Prepayments.

               (a) Terms of all Prepayments. Upon the prepayment of any Loan
        (whether such prepayment is an optional prepayment under Subparagraph
        2.07(b), a mandatory prepayment required by Subparagraph

                                       22
<PAGE>   27

        2.07(c) or a mandatory prepayment required by any other provision of
        this Agreement or the other Credit Documents, including a prepayment
        upon acceleration), the applicable Borrower shall pay to the Lender that
        made such Loan (i) all accrued interest to the date of such prepayment
        on the amount prepaid and (ii) if such prepayment is the prepayment of a
        LIBOR Loan or of a LIBOR Portion on a day other than the last day of an
        Interest Period for such LIBOR Loan or such LIBOR Portion, all amounts
        payable to such Lender pursuant to Paragraph 2.14.

               (b) Optional Prepayments. At its option, either Borrower may
        prepay, in whole or in part, any Borrowing made to it, provided that:

                      (i) Such Borrower delivers to Agent prior written notice
               of such prepayment, which notice shall be delivered (A) not less
               than three (3) Business Days prior to the prepayment of any
               Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR
               Portion or a Term Loan Borrowing; and (B) not less than one (1)
               Business Day prior to any prepayment of a Base Rate Borrowing or
               Base Rate Portion; and

                      (ii) Any prepayment in part shall be in a minimum
               aggregate principal amount equal to $5,000,000 or an integral
               multiple of $1,000,000 in excess thereof.

               (c)    Mandatory Prepayments.

                      (i) If, at any time, the aggregate principal amount of all
               Facility A Revolving Loans then outstanding exceeds any
               limitations set forth in Subparagraph 2.05(c), the applicable
               Borrower(s) shall immediately prepay such Facility A Revolving
               Loans in such amounts as Agent shall determine are necessary to
               eliminate such excess.

                      (ii) If, at any time, the aggregate principal amount of
               all Facility B Revolving Loans then outstanding exceeds any
               limitations set forth in Subparagraph 2.05(c), the applicable
               Borrower(s) shall immediately prepay such Facility B Revolving
               Loans in such amounts as Agent shall determine are necessary to
               eliminate such excess.

               (d) Application of Prepayments. All prepayments of Borrowings
        shall, to the extent possible, be applied to prepay the Base Rate
        Borrowings, Base Rate Portions, LIBOR Borrowings or LIBOR Portions
        designated by either Borrower.

        2.08.  Other Payment Terms.

               (a)    Place and Manner.

                      (i) Borrowers shall make all payments due to each Lender
               or Agent hereunder by payments to Agent at Agent's New York
               office located at the address specified in Paragraph 8.01, with
               each such payment due to a Lender to be for the account of such
               Lender and such Lender's Lending Office.

                      (ii) Borrowers shall make all payments hereunder in same
               day or immediately available funds and without deduction or
               offset not later than 11:00 a.m. (California time) and on the
               date due. Agent shall promptly disburse to each Lender each
               payment received by Agent for the account of such Lender.

               (b) Date. Whenever any payment due hereunder shall fall due on a
        day other than a Business Day, such payment shall be made on the next
        succeeding Business Day, and such extension of time shall be included in
        the computation of interest or fees, as the case may be.

                                       23
<PAGE>   28

               (c)    Currency of Payment.

                      (i) Borrowers shall pay principal of, interest on and all
               other amounts related to each Borrowing in Dollars. Borrowers
               shall pay Commitment Fees and all other amounts payable under
               this Agreement and the other Credit Documents in Dollars.

                      (ii) If any amounts required to be paid by Borrowers under
               this Agreement, any other Credit Document or any order, judgment
               or award given or rendered in relation hereto or thereto has to
               be converted from the currency (the "first currency") in which
               the same is payable hereunder or thereunder into another currency
               (the "second currency") for the purpose of (A) making or filing a
               claim or proof against Borrowers with any Governmental Authority,
               (B) obtaining an order or judgment in any court or other tribunal
               or (C) enforcing any order or judgment given or made in relation
               hereto, Borrowers shall, to the fullest extent permitted by law,
               indemnify and hold harmless each of the Persons to whom such
               amounts are payable from and against any loss suffered as a
               result of any discrepancy between (1) the rate of exchange used
               for such purpose to convert the amounts in question from the
               first currency into the second currency and (2) the rate or rates
               of exchange at which such Person may, using reasonable efforts in
               the ordinary course of business, purchase the first currency with
               the second currency upon receipt of a sum paid to it in
               satisfaction, in whole or in part, of any such order, judgment,
               claim or proof. The foregoing indemnity shall constitute a
               separate obligation of Borrowers distinct from their other
               obligations hereunder and shall survive the giving or making of
               any judgment or order in relation to all or any of such
               obligations. The obligations of Borrowers under this Subparagraph
               2.08(c) shall survive the payment and performance of the
               Obligations and the termination of this Agreement.

               (d) Late Payments. If any amount required to be paid by either
        Borrower under this Agreement or the other Credit Documents (including,
        without limitation, principal or interest payable on any Loan, any fees
        or any other amount) remains unpaid after such amount is due, such
        Borrower shall pay interest on the aggregate, outstanding balance of
        such amount from the date due until such amount is paid in full at a per
        annum rate equal to the Base Rate plus two percent (2.00%), such rate to
        change from time to time as the Base Rate shall change.

               (e) Application of Payments. All payments hereunder shall be
        applied first to unpaid fees, costs and expenses then due and payable
        under this Agreement or the other Credit Documents, second to accrued
        interest then due and payable under this Agreement or the other Credit
        Documents and finally to reduce the principal amount of outstanding
        Loans.

               (f) Failure to Pay Agent. Unless Agent shall have received notice
        from a Borrower at least one (1) Business Day prior to the date on which
        any payment is due to Lenders hereunder that such Borrower will not make
        such payment in full, Agent shall be entitled to assume that such
        Borrower has made or will make such payment in full to Agent on such
        date and Agent may, in reliance upon such assumption, cause to be paid
        to the applicable Lenders on such due date an amount equal to the amount
        then due such Lenders. If and to the extent such Borrower shall not have
        so made such payment in full to Agent, each such Lender shall repay to
        Agent forthwith on demand such amount distributed to such Lender
        together with interest thereon, for each day from the date such amount
        is distributed to such Lender until the date such Lender repays such
        amount to Agent, at a per annum rate equal to the Federal Funds Rate for
        the first three (3) days and the Base Rate thereafter for any amount in
        Dollars. A certificate of Agent submitted to any Lender with respect to
        any amount owing by such Lender under this Subparagraph 2.08(f) shall
        constitute prima facie evidence of such amount.

                                       24
<PAGE>   29

        2.09.  Loan Accounts; Notes.

               (a) Loan Accounts. The obligation of each Borrower to repay the
        Loans made to it by each Lender and to pay interest thereon at the rates
        provided herein shall be evidenced by an account or accounts maintained
        by such Lender on its books (individually, a "Loan Account"), except
        that any Lender may request that its Loans be evidenced by a note or
        notes pursuant to Subparagraph 2.09(b). Each Lender shall record in its
        Loan Accounts (i) the date, amount and currency of each Loan made by
        such Lender, (ii) the interest rates applicable to each such Loan and
        each Portion thereof and the effective dates of all changes thereto,
        (iii) the Interest Period for each LIBOR Loan and LIBOR Portion, (iv)
        the date and amount of each principal and interest payment on each Loan
        and Portion and (v) such other information as such Lender may determine
        is necessary for the computation of principal and interest payable to it
        by each Borrower hereunder; provided, however, that any failure by a
        Lender to make, or any error by any Lender in making, any such notation
        shall not affect Borrowers' Obligations hereunder. The Loan Accounts
        shall constitute prima facie evidence of the matters noted therein.

               (b) Notes. If any Lender so requests, (i) such Lender's Revolving
        Loans shall be evidenced by promissory notes in the form of Exhibit C(1)
        (individually, a "Revolving Loan Note") and (ii) such Lender's Term
        Loans shall be evidenced by promissory notes in the form of Exhibit C(2)
        (individually, a "Term Loan Note"), each of which shall be (A) payable
        to the order of such Lender, (B) dated the Closing Date, and (C)
        otherwise appropriately completed.

        2.10.  Loan Funding.

               (a) Lender Funding and Disbursements to Borrowers. Each Lender
        shall, before 11:00 a.m. (New York time) on the date of each Borrowing,
        make available to Agent at Agent's New York office specified in
        Paragraph 8.01, in immediately available funds, such Lender's applicable
        Proportionate Share of such Borrowing. After Agent's receipt of such
        funds and upon satisfaction of the applicable conditions set forth in
        Section III, Agent shall promptly disburse such funds to the applicable
        Borrower no later than 1:00 p.m. (California time) in immediately
        available funds. Agent shall disburse the proceeds of each Borrowing as
        directed by the applicable Borrower in the applicable Notice of
        Borrowing.

               (b) Lender Failure to Fund. Unless Agent shall have received
        notice from a Lender prior to the date of a Borrowing that such Lender
        will not make available to Agent such Lender's applicable Proportionate
        Share of such Borrowing, Agent shall be entitled to assume that such
        Lender has made or will make such amount available to Agent on the date
        of such Borrowing in accordance with Subparagraph 2.08(a), and Agent may
        on such date, in reliance upon such assumption, disburse or otherwise
        credit to the applicable Borrower a corresponding amount. If any Lender
        does not make the amount of its applicable Proportionate Share of a
        Borrowing available to Agent on or prior to the date of such Borrowing,
        such Lender shall pay to Agent, on demand, interest which shall accrue
        on such amount from the date of such Borrowing until such amount is paid
        to Agent at rates equal to the Federal Funds Rate for the first three
        (3) days and the Base Rate thereafter. A certificate of Agent submitted
        to any Lender with respect to any amount owing by such Lender under this
        Subparagraph 2.08(b) shall constitute prima facie evidence of such
        amount. If the amount of any Lender's applicable Proportionate Share of
        any Borrowing is not paid to Agent by such Lender within three (3)
        Business Days after the date of such Borrowing, the applicable Borrower
        shall repay such amount to Agent, on demand, together with interest
        thereon, for each day from the date such amount was disbursed to such
        Borrower until the date such amount is repaid to Agent, at the interest
        rate applicable at the time to the Loans comprising such Borrowing.

               (c) Lenders' Obligations Several. The failure of any Lender to
        make the Loan to be made by it as part of any Borrowing shall not
        relieve any other Lender of its obligation hereunder to make its Loan as
        part of such Borrowing, but no Lender shall be obligated in any way to
        make any Loan which another Lender has failed or refused to make or
        otherwise be in any way responsible for the failure or refusal of any
        other Lender to make any Loan required to be made by such other Lender.

                                       25
<PAGE>   30

        2.11.  Pro Rata Treatment.

               (a) Borrowings, Commitment Reductions, Etc. Except as otherwise
        provided herein:

                      (i) Each Borrowing under Facility A and reduction of the
               Total Facility A Commitment shall be made or shared among
               Facility A Lenders pro rata according to their respective
               Facility A Proportionate Shares;

                      (ii) Each Borrowing under Facility B and reduction of the
               Total Facility B Commitments shall be made or shared among
               Facility B Lenders pro rata according to their respective
               Facility B Proportionate Shares;

                      (iii) Each payment of principal on Loans in any Borrowing
               shall be shared among Lenders which made or funded the Loans in
               such Borrowing pro rata according to the respective unpaid
               principal amounts of such Loans then owed to such Lenders;

                      (iv) Each payment of interest on Loans in any Borrowing
               shall be shared among Lenders which made or funded the Loans in
               such Borrowing pro rata according to (A) the respective unpaid
               principal amounts of such Loans then owed to such Lenders so made
               or funded by such Lenders and (B) the dates on which such Lenders
               so made or funded such Loans;

                      (v) Each payment of Facility A Commitment Fees shall be
               shared among Facility A Lenders (except for Defaulting Lenders)
               pro rata according to (A) their respective Facility A
               Proportionate Shares and (B) in the case of each Facility A
               Lender which becomes a Facility A Lender hereunder after the date
               hereof and before the Facility A Revolving Loan Maturity Date,
               the date upon which such Facility A Lender so became a Facility A
               Lender;

                      (vi) Each payment of Facility B Commitment Fees shall be
               shared among Facility B Lenders (except for Defaulting Lenders)
               pro rata according to (A) their respective Facility B
               Proportionate Shares and (B) in the case of each Facility B
               Lender which becomes a Facility B Lender hereunder after the date
               hereof and before the Facility B Revolving Loan Maturity Date,
               the date upon which such Facility B Lender so became a Facility B
               Lender;

                      (vii) Each payment of interest (other than interest on
               Loans) shall be shared among Lenders and Agent owed the amount
               upon which such interest accrues pro rata according to (A) the
               respective amounts so owed such Lenders and Agent and (B) the
               dates on which such amounts became owing to such Lenders and
               Agent; and

                      (v) All other payments under this Agreement and the other
               Credit Documents shall be for the benefit of the Person or
               Persons specified.

               (b) Sharing of Payments, Etc. If any Lender shall obtain any
        payment (whether voluntary, involuntary, through the exercise of any
        right of setoff, or otherwise) on account of the Loan owed to it as part
        of any Borrowing in excess of its ratable share of payments on account
        of all Loans in such Borrowing obtained by all applicable Lenders
        entitled to such payments, such Lender shall forthwith purchase from
        such other Lenders such participations in their Loans as shall be
        necessary to cause such purchasing Lender to share the excess payment
        ratably with each of them; provided, however, that if all or any portion
        of such excess payment is thereafter recovered from such purchasing
        Lender, such purchase shall be rescinded and each other applicable
        Lender shall repay to the purchasing Lender the purchase price to the
        extent of such recovery together with an amount equal to such other
        Lender's ratable share (according to the proportion of (i) the amount of
        such other Lender's required repayment to (ii) the total amount so
        recovered from the purchasing Lender) of any interest or other amount
        paid or payable by the purchasing Lender in respect of the total amount
        so recovered. Each Borrower agrees that any Lender so purchasing a
        participation from another Lender pursuant to this Subparagraph 2.11 (b)
        may, to the fullest extent permitted by law, exercise

                                       26
<PAGE>   31

        all its rights of payment (including the right of setoff) with respect
        to such participation as fully as if such Lender were the direct
        creditor of such Borrower in the amount of such participation.

        2.12.  Change of Circumstances.

               (a) Inability to Obtain Funds, Determine Rates, Etc. If, on or
        before the first day of any Interest Period for any LIBOR Borrowing or
        LIBOR Portion, Agent shall determine (which determination shall be
        conclusive and binding upon Borrowers absent manifest error) that (i)
        the LIBO Rate for such Interest Period cannot be adequately and
        reasonably determined due to other circumstances affecting the London
        interbank market, or (ii) the rate of interest for such Borrowing or
        Portion does not adequately and fairly reflect the cost to Lenders of
        making or maintaining such Borrowing or Portion, Agent shall immediately
        give notice of such condition to the applicable Borrowers and the
        applicable Lenders. After the giving of any such notice and until Agent
        shall otherwise notify the applicable Borrowers that the circumstances
        giving rise to such condition no longer exist, such Borrowers' right to
        obtain, continue or convert to Borrowings or Portions shall be
        suspended. Any LIBOR Borrowings or LIBOR Portions outstanding at the
        commencement of any such suspension shall be repaid at the end of the
        then current Interest Period for such Borrowings or Portions unless such
        suspension has then ended.

               (b) Illegality. If, after the date of this Agreement, the
        adoption of any Governmental Rule, any change in any Governmental Rule
        or the application or requirements thereof (whether such change occurs
        in accordance with the terms of such Governmental Rule as enacted, as a
        result of amendment or otherwise), any change in the interpretation or
        administration of any Governmental Rule by any Governmental Authority,
        or compliance by any Lender with any request or directive (whether or
        not having the force of law) of any Governmental Authority (a "Change of
        Law") shall make it unlawful or impossible for any Lender to make or
        maintain any LIBOR Loan or LIBOR Portion in Dollars, such Lender shall
        immediately notify Agent and the applicable Borrower of such Change of
        Law. Upon receipt of such notice, (i) such Borrower's right to obtain,
        continue or convert to LIBOR Loans or LIBOR Portions in the affected
        currency shall be suspended until such time as Agent shall notify such
        Borrower and the applicable Lenders that the circumstances giving rise
        to such suspension no longer exist, and (ii) such Borrower shall, if so
        requested by such Lender, immediately repay such LIBOR Loans or LIBOR
        Portions if such Lender shall notify such Borrower that such Lender may
        not lawfully continue to fund and maintain such LIBOR Loans or LIBOR
        Portions. Any prepayment of LIBOR Loans or LIBOR Portions made pursuant
        to the preceding sentence prior to the last day of an Interest Period
        for such LIBOR Loans or LIBOR Portions shall be deemed a prepayment
        thereof for purposes of Paragraph 2.14.

               (c) Increased Costs. If, after the date of this Agreement, any
        Change of Law:

                      (i) Shall subject any Lender to any tax, duty or other
               charge with respect to any LIBOR Loan or LIBOR Portion, or shall
               change the basis of taxation of payments by either Borrower to
               any such Lender on such a LIBOR Loan or LIBOR Portion, or in
               respect to such a LIBOR Loan or LIBOR Portion, under this
               Agreement (except for changes in the rate of taxation on the
               overall net income of such Lender imposed by its jurisdiction of
               incorporation or the jurisdiction of its Applicable Lending
               Office); or

                      (ii) Shall impose, modify or hold applicable any reserve
               (excluding any Reserve Requirement or other reserve to the extent
               included in the calculation of the LIBO Rate for any Loans or
               Portions), special deposit or similar requirement against assets
               held by, deposits or other liabilities in or for the account of,
               advances or loans by, or any other acquisition of funds by any
               Lender for any LIBOR Loan or LIBOR Portion; or

                      (iii) Shall impose on any Lender any other condition
               related to any LIBOR Loan or LIBOR Portion or such Lender's
               Commitments;

        And the effect of any of the foregoing is to increase the cost to such
        Lender of making, continuing or maintaining any such LIBOR Loan or LIBOR
        Portion or its Commitments or to reduce any amount receivable by such
        Lender hereunder; then Borrowers shall from time to time, within ten
        (10) Business

                                       27
<PAGE>   32

        Days after demand by such Lender, pay to such Lender additional amounts
        sufficient to reimburse such Lender for such increased costs or to
        compensate such Lender for such reduced amounts; provided, however, that
        Borrowers shall have no obligation to make any payment to any demanding
        party under this Subparagraph 2.10(c) on account of any such increased
        costs or reduced amounts unless Borrowers receive notice of such
        increased costs or reduced amounts from the demanding party within
        twelve (12) months after they are incurred or realized. A certificate
        executed by an officer of the applicable Lender setting forth in
        reasonable detail the amount of such increased costs or reduced amounts,
        submitted by such Lender to Borrowers shall constitute prima facie
        evidence of such costs or amounts. The obligations of Borrowers under
        this Subparagraph 2.12(c) shall survive the payment and performance of
        the Obligations and the termination of this Agreement.

               (d) Capital Requirements. If, after the date of this Agreement,
        any Lender determines that (i) any Change of Law affects the amount of
        capital required or expected to be maintained by such Lender or any
        Person controlling such Lender (a "Capital Adequacy Requirement") and
        (ii) the amount of capital maintained by such Lender or such Person
        which is attributable to or based upon the Loans, the Commitments or
        this Agreement must be increased as a result of such Capital Adequacy
        Requirement (taking into account such Lender's or such Person's policies
        with respect to capital adequacy), Borrowers shall pay to such Lender or
        such Person, within ten (10) Business Days after demand of such Lender,
        such amounts as such Lender or such Person shall determine are necessary
        to compensate such Lender or such Person for the increased costs to such
        Lender or such Person of such increased capital; provided, however, that
        Borrowers shall have no obligation to make any payment to any demanding
        party under this Subparagraph 2.12(d) on account of any such increased
        costs unless Borrowers receive notice of such increased costs from the
        demanding party within twelve (12) months after they are incurred or
        realized. A certificate executed by an officer of the applicable Lender
        setting forth in reasonable detail the amount of such increased costs,
        submitted by any Lender to Borrowers shall constitute prima facie
        evidence of such costs. The obligations of Borrowers under this
        Subparagraph 2.12(d) shall survive the payment and performance of the
        Obligations and the termination of this Agreement.

               (e) Mitigation. Any Lender which becomes aware of (i) any Change
        of Law which will make it unlawful or impossible for such Lender to make
        or maintain any LIBOR Loan or LIBOR Portion or (ii) any Change of Law or
        other event or condition which will obligate Borrowers to pay any amount
        pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall notify
        Borrowers and Agent thereof as promptly as practical. If any Lender has
        given notice of any such Change of Law or other event or condition and
        thereafter becomes aware that such Change of Law or other event or
        condition has ceased to exist, such Lender shall notify Borrowers and
        Agent thereof as promptly as practical. Each Lender affected by any
        Change of Law which makes it unlawful or impossible for such Lender to
        make or maintain any LIBOR Loan or LIBOR Portion or to which Borrowers
        are obligated to pay any amount pursuant to Subparagraph 2.12(c) or
        Subparagraph 2.12(d) shall use reasonable commercial efforts (including
        changing the jurisdiction of its Applicable Lending Offices) to avoid
        the effect of such Change of Law or to avoid or materially reduce any
        amounts which Borrowers are obligated to pay pursuant to Subparagraph
        2.12(c) or Subparagraph 2.12(d) if, in the reasonable opinion of such
        Lender, such efforts would not be disadvantageous to such Lender or
        contrary to such Lender's normal banking practices.

        2.13.  Taxes on Payments.

               (a) Payments Free of Taxes. All payments made by Borrowers under
        this Agreement and the other Credit Documents shall be made free and
        clear of, and, except as provided herein, without deduction or
        withholding for or on account of, Non-Excluded Taxes. If any
        Non-Excluded Taxes are required to be withheld from any amounts payable
        to Agent or any Lender hereunder or under the other Credit Documents,
        the amounts so payable to Agent or such Lender shall be increased to the
        extent necessary to yield to Agent or such Lender (after payment of all
        Non-Excluded Taxes) interest or any such other amounts payable hereunder
        at the rates or in the amounts specified in this Agreement and the other
        Credit Documents. Whenever any Taxes are payable by Borrowers, as
        promptly as possible thereafter, Borrowers shall send to Agent for its
        own account or for the account of such Lender, as the case may be, a
        certified copy of an original official receipt received by Borrowers
        showing payment thereof. If Borrowers fail to pay any Non-Excluded Taxes
        when due to the appropriate taxing authority or fails to remit to Agent
        the

                                       28
<PAGE>   33

        required receipts or other required documentary evidence, Borrowers
        shall indemnify Agent and Lenders for any taxes (including interest or
        penalties) that may become payable by Agent or any Lender as a result of
        any such failure. The obligations of Borrowers under this Subparagraph
        2.13(a) shall survive the payment and performance of the Obligations and
        the termination of this Agreement.

               (b) Withholding Exemption Certificates. Each Lender which is not
        organized under the laws of the United States of America or a state
        thereof shall, on or prior to the Closing Date in the case of any such
        Lender that is a Lender hereunder on the date hereof and on or prior to
        the date any other Lender becomes a Lender hereunder, deliver to
        Borrowers and Agent two duly completed copies of United States Internal
        Revenue Service Form 1001 or 4224 (or successor applicable form), as the
        case may be, certifying in each case that such Lender is entitled to
        receive payments on its Loans under this Agreement from Borrower's
        Applicable Payment Office for the account of such Lender's Domestic
        Lending Office or Euro-Dollar Lending Office without deduction or
        withholding of any United States federal income taxes. Each such Lender
        further agrees (A) promptly to notify the applicable Borrowers and Agent
        of any change of circumstances (including any change in any treaty, law
        or regulation) which would prevent such Lender from receiving such
        payments hereunder without any deduction or withholding of such taxes
        and (B) if such Lender is still legally entitled to do so, then on or
        before the date that any certificate or other form delivered by such
        Lender under this Subparagraph 2.13(b) expires, to deliver to such
        Borrowers and Agent a new certificate or form, certifying that such
        Lender is entitled to receive such payments under this Agreement without
        deduction or such taxes.

               (c) Mitigation. If Agent or any Lender claims any additional
        amounts to be payable to it pursuant to this Paragraph 2.13, such Person
        shall use reasonable commercial efforts to file any certificate or
        document requested in writing by the applicable Borrower reflecting a
        reduced rate of withholding or to change the jurisdiction of an
        Applicable Lending Office if the making of such a filing or such change
        in the jurisdiction of an Applicable Lending Office would avoid the need
        for or materially reduce the amount of any such additional amounts which
        may thereafter accrue and if, in the reasonable opinion of such Person,
        in the case of a change in the jurisdiction of an Applicable Lending
        Office, such change would not be disadvantageous to such Person or
        contrary to such Person's normal banking practices.

               (d) Tax Returns. Nothing contained in this Paragraph 2.13 shall
        require Agent or any Lender to make available any of its tax returns (or
        any other information relating to its taxes which it deems to be
        confidential).

               (e) Lender Rate Contracts. Nothing contained in this Paragraph
        2.13 shall override or supercede any term or provision of any Lender
        Rate Contract regarding withholding taxes relating to Rate Contracts.

        2.14. Funding Loss Indemnification. If either Borrower shall (a) repay,
prepay or convert any LIBOR Loan or LIBOR Portion on any day other than the last
day of an Interest Period therefor (whether a scheduled payment, an optional
prepayment or conversion, a mandatory prepayment or conversion, a payment upon
acceleration or otherwise), (b) fail to borrow any LIBOR Loan or LIBOR Portion
after delivering the Notice of Borrowing therefor to Agent (whether as a result
of the failure to satisfy any applicable conditions or otherwise), (c) fail to
convert any Portion of a Term Loan Borrowing into a LIBOR Portion in accordance
with a Notice of Term Loan Conversion delivered to Agent (whether as a result of
the failure to satisfy any applicable conditions or otherwise), or (d) fail to
pay when due any principal or interest on any LIBOR Loan or LIBOR Portion, such
Borrower shall, within ten (10) Business Days after demand of such Lender,
reimburse such Lender for and hold such Lender harmless from all reasonable
costs and losses incurred by such Lender as a result of such repayment,
prepayment, conversion or failure; provided, however, that Borrowers shall have
no obligation to make any payment to any demanding party under this Paragraph
2.14 on account of any such costs or losses unless Borrowers receive notice of
such costs or losses from the demanding party within twelve (12) months after
they are incurred or realized. Borrowers understand that such costs and losses
may include, without limitation, losses incurred by a Lender as a result of
funding and other contracts entered into by such Lender to fund a LIBOR Loan or
LIBOR Portion. Each Lender demanding payment under this Paragraph 2.14 shall
deliver to Borrowers, with a copy to Agent, a certificate setting forth the
amount of costs and losses for which demand is made, which certificate shall set
forth in reasonable detail the calculation of the amount demanded. Such a
certificate so delivered to Borrowers shall

                                       29
<PAGE>   34

constitute prima facie evidence of such costs and losses. The obligations of
Borrowers under this Paragraph 2.14 shall survive the payment and performance of
the Obligations and the termination of this Agreement.

        2.15.  Security.

               (a) Guaranties, Etc. The Obligations shall be secured by the
        following:

                      (i) A Guaranty in the form of Exhibit D (the "Guaranty"),
               duly executed by FIL and all Eligible Material Subsidiaries, with
               such changes thereto as may be appropriate based on the law of
               the applicable jurisdictions; and

                      (ii) A Pledge Agreement or Pledge Agreements, each in the
               form of Exhibit E (individually a "Pledge Agreement"), duly
               executed by FIL and any Subsidiary that directly owns the stock
               of any Ineligible Material Subsidiaries, together with the
               Guaranty executed by any such Subsidiary, with such changes
               thereto as may be appropriate based on the law of the applicable
               jurisdictions;

               provided, however, that (1) in lieu of providing a pledge of
               stock of Flextronics Industrial (Shenzhen) Co. Ltd. by
               Flextronics Singapore Pte Ltd., Borrowers shall provide a pledge
               of the stock of Flextronics Singapore Pte Ltd. and Flextronics
               Singapore Pte Ltd. shall execute the Guaranty, (2) in lieu of
               providing a pledge of the stock of Flextronics International
               Sweden AB by F.L. Tronics Holdings AB and a pledge of the stock
               of Flextronics International Finland Oy by Flextronics Holding
               Finland OY, Flextronics Holdings UK Limited shall execute the
               Guaranty and pledge of the stock of F.L. Tronics Holdings AB and
               (3) in lieu of providing a pledge of the stock of Flextronics
               International Kft, FIL shall pledge the stock of Flextronics
               International GmbH; (4) with respect to Flextronics Singapore Pte
               Ltd., on or prior to the date such Subsidiary is dissolved and
               the stock of Flextronics International (Shenzhen) Co. Ltd. is
               thereafter held by Flextronics International Singapore Pte Ltd.,
               FIL shall promptly provide a pledge of the stock of Flextronics
               International Singapore Pte Ltd. and Flextronics International
               Singapore Pte Ltd. shall promptly execute the Guaranty which
               shall replace the guaranty of Flextronics Singapore Pte Ltd.; (5)
               if FIL does not dissolve Flextronics International Fremont, Inc.
               on or before May 31, 2000, Flextronics International Fremont,
               Inc. shall also promptly execute the Guaranty; and (6) on or
               prior to April 14, 2000, Dovatron Malaysia Sdn. Bhd. shall
               execute the Guaranty, in connection with the DII Acquisition.

               (b)    Changes in Material Subsidiaries.

                      (i) If, at any time after the date of this Agreement, any
               Subsidiary of FIL that is not a Guarantor under the Guaranty
               shall become an Eligible Material Subsidiary, Borrowers promptly
               shall deliver, or cause to be delivered, to Agent, within sixty
               (60) days of any such event, (A) a Subsidiary Joinder in the form
               of Attachment 1 to the Guaranty, appropriately completed and duly
               executed by such Subsidiary, and (B) such other instruments,
               agreements, certificates, opinions and documents as Agent may
               reasonably request to secure, maintain, protect and evidence the
               obligations of such Subsidiary under the Guaranty.

                      (ii) If, at any time after the date of this Agreement, any
               Subsidiary of FIL that is a Guarantor under the Guaranty shall
               cease to be an Eligible Material Subsidiary, Agent promptly shall
               release such Subsidiary from its obligations under the Guaranty,
               subject to the completion by Borrowers (and, if the Equity
               Securities of such Subsidiary are owned directly by another
               Subsidiary of FIL, by such other parent Subsidiary) of such
               actions as may be necessary to grant to Agent, to the extent
               provided in clause (iii) below, a perfected security interest in
               the Equity Securities of such Subsidiary.

                      (iii) If, at any time after the date of this Agreement,
               any Subsidiary of FIL shall become an Ineligible Material
               Subsidiary, Borrowers shall deliver, or cause to be delivered, to

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<PAGE>   35

               Agent, within sixty (60) days of any such event, such
               instruments, agreements, certificates, opinions and documents
               (including Uniform Commercial Code financing statements) as Agent
               may reasonably request to grant, perfect, maintain, protect and
               evidence security interests in favor of Agent, for the benefit of
               Agent and Lenders as security for the Obligations, in any and all
               Equity Securities of such Subsidiary, to the extent such security
               interests are not prohibited by any applicable Governmental Rule
               and would not significantly increase the tax liability of FIL and
               its Subsidiaries.

                      (iv) If, at any time after the date of this Agreement, any
               Ineligible Material Subsidiary becomes an Eligible Material
               Subsidiary, upon Borrowers' compliance with clause (i) of
               Subparagraph 2.15(b) above, Agent shall release the Equity
               Securities of such Subsidiary from any Pledge Agreement
               previously delivered with respect to such Subsidiary.

               (c) Further Assurances. Borrowers shall deliver, and shall cause
        their Guarantors and their Subsidiaries to deliver, to Agent such other
        pledge agreements, guaranties, guaranty supplements and other
        instruments, agreements, certificates, opinions and documents (including
        Uniform Commercial Code financing statements) as Agent may reasonably
        request to implement the provisions of Subparagraph 2.15(a) and
        otherwise to establish, maintain, protect and evidence the rights
        provided to Agent, for the benefit of Agents and Lenders, pursuant to
        the Security Documents. Borrowers shall fully cooperate with Agent and
        Lenders and perform all additional acts reasonably requested by Agent or
        any Lender to effect the purposes of this Paragraph 2.15. Without
        limiting the generality of the foregoing, Borrowers covenant and agree
        that they will ensure that the aggregate revenues of the Material
        Subsidiaries that have executed and delivered the Guaranty and/or Pledge
        Agreements pursuant to this Agreement and the FIL Credit Agreement for
        each year will equal or exceed 75% of the consolidated total revenues of
        FIL and all of its Subsidiaries as reflected for such year in FIL's
        annual audited Financial Statements.

        2.16. Replacement of Lenders. If any Lender shall (a) become a
Defaulting Lender more than one (1) time in a period of twelve (12) consecutive
months, (b) continue as a Defaulting Lender for more than three (3) Business
Days at any time, (c) suspend its obligation to make or maintain LIBOR Loans or
LIBOR Portions pursuant to Subparagraph 2.12(b) for a reason which is not
applicable to any other Lender or (d) demand any payment under Subparagraph
2.12(a), 2.12(c) or 2.12(d) for a reason which is not applicable to any other
Lender, then Agent may (or upon the written request of Borrowers, shall) replace
such Lender (the "affected Lender"), or cause such affected Lender to be
replaced, with another lender (the "replacement Lender") satisfying the
requirements of an Assignee Lender under Subparagraph 8.05(c), by having the
affected Lender sell and assign all of its rights and obligations under this
Agreement and the other Credit Documents to the replacement Lender pursuant to
Subparagraph 8.05(c); provided, however, that if Borrowers seek to exercise such
right, they must do so within sixty (60) days after either Borrower first knows
or should have known of the occurrence of the event or events giving rise to
such right, and neither Agent nor any Lender shall have any obligation to
identify or locate a replacement Lender for Borrowers; and provided, further,
that no Lender shall be replaced under this Agreement unless such Lender is also
replaced under the FIL Credit Agreement. Upon receipt by any affected Lender of
a written notice from Agent stating that Agent is exercising the replacement
right set forth in this Paragraph 2.16, such affected Lender shall sell and
assign all of its rights and obligations under this Agreement and the other
Credit Documents to the replacement Lender pursuant to an Assignment Agreement
and Subparagraph 8.05(c) for a purchase price equal to the sum of the principal
amount of the affected Lender's Loans so sold and assigned, all accrued and
unpaid interest thereon and its ratable share of all fees to which it is
entitled.

SECTION III.      CONDITIONS PRECEDENT.

        3.01. Initial Conditions Precedent. The obligations of the applicable
Lenders to make the Loans comprising the initial Borrowing are subject to
receipt by Agent, on or prior to the Closing Date, of each item listed in
Schedule 3.01, each in form and substance satisfactory to Agent and each Lender,
and with sufficient copies for, Agent and each Lender.

        3.02. Conditions Precedent to Term Loan Borrowing . The obligations of
Facility B Lenders to make the Term Loans comprising the Term Loan Borrowing
also are subject to receipt by Agent, on or prior to the Facility

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<PAGE>   36

B Revolving Loan Maturity Date, of a Term Loan Note for each Facility B Lender
so requesting such a note, duly executed by the applicable Borrower.

        3.03. Conditions Precedent to Each Credit Event. The occurrence of each
Credit Event (including the initial Borrowing) is subject to the further
conditions that:

               (a) Borrowers shall have delivered to Agent the Notice of
        Borrowing, Notice of Term Loan Conversion or Notice of Interest Period
        Selection, as the case may be, for such Credit Event in accordance with
        this Agreement; and

               (b) On the date such Credit Event is to occur and after giving
        effect to such Credit Event, the following shall be true and correct:

                      (i) The representations and warranties of Borrowers and
               their Subsidiaries set forth in Paragraph 4.01 and in the other
               Credit Documents are true and correct in all material respects as
               if made on such date (except for representations and warranties
               expressly made as of a specified date, which shall be true as of
               such date); and

                      (ii) No Default has occurred and is continuing or will
               result from such Credit Event.

The submission by either Borrower to Agent of each Notice of Borrowing, each
Notice of Term Loan Conversion (other than a notice for a conversion to a Base
Rate Portion) and each Notice of Interest Period Selection (other than a notice
selecting an Interest Period of one (1) month) shall be deemed to be a
representation and warranty by such Borrower that each of the statements set
forth above in this Subparagraph 3.03(b) is true and correct as of the date of
such notice.

        3.04. Covenant to Deliver. Borrowers agree (not as a condition but as a
covenant) to deliver to Agent each item required to be delivered to Agent as a
condition to the occurrence of any Credit Event if such Credit Event occurs.
Borrowers expressly agree that the occurrence of any such Credit Event prior to
the receipt by Agent of any such item shall not constitute a waiver by Agent or
any Lender of Borrowers' obligation to deliver such item.

SECTION IV.       REPRESENTATIONS AND WARRANTIES.

        4.01. Borrowers' Representations and Warranties. In order to induce
Agent and Lenders to enter into this Agreement, Borrowers hereby represent and
warrant to Agent and Lenders as follows:

               (a) Due Incorporation, Qualification, etc. Each of Borrowers and
        their Subsidiaries (i) is a corporation duly organized, validly existing
        and, in any jurisdiction in which such legal concept is applicable, in
        good standing under the laws of its jurisdiction of organization; (ii)
        has the power and authority to own, lease and operate its properties and
        carry on its business as now conducted; and (iii) is duly qualified and
        licensed to do business as a foreign corporation or branch in each
        jurisdiction where the failure to be so qualified or licensed is
        reasonably and substantially likely to have a Material Adverse Effect.

               (b) Authority. The execution, delivery and performance by each of
        the Borrowers, the Guarantors and their Subsidiaries of each Credit
        Document executed, or to be executed, by such Person and the
        consummation of the transactions contemplated thereby (i) are within the
        power of such Person and (ii) have been duly authorized by all necessary
        actions on the part of such Person.

               (c) Enforceability. Each Credit Document executed, or to be
        executed, by each of the Borrowers, the Guarantors and their
        Subsidiaries has been, or will be, duly executed and delivered by such
        Person and constitutes, or will constitute, a legal, valid and binding
        obligation of such Person, enforceable against such Person in accordance
        with its terms, except as limited by bankruptcy, insolvency or other
        laws

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<PAGE>   37

        of general application relating to or affecting the enforcement of
        creditors' rights generally and general principles of equity.

               (d) Non-Contravention. The execution and delivery by each of the
        Borrowers, the Guarantors and their Subsidiaries of the Credit Documents
        executed by such Person and the performance and consummation of the
        transactions contemplated thereby do not (i) violate any Requirement of
        Law applicable to such Person; (ii) violate any provision of, or result
        in the breach or the acceleration of, or entitle any other Person to
        accelerate (whether after the giving of notice or lapse of time or
        both), any Contractual Obligation of such Person; or (iii) result in the
        creation or imposition of any Lien (or the obligation to create or
        impose any Lien) upon any property, asset or revenue of such Person
        (except such Liens as may be created in favor of Agent pursuant to this
        Agreement or the other Credit Documents).

               (e) Approvals. No consent, approval, order or authorization of,
        or registration, declaration or filing with, any Governmental Authority
        or other Person (including the shareholders of any Person) is required
        in connection with the execution and delivery of the Credit Documents
        executed by each of the Borrowers, the Guarantors and their Subsidiaries
        the performance or consummation of the transactions contemplated
        thereby.

               (f) No Violation or Default. None of Borrowers, the Guarantors
        and their Subsidiaries is in violation of or in default with respect to
        (i) any Requirement of Law applicable to such Person or (ii) any
        Contractual Obligation of such Person (nor is there any waiver in effect
        which, if not in effect, would result in such a violation or default),
        where, in each case, such violation or default is reasonably and
        substantially likely to have a Material Adverse Effect. Without limiting
        the generality of the foregoing, none of the Borrowers, the Guarantors
        and their Subsidiaries (A) has violated any Environmental Laws, (B) has
        any liability under any Environmental Laws or (C) has received notice or
        other communication of an investigation or, to the knowledge of either
        Borrower, the Guarantors or their Subsidiaries, is under investigation
        by any Governmental Authority having authority to enforce Environmental
        Laws, where such violation, liability or investigation is reasonably and
        substantially likely to have a Material Adverse Effect. No Default has
        occurred and is continuing.

               (g) Litigation. No actions (including derivative actions), suits,
        proceedings or investigations are pending or, to the knowledge of either
        Borrower, threatened against either Borrower, the Guarantors or any of
        their Subsidiaries at law or in equity in any court or before any other
        Governmental Authority which (i) is reasonably and substantially likely
        (alone or in the aggregate) to have a Material Adverse Effect or (ii)
        seeks to enjoin, either directly or indirectly, the execution, delivery
        or performance by either Borrower, the Guarantors or any of their
        Subsidiaries of the Credit Documents or the transactions contemplated
        thereby.

               (h) Title; Possession Under Leases. Each Borrower and its
        Subsidiaries own and have good and marketable title, or a valid
        leasehold interest in, all their respective material properties and
        assets as reflected in the most recent Financial Statements delivered to
        Agent (except those assets and properties disposed of in the ordinary
        course of business or otherwise in compliance with this Agreement since
        the date of such Financial Statements) and all respective material
        assets and properties acquired by such Borrower and its Subsidiaries
        since such date (except those disposed of in the ordinary course of
        business or otherwise in compliance with this Agreement). Such assets
        and properties are subject to no Lien, except for Permitted Liens.

               (i) Financial Statements. The Financial Statements of FIL and its
        Subsidiaries which have been delivered to Agent, (i) are in accordance
        with the books and records of FIL and its Subsidiaries, which have been
        maintained in accordance with good business practice; (ii) have been
        prepared in conformity with GAAP; and (iii) fairly present in all
        material respects the financial conditions and results of operations of
        FIL and its Subsidiaries as of the date thereof and for the period
        covered thereby. Neither FIL nor any of its Subsidiaries has any
        Contingent Obligations, liability for taxes or other outstanding
        obligations which are material in the aggregate, except as disclosed or
        reflected in the Financial Statements of FIL dated December 31, 1999,
        furnished by Borrowers to Agent prior to the date hereof, or in the
        Financial Statements delivered to Agent pursuant to clause (i) or (ii)
        of Subparagraph 5.01(a), or except as permitted under Section 5 of this
        Agreement.

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<PAGE>   38

               (j)    Employee Benefit Plans.

                      (i) Based on the latest valuation of each Employee Benefit
               Plan that either Borrower or any ERISA Affiliate maintains or
               contributes to, or has any obligation under (which occurred
               within twelve months of the date of this representation), the
               aggregate benefit liabilities of such plan within the meaning of
               Section 4001 of ERISA did not exceed the aggregate value of the
               assets of such plan. No Borrower nor any ERISA Affiliate has any
               liability with respect to any post-retirement benefit under any
               Employee Benefit Plan which is a welfare plan (as defined in
               section 3(1) of ERISA), other than liability for health plan
               continuation coverage described in Part 6 of Title I(B) of ERISA,
               which liability for health plan contribution coverage is not
               reasonably and substantially likely to have a Material Adverse
               Effect.

                      (ii) Each Employee Benefit Plan complies, in both form and
               operation, in all material respects, with its terms, ERISA and
               the IRC, and no condition exists or event has occurred with
               respect to any such plan which would result in the incurrence by
               either Borrower or any ERISA Affiliate of any material liability,
               fine or penalty. Each Employee Benefit Plan, related trust
               agreement, arrangement and commitment of either Borrower or any
               ERISA Affiliate is legally valid and binding and in full force
               and effect. No Employee Benefit Plan is being audited or
               investigated by any government agency or is subject to any
               pending or threatened claim or suit. No Borrower nor any ERISA
               Affiliate nor any fiduciary of any Employee Benefit Plan has
               engaged in a prohibited transaction under section 406 of ERISA or
               section 4975 of the IRC.

                      (iii) No Borrower nor any ERISA Affiliate contributes to
               or has any material contingent obligations to any Multiemployer
               Plan. No Borrower nor any ERISA Affiliate has incurred any
               material liability (including secondary liability) to any
               Multiemployer Plan as a result of a complete or partial
               withdrawal from such Multiemployer Plan under Section 4201 of
               ERISA or as a result of a sale of assets described in Section
               4204 of ERISA. No Borrower nor any ERISA Affiliate has been
               notified that any Multiemployer Plan is in reorganization or
               insolvent under and within the meaning of Section 4241 or Section
               4245 of ERISA or that any Multiemployer Plan intends to terminate
               or has been terminated under Section 4041A of ERISA.

                      (iv) All employer and employee contributions required by
               any applicable Governmental Rule in connection with all Foreign
               Plans have been made, or, if applicable, accrued, in accordance
               with the country-specific accounting practices. The fair market
               value of the assets of each funded Foreign Plan, the liability of
               each insurer for any Foreign Plan funded through insurance or the
               book reserve established for any Foreign Plan, together with any
               accrued contributions, is sufficient to procure or provide for
               the accrued benefit obligations, as of the date hereof, with
               respect to all current and former participants in such Foreign
               Plan according to the actuarial assumptions and valuations most
               recently used to determine employer contributions to such Foreign
               Plan, which actuarial assumptions are commercially reasonable.
               Each Foreign Plan required to be registered has been registered
               and has been maintained in good standing with applicable
               Governmental Authorities. Each Foreign Plan reasonably complies
               in all material respects with all applicable Governmental Rules.

               (k) Other Regulations. No Borrower, Guarantor or any Material
        Subsidiary is subject to regulation under the Investment Company Act of
        1940, the Public Utility Holding Company Act of 1935, the Federal Power
        Act, the Interstate Commerce Act, any state public utilities code or any
        other Governmental Rule that limits its ability to incur Indebtedness.

               (l) Patent and Other Rights. Each Borrower and its Subsidiaries
        own, license or otherwise have the full right to use, under validly
        existing agreements, without known conflict with any rights of others,
        all material patents, licenses, trademarks, trade names, trade secrets,
        service marks, copyrights and all rights with respect thereto, which are
        required to conduct their businesses as now conducted.

               (m) Governmental Charges. Each Borrower and its Subsidiaries have
        filed or caused to be filed all tax returns, reports and declarations
        which are required to be filed by them. Each Borrower and its

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<PAGE>   39

        Subsidiaries have paid, or made provision for the payment of, all taxes
        and other Governmental Charges which have or may have become due
        pursuant to said returns or otherwise and all other indebtedness, except
        such Governmental Charges or indebtedness, if any, which are being
        contested in good faith and as to which adequate reserves (determined in
        accordance with GAAP) have been provided or which are not reasonably and
        substantially likely to have a Material Adverse Effect if unpaid.

               (n) Margin Stock. No Borrower owns any Margin Stock which, in the
        aggregate, would constitute a substantial part of the assets of such
        Borrower, and no proceeds of any Loan will be used to purchase or carry,
        directly or indirectly, any Margin Stock or to extend credit, directly
        or indirectly, to any Person for the purpose of purchasing or carrying
        any Margin Stock.

               (o) Subsidiaries, Etc. Schedule 4.01(o) (as updated on a
        quarterly basis by Borrowers in a written notice to Agent no later than
        the date financial statements are required to be delivered pursuant to
        Subparagraph 5.01(a)) sets forth each of FIL's Subsidiaries (other than
        Subsidiaries with less than $100,000 in annual revenues or consolidated
        assets), its jurisdiction of organization, the classes of its Equity
        Securities, the number of shares of each such class issued and
        outstanding, the percentages of shares of each such class owned directly
        or indirectly by FIL and whether FIL owns such shares directly or, if
        not, the Subsidiary of FIL that owns such shares. The only Material
        Subsidiaries on the date of this Agreement are Flextronics International
        USA, Inc., Flex International Marketing (L) Ltd., Flextronics
        International Latin America (L) Ltd., Flextronics Manufacturing Mexico,
        S.A. de C.V., Flextronics International Finland Oy, Flextronics
        Industrial (Shenzhen) Co. Ltd., Flextronics International GmbH,
        Flextronics International Sweden AB and Flextronics International Kft.
        Each Borrower and each of the other Material Subsidiaries is a
        Subsidiary of FIL.

               (p) Solvency, Etc. Each of the Borrowers, the Guarantors and
        their Material Subsidiaries is Solvent and, after the execution and
        delivery of the Credit Documents and the consummation of the
        transactions contemplated thereby, will be Solvent.

               (q) No Withholding, Etc. No Borrower or Guarantor is required by
        any Governmental Rule to make any deduction or withholding of any nature
        whatsoever from any payment required to be made by either Borrower or
        any or Guarantor hereunder or under any other Credit Document. Neither
        this Agreement nor any of the other Credit Documents is subject to any
        registration or stamp tax or any other similar or like taxes payable in
        any jurisdiction.

               (r)    Foreign Guarantors.

                      (i) No Immunities, etc. Each Guarantor is subject to civil
               and commercial law with respect to its obligations under this
               Agreement and the other Credit Documents, and the execution,
               delivery and performance by each such Guarantor of any Credit
               Documents constitute and will constitute private and commercial
               acts and not public or governmental acts. Neither such Guarantor
               nor any of its property, whether or not held for its own account,
               has any immunity (sovereign or other similar immunity) from any
               suit or proceeding, from jurisdiction of any court or from
               set-off or any legal process (whether service or notice,
               attachment prior to judgment, attachment in aid of execution of
               judgment, execution of judgment or other similar immunity) under
               laws of the jurisdiction in which such Guarantor is organized and
               existing in respect of its obligations under this Agreement and
               the other Credit Documents. Each such Guarantor has waived every
               immunity (sovereign or otherwise) to which it or any of its
               properties would otherwise be entitled from any legal action,
               suit or proceeding, from jurisdiction of any court and from
               set-off or any legal process (whether service or notice,
               attachment prior to judgment, attachment in aid of execution of
               judgment, execution of judgment or otherwise) under the laws of
               the jurisdiction in which such Guarantor is organized and
               existing in respect of its obligations under this Agreement and
               the other Credit Documents. The waiver by each such Guarantor
               described in the immediately preceding sentence is the legal,
               valid and binding obligation of such Guarantor.

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<PAGE>   40

                      (ii) No Recordation Necessary. This Agreement and each of
               the other Credit Documents executed by a Guarantor is in proper
               legal form under the law of the jurisdiction in which such
               Guarantor is organized and existing for the enforcement hereof or
               thereof against such Guarantor under the law of such
               jurisdiction, and to ensure the legality, validity,
               enforceability, priority or admissibility in evidence of this
               Agreement and such other Credit Documents. It is not necessary to
               ensure the legality, validity, enforceability, priority or
               admissibility in evidence of this Agreement or any other Credit
               Document executed by a Guarantor that this Agreement, any other
               Credit Document or any other document be filed, registered or
               recorded with, or executed or notarized before, any court or
               other authority in the jurisdiction in which such Guarantor is
               organized and existing or that any registration charge or stamp
               or similar tax be paid on or in respect of this Agreement, any
               other Credit Document or any other document, except for any such
               filing, registration or recording, or execution or notarization,
               as has been made or is not required to be made until this
               Agreement, any other Credit Document or any other document is
               sought to be enforced and for any charge or tax as has been
               timely paid.

                      (iii) Exchange Controls. The execution, delivery and
               performance by a Guarantor of each of the Credit Documents
               executed by a Guarantor is, under applicable foreign exchange
               control regulations of the jurisdiction in which each Guarantor
               is organized and existing, not subject to any notification or
               authorization except (A) such as have been made or obtained or
               (B) such as cannot be made or obtained until a later date
               (provided any notification or authorization described in
               immediately preceding clause (B) shall be made or obtained as
               soon as is reasonably practicable).

               (s) No Material Adverse Effect. No event has occurred and no
        condition exists which is reasonably and substantially likely to have a
        Material Adverse Effect.

               (t) Accuracy of Information Furnished. The Credit Documents and
        the other certificates, statements and information (excluding
        projections) furnished to Agent or any Lender by or on behalf of
        Borrowers and their Subsidiaries in connection with the Credit Documents
        and the transactions contemplated thereby, taken as a whole, do not
        contain and will not contain any untrue statement of a material fact and
        do not omit and will not omit to state a material fact necessary to make
        the statements therein, in light of the circumstances under which they
        were made, not misleading. All projections have been based upon
        reasonable assumptions and represent, as of their respective dates of
        presentations, Borrowers' best estimates of the future performance of
        Borrowers and their Subsidiaries.

        4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed,
for the benefit of Lenders and Agent, each representation and warranty contained
in Paragraph 4.01 on and as of the date of each Credit Event (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date).

SECTION V.        COVENANTS.

        5.01. Affirmative Covenants. Until the termination of this Agreement and
the satisfaction in full by Borrowers of all Obligations, Borrowers will comply,
and will cause compliance, with the following affirmative covenants, unless
Required Lenders shall otherwise consent in writing:

               (a) Financial Statements, Reports, etc. Each Borrower shall
        furnish to Agent the following, each in such form and such detail as
        Agent or the Required Lenders shall reasonably request:

                      (i) As soon as available and in no event later than
               forty-five (45) days after the last day of each fiscal quarter of
               FIL, a copy of the Financial Statements of FIL and its
               Subsidiaries (prepared on a consolidated basis) for such quarter
               and for the fiscal year to date, certified by the chief financial
               officer, treasurer or controller of FIL to present fairly in all
               material respects the financial condition, results of operations
               and other information reflected therein and to have been prepared
               in accordance with GAAP (subject to normal year-end audit
               adjustments);

                                       36
<PAGE>   41

                      (ii) As soon as available and in no event later than
               ninety (90) days after the close of each fiscal year of FIL, (A)
               copies of the audited Financial Statements of FIL and its
               Subsidiaries (prepared on a consolidated and consolidating basis)
               for such year, audited by independent certified public
               accountants of recognized national standing reasonably acceptable
               to Agent, (B) copies of the unqualified opinions (or qualified
               opinions reasonably acceptable to Agent) and (C) if available
               from such accountants, certificates of such accountants to Agent
               stating that in making the examination necessary for their
               opinion they have reviewed this Agreement and have obtained no
               knowledge of any Default which has occurred and is continuing, or
               if, in the opinion of such accountants, a Default has occurred
               and is continuing, a statement as to the nature thereof;

                      (iii) Contemporaneously with the quarterly and year-end
               Financial Statements required by the foregoing clauses (i) and
               (ii), a compliance certificate of the chief financial officer,
               treasurer or controller of FIL and each Borrower (a "Compliance
               Certificate") which (A) states that no Default has occurred and
               is continuing, or, if any such Default has occurred and is
               continuing, a statement as to the nature thereof and what action
               Borrowers propose to take with respect thereto; and (B) sets
               forth, for the quarter or year covered by such Financial
               Statements or as of the last day of such quarter or year (as the
               case may be), the calculation of the financial ratios and tests
               provided in the FIL Credit Agreement;

                      (iv) As soon as possible and in no event later than five
               (5) Business Days after any officer of such Borrower knows of the
               occurrence or existence of (A) any Reportable Event under any
               Employee Benefit Plan or Multiemployer Plan; (B) any actual or
               threatened litigation, suits, claims or disputes against either
               Borrower or any of its Subsidiaries involving potential monetary
               damages payable by either Borrower or its Subsidiaries of
               $10,000,000 or more (alone or in the aggregate); (C) any other
               event or condition which is reasonably and substantially likely
               to have a Material Adverse Effect; or (D) any Default; the
               statement of the chief financial officer, treasurer or controller
               of such Borrower setting forth details of such event, condition
               or Default and the action which such Borrower proposes to take
               with respect thereto;

                      (v) As soon as available and in no event later than five
               (5) Business Days after they are sent, made available or filed,
               copies of (A) all registration statements and reports filed by
               either Borrower or any of their Affiliates with the United States
               Securities and Exchange Commission (including, without
               limitation, all 10-Q, 10-K and 8-K reports); and (B) all reports,
               proxy statements and financial statements sent or made available
               by either Borrower or any of their Affiliates to its security
               holders;

                      (vi) As soon as possible and in no event later than (A)
               forty-five (45) days after the last day of each fiscal quarter
               (or ninety (90) days in the case of the last fiscal quarter of
               each fiscal year), written notice of any new Subsidiary acquired
               or established directly or indirectly by FIL during such quarter,
               any new Equity Securities of any existing Subsidiary acquired
               directly or indirectly by FIL during such quarter or any other
               change in the information set forth in Schedule 4.01(o) during
               such quarter; and (B) ten (10) days after the date that any
               entity becomes a Material Subsidiary, written notice setting
               forth each Subsidiary of FIL that has become a Material
               Subsidiary and indicating for each such new Material Subsidiary
               whether such Material Subsidiary is an Eligible Material
               Subsidiary or Ineligible Material Subsidiary;

                      (vii) As soon as available and in no event later than five
               (5) Business Days after either Borrower changes its legal name or
               the address of its chief executive office, written notice setting
               forth such Borrower's new legal name and/or new address; and

                      (viii) Such other instruments, agreements, certificates,
               opinions, statements, documents and information relating to the
               operations or condition (financial or otherwise) of FIL, such
               Borrower or their Subsidiaries, and compliance by such Borrower
               with the terms of this Agreement and the other Credit Documents
               as Agent may from time to time reasonably request.

                                       37
<PAGE>   42

        In lieu of furnishing to Agent hard copies of the quarterly Financial
        Statements described in clause (i) above and the annual Financial
        Statements and auditor's report described in clauses (ii)(A) and (ii)(B)
        above and the other documents referred to in clause (v) above, Borrowers
        may make such documents available to Lenders at FIL's website located at
        www.flextronics.com and through the United States Securities and
        Exchange Commission's EDGAR system ("EDGAR") or by transmitting such
        documents electronically to Lenders. The Agent shall provide to any
        Lender hard copies of such documents upon request if such Lender does
        not have access to FIL's website or EDGAR.

               (b) Books and Records. Each Borrower and their Subsidiaries shall
        at all times keep proper books of record and account which shall be
        complete and correct in all material respects in accordance with GAAP.

               (c) Inspections. Each Borrower and their Subsidiaries shall
        permit Agent and each Lender, or any agent or representative thereof,
        upon reasonable notice and during normal business hours, to visit and
        inspect any of the properties and offices of such Borrower and its
        Subsidiaries, to examine the books and records of such Borrower and its
        Subsidiaries and make copies thereof and to discuss the affairs,
        finances and business of such Borrower and its Subsidiaries with, and to
        be advised as to the same by, their officers, auditors and accountants,
        all at such times and intervals as Agent or any Lender may reasonably
        request (which visits and inspections shall be at the expense of Agent
        or such Lender unless a Default has occurred and is continuing).

               (d) Insurance. Each Borrower and their Subsidiaries shall (i)
        carry and maintain insurance of the types and in the amounts customarily
        carried from time to time during the term of this Agreement by others
        engaged in substantially the same business as such Person and operating
        in the same geographic area as such Person, including fire, public
        liability, property damage and worker's compensation, (ii) carry and
        maintain each policy for such insurance with financially sound insurers
        and (iii) deliver to Agent from time to time, as Agent may request,
        schedules setting forth all insurance then in effect.

               (e) Governmental Charges and Other Indebtedness. Each Borrower
        and their Subsidiaries shall promptly pay and discharge when due (i) all
        taxes and other Governmental Charges prior to the date upon which
        penalties accrue thereon, (ii) all indebtedness which, if unpaid, could
        become a Lien upon the property of such Borrower or its Subsidiaries and
        (iii) subject to any subordination provisions applicable thereto, all
        other Indebtedness, which in each case, if unpaid, is reasonably and
        substantially likely to have a Material Adverse Effect, except such
        Indebtedness as may in good faith be contested or disputed, or for which
        arrangements for deferred payment have been made, provided that in each
        such case appropriate reserves are maintained in accordance with GAAP.

               (f) Use of Proceeds. Each Borrower shall use the proceeds of the
        Loans only for the respective purposes set forth in Section II. No
        Borrower shall use any part of the proceeds of any Loan, directly or
        indirectly, for the purpose of purchasing or carrying any Margin Stock
        or for the purpose of purchasing or carrying or trading in any
        securities under such circumstances as to involve such Borrower, any
        Lender or Agent in a violation of Regulations T, U or X issued by the
        Federal Reserve Board.

               (g) General Business Operations. Each of the Borrowers and their
        Subsidiaries shall (i) preserve and maintain its corporate existence and
        all of its rights, privileges and franchises reasonably necessary to the
        conduct of its business, (ii) conduct its business activities in
        compliance with all Requirements of Law and Contractual Obligations
        applicable to such Person and (iii) keep all property useful and
        necessary in its business in good working order and condition, ordinary
        wear and tear excepted, except, in each case, where any failure is not
        reasonably and substantially likely to have a Material Adverse Effect.

               (h) Pari Passu Ranking. Each Borrower shall take, or cause to be
        taken, all actions necessary to ensure that the Obligations of such
        Borrower are and continue to rank at least pari passu in right of
        payment with all other unsecured and unsubordinated Indebtedness of such
        Borrower.

                                       38
<PAGE>   43

        5.02. Negative Covenants. Until the termination of this Agreement and
the satisfaction in full by Borrowers of all Obligations, Borrowers will comply,
and will cause compliance, with the following negative covenants, unless
Required Lenders shall otherwise consent in writing:

               (a) Indebtedness. Neither Borrower nor any of their Subsidiaries
        shall create, incur, assume or permit to exist any Indebtedness except
        for the following ("Permitted Indebtedness"):

                      (i) Indebtedness that is not secured by a Lien in any
               asset or property of either Borrower or any of their
               Subsidiaries;

                      (ii) (A) Indebtedness under Capital Leases or under
               purchase money loans incurred by Borrower or any of its
               Subsidiaries to finance the acquisition, construction,
               development or improvement by such Person of real property,
               fixtures or equipment provided that in each case (1) such
               Indebtedness is incurred by such Person at the time of, or not
               later than ninety (90) days after, the acquisition by such Person
               of the property so financed and (2) such Indebtedness does not
               exceed the purchase price of the property (or the cost of
               constructing, developing or improving the same) so financed, and
               (B) Indebtedness under initial or successive refinancings of any
               such Capital Leases or purchase money loans provided that the
               principal amount of any such refinancing does not exceed the
               principal amount of the Indebtedness being refinanced;

                      (iii)  Existing Secured Indebtedness;

                      (iv) Indebtedness of any Borrower to any other Borrower or
               any Eligible Material Subsidiary or Indebtedness of any Eligible
               Material Subsidiary to any Borrower or any other Eligible
               Material Subsidiary, in each case to the extent otherwise
               permitted pursuant to Subparagraph 5.02(e) and Subparagraph
               5.02(i); and

                      (v) Other Indebtedness that is secured by a Lien on any
               assets or property of any of the Borrowers or any of their
               Subsidiaries, provided that the aggregate principal amount of all
               secured Indebtedness of FIL and its Subsidiaries (other than
               Existing Secured Indebtedness or Indebtedness secured by cash or
               cash equivalents to the extent such cash or cash equivalents are
               proceeds of such Indebtedness), outstanding during any fiscal
               quarter of FIL does not exceed ten percent (10%) of the
               consolidated assets of FIL and its Subsidiaries on the last day
               of the immediately preceding fiscal quarter.

               (b) Liens. Neither Borrower nor any of their Subsidiaries shall
        create, incur, assume or permit to exist any Lien on or with respect to
        any of their assets or property of any character, whether now owned or
        hereafter acquired, except for the following Liens ("Permitted Liens"):

                      (i) Liens that secure only Indebtedness which constitutes
               Permitted Indebtedness under clause (ii), (iii) or (iv) of
               Subparagraph 5.02(a);

                      (ii) Liens in favor of either Borrower or any Eligible
               Material Subsidiary on all or part of the assets of Subsidiaries
               of either Borrower or Eligible Material Subsidiary securing
               Indebtedness owing by Subsidiaries of either Borrower or Eligible
               Material Subsidiary, as the case may be, to either Borrower or to
               such other Eligible Material Subsidiary;

                      (iii) Liens to secure taxes, assessments and other
               government charges in respect of obligations not overdue or Liens
               on properties to secure claims for labor, material or supplies in
               respect of obligations not overdue, or which are being contested
               in good faith by appropriate proceedings diligently conducted and
               with respect to which adequate reserves are being maintained in
               accordance with generally accepted accounting principles so long
               as such Liens are not being foreclosed;

                                       39
<PAGE>   44

                      (iv) deposits or pledges made in connection with, or to
               secure payment of, workmen's compensation, unemployment
               insurance, old age pensions or other social security obligations
               and good faith deposits in connection with tenders, contracts or
               leases to which either Borrower or any of its Subsidiaries is a
               party or deposits or pledges to secure, or in lieu of, surety,
               penalty or appeal bonds, performance bonds or other similar
               obligations;

                      (v) Liens of carriers, warehousemen, mechanics and
               materialmen, and other like Liens on properties which would not
               have a Material Adverse Effect and are in respect of obligations
               not overdue, or which are being contested in good faith by
               appropriate proceedings diligently conducted and with respect to
               which adequate reserves are being maintained in accordance with
               generally accepted accounting principles so long as such Liens
               are not being foreclosed;

                      (vi) encumbrances on real property consisting of
               easements, rights of way, zoning restrictions, restrictions on
               the use of real property and defects and irregularities in the
               title thereto, landlord's or lessor's or lessee's Liens under
               leases to which either Borrower or any of its Subsidiaries is a
               party, and other minor Liens or encumbrances none of which
               interferes materially with the use of the property, which defects
               do not individually or in the aggregate have a Material Adverse
               Effect;

                      (vii) Liens in favor of the Agent for the benefit of the
               Lenders and the Agent under the Credit Documents;

                      (viii) Liens in favor of the agent for the benefit of the
               lenders and the agent under the FIL Credit Documents;

                      (ix) Liens in favor of Ericsson Business Networks AB under
               the Pledge Agreement dated March 27, 1997 between Ericsson and
               Flextronics Holdings AB;

                      (x) Liens securing Indebtedness or other obligations on
               cash or cash equivalents to the extent such cash or cash
               equivalents represent proceeds from such Indebtedness or other
               obligations; and

                      (xi) rights of third parties in equipment or inventory
               consigned to, or otherwise owned by such third party and which is
               being stored on property owned or leased by, either Borrower or a
               Subsidiary.

        Provided, however, that the foregoing exceptions shall not permit any
        Lien in any of the Collateral or in any other Equity Securities issued
        by any Subsidiary of either Borrower and owned by such Borrower or any
        of its other Subsidiaries, except for Liens in favor of Agent securing
        the Obligations or pursuant to the FIL Credit Documents.

               (c) Asset Dispositions. Neither Borrower nor any of their
        Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
        their assets or property, whether now owned or hereafter acquired,
        except for (i) assets or property sold, leased, transferred or otherwise
        disposed of in the ordinary course of business for fair market value;
        (ii) sales of accounts receivable in financing transactions, provided
        that the aggregate principal amount of any accounts receivable sold in
        any fiscal quarter of FIL shall not exceed thirty percent (30%) of the
        aggregate principal amount of accounts receivable originated by FIL and
        its Subsidiaries during such fiscal quarter; (iii) sales of duplicative
        or excess assets existing as a result of transactions otherwise
        permitted pursuant to Subparagraph 5.02(d), provided that the aggregate
        principal amount of any such duplicative assets sold in any fiscal year
        does not exceed five percent (5%) of all fixed assets of FIL and its
        Subsidiaries net of depreciation held by FIL and its Subsidiaries as of
        the end of the immediately preceding fiscal quarter; and (iv) sales or
        transfers of assets or property to either Borrower or any Material
        Subsidiary for a purchase price that is less than fair market value;
        provided, however, that the foregoing exception shall not permit any
        sale, lease, transfer or other disposition of any Collateral or of any

                                       40
<PAGE>   45
        other Equity Securities issued by any Subsidiary of either Borrower and
        owned by either Borrower or any of their other Subsidiaries, except for
        Liens in favor of Agent securing the Obligations or pursuant to the FIL
        Credit Documents; and (v) assets sold and leased back by FIL or its
        Subsidiaries in the ordinary course of business.

               (d) Mergers, Acquisitions, Etc. Neither Borrower nor any of their
        Subsidiaries shall consolidate with or merge into any other Person or
        permit any other Person to merge into them, acquire any Person as a new
        Subsidiary or acquire all or substantially all of the assets of any
        other Person, except for the following:

                      (i) Borrowers and their Subsidiaries may merge with each
               other, provided that (A) in any such merger involving either
               Borrower, such Borrower is the surviving corporation and (B) no
               Default has occurred and is continuing on the date of, or will
               result after giving effect to, any such merger; and

                      (ii) Borrowers and their Subsidiaries may acquire any
               Person as a new Subsidiary or of all or substantially all of the
               assets of any Person, provided that:

                             (A) No Default has occurred and is continuing on
                      the date of, or will result after giving effect to, any
                      such acquisition;

                             (B) Such Person is not primarily engaged in any
                      business substantially different from (1) the present
                      business of the acquiring Borrower or Subsidiary or (2)
                      any business reasonably related thereto; and

                             (C) Borrowers or their Subsidiaries possess the
                      power to direct or cause the direction of the management
                      and policies of such Person.

               (e) Investments. Neither Borrower nor any of their Subsidiaries
        shall make any Investment except for the following:

                      (i) Investments permitted by the investment policy of FIL
               set forth in Schedule 5.02(e) or, if any changes to the
               investment policy of FIL are hereafter duly approved by the Board
               of Directors of FIL, in any subsequent investment policy which is
               the most recent investment policy delivered by FIL to Agent with
               a certificate of FIL's chief financial officer to the effect that
               such investment policy has been duly approved by FIL's Board of
               Directors and is then in effect;

                      (ii) Investments listed in Schedule 5.02(e) existing on
               the date of this Agreement;

                      (iii) Investments received by Borrowers and their
               Subsidiaries in connection with the bankruptcy or reorganization
               of customers and suppliers and in settlement of delinquent
               obligations of, and other disputes with, customers and suppliers
               arising in the ordinary course of business;

                      (iv) Investments by Borrowers and the Material
               Subsidiaries and the Guarantors in each other;

                      (v) Investments consisting of loans to employees and
               officers for travel, housing, relocation and other similar
               expenses incurred in the ordinary course of business;

                      (vi) Investments of Borrowers and their Subsidiaries in
               interest rate protection, currency swap and foreign exchange
               arrangements, provided that all such arrangements are entered
               into in connection with bona fide hedging operations and not for
               speculation;

                                       41
<PAGE>   46

                      (vii) Deposit accounts;

                      (viii) Investments permitted by Subparagraph 5.02(d);

                      (ix) Investment by FIL or its Subsidiaries of up to
               $125,000,000 in Chatham Technologies, Inc.; and

                      (x) Other Investments, provided that:

                             (A) No Default has occurred and is continuing on
                      the date of, or will result after giving effect to, any
                      such Investment; and

                             (B) The aggregate consideration paid by FIL and its
                      Subsidiaries for all such Investments in any fiscal year
                      does not exceed five percent (5%) of the total assets of
                      FIL and its Subsidiaries at the end of the immediately
                      preceding fiscal quarter.

               (f) Dividends, Redemptions, Etc. Neither Borrower nor any of
        their Subsidiaries shall pay any dividends or make any distributions on
        its Equity Securities; purchase, redeem, retire, defease or otherwise
        acquire for value any of its Equity Securities; return any capital to
        any holder of its Equity Securities as such; make any distribution of
        assets, Equity Securities, obligations or securities to any holder of
        its Equity Securities as such; or set apart any sum for any such
        purpose; except as follows:

                      (i) Either Borrower or any of their Subsidiaries may pay
               dividends on its capital stock payable solely in such Person's
               own capital stock, provided that, in the case of any such
               dividend payable by an Ineligible Material Subsidiary, such
               dividend is delivered and pledged to Agent to the extent required
               by Subparagraph 2.15(b); and

                      (ii) Any Subsidiary of either Borrower may pay dividends
               to or repurchase its capital stock from such Borrower.

               (g) Change in Business. Neither Borrower nor any of their
        Subsidiaries shall engage to any material extent, either directly or
        indirectly, in any business substantially different from (i) their
        present business or (ii) any business reasonably related thereto.

               (h)    Employee Benefit Plans.

                      (i) Neither Borrower nor any ERISA Affiliate shall (A)
               adopt or institute any Employee Benefit Plan that is an employee
               pension benefit plan within the meaning of Section 3(2) of ERISA,
               (B) take any action which will result in the partial or complete
               withdrawal, within the meanings of sections 4203 and 4205 of
               ERISA, from a Multiemployer Plan, (C) engage or permit any Person
               to engage in any transaction prohibited by section 406 of ERISA
               or section 4975 of the IRC involving any Employee Benefit Plan or
               Multiemployer Plan which would subject either Borrower or any
               ERISA Affiliate to any tax, penalty or other liability including
               a liability to indemnify, (D) incur or allow to exist any
               accumulated funding deficiency (within the meaning of section 412
               of the IRC or section 302 of ERISA), (E) fail to make full
               payment when due of all amounts due as contributions to any
               Employee Benefit Plan or Multiemployer Plan, (F) fail to comply
               with the requirements of section 4980B of the IRC or Part 6 of
               Title I(B) of ERISA, or (G) adopt any amendment to any Employee
               Benefit Plan which would require the posting of security pursuant
               to section 401(a)(29) of the IRC, where singly or cumulatively,
               the above would be reasonably and substantially likely to have a
               Material Adverse Effect.

                      (ii) Neither Borrower nor any of their Subsidiaries shall
               (A) engage in any transaction prohibited by any Governmental Rule
               applicable to any Foreign Plan, (B) fail to make full payment
               when due of all amounts due as contributions to any Foreign Plan
               or (C) otherwise fail to comply with the requirements of any
               Governmental Rule applicable to any Foreign Plan,

                                       42
<PAGE>   47

               where singly or cumulatively, the above would be reasonably and
               substantially likely to have a Material Adverse Effect.

               (i) Transactions With Affiliates. Neither Borrower nor any of
        their Subsidiaries shall enter into any Contractual Obligation with any
        Affiliate (other than FIL, any other borrower under the FIL Credit
        Agreement or one of their Subsidiaries) or engage in any other
        transaction with any such Affiliate except upon terms at least as
        favorable to such Borrower or such Subsidiary as an arms-length
        transaction with unaffiliated Persons, except as disclosed or reflected
        in the Financial Statements of FIL dated December 31, 1999, furnished by
        Borrowers to Agent prior to the date hereof, or in the Financial
        Statements delivered to Agent pursuant to clause (i) or (ii) of
        Subparagraph 5.01(a).

               (j) Accounting Changes. Neither Borrower nor any of their
        Subsidiaries shall change (i) their fiscal year (currently April 1
        through March 31) or (ii) their accounting practices except as required
        by GAAP.

               (k) Burdensome Contractual Obligations. None of the Borrowers,
        the Guarantors and any of their Subsidiaries will enter into any
        Contractual Obligation (excluding this Agreement and the other Credit
        Documents) that restricts the ability of any Subsidiary of FIL to pay or
        make dividends or distributions in cash or kind, to make loans, advances
        or other payments of whatsoever nature or to make transfers or
        distributions of all or any part of their assets to Borrowers or to any
        Subsidiary of such Subsidiary.

SECTION VI.       DEFAULT.

        6.01.  Events of Default.  The occurrence or existence of any one or
more of the following shall constitute an "Event of Default" hereunder:

               (a) Non-Payment. Either Borrower shall (i) fail to pay when due
        any principal of any Loan or (ii) fail to pay within three (3) Business
        Days after the same becomes due any interest, fee or other payment
        required under the terms of this Agreement or any of the other Credit
        Documents; or

               (b) Specific Defaults. Either Borrower or any of its Subsidiaries
        shall fail to observe or perform any covenant, obligation, condition or
        agreement set forth in Paragraph 5.02; or

               (c) Other Defaults. Either Borrower or any of its Subsidiaries
        shall fail to observe or perform any other covenant, obligation,
        condition or agreement contained in this Agreement or the other Credit
        Documents and such failure shall continue for fifteen (15) Business Days
        after the earlier of (i) either Borrower's written acknowledgement of
        such failure and (ii) Agent's or any Lender's written notice to
        Borrowers of such failure; or

               (d) Representations and Warranties. Any representation, warranty,
        certificate, information or other statement (financial or otherwise)
        made or furnished by or on behalf of either Borrower to Agent or any
        Lender in or in connection with this Agreement or any of the other
        Credit Documents, or as an inducement to Agent or any Lender to enter
        into this Agreement, shall be false, incorrect, incomplete or misleading
        in any material respect when made (or deemed made) or furnished and
        either (i) Agent or any Lender has delivered to Borrowers written notice
        thereof and such representation, warranty, certificate, information or
        other statement cannot be remedied or (ii) such representation,
        warranty, certificate, information or other statement continues to be
        false, incorrect, incomplete or misleading in any material respect
        thirty (30) days after the earlier of (A) either Borrower's written
        acknowledgement that such representation, warranty, certificate,
        information or other statement was false, incorrect, incomplete or
        misleading in any material respect and (B) Agent's or any Lender's
        written notice to Borrowers that such representation, warranty,
        certificate, information or other statement was false, incorrect,
        incomplete or misleading in any material respect; or

               (e) Cross-Default. (i) Either Borrower or any of its Subsidiaries
        shall fail to make any payment on account of any Indebtedness of such
        Person (other than the Obligations) when due (whether at

                                       43
<PAGE>   48

        scheduled maturity, by required prepayment, upon acceleration or
        otherwise) and such failure shall continue beyond any period of grace
        provided with respect thereto, if the amount of such Indebtedness
        exceeds $10,000,000 or the effect of such failure is to cause, or permit
        the holder or holders thereof to cause, Indebtedness of Borrowers and
        their Subsidiaries (other than the Obligations) in an aggregate amount
        exceeding $10,000,000 to become due (whether at scheduled maturity, by
        required prepayment, upon acceleration or otherwise); or (ii) either
        Borrower or any of its Subsidiaries shall otherwise fail to observe or
        perform any agreement, term or condition contained in any agreement or
        instrument relating to any Indebtedness of such Person (other than the
        Obligations), or any other event shall occur or condition shall exist,
        if the effect of such failure, event or condition is to cause, or permit
        the holder or holders thereof to cause, Indebtedness of Borrowers and
        their Subsidiaries (other than the Obligations) in an aggregate amount
        exceeding $10,000,000 to become due (and/or to be secured by cash
        collateral); or (iii) any Event of Default, as defined in the FIL Credit
        Agreement, shall occur, without regard to any waiver of such Event of
        Default under the FIL Credit Agreement; or

               (f) Insolvency, Voluntary Proceedings. Either Borrower, FIL or
        any of their Subsidiaries shall (i) apply for or consent to the
        appointment of a receiver, trustee, liquidator or custodian of itself or
        of all or a substantial part of its property, (ii) be unable, or admit
        in writing its inability, to pay its debts generally as they mature,
        (iii) make a general assignment for the benefit of its or any of its
        creditors, (iv) become insolvent (as such term may be defined or
        interpreted under any applicable statute), (v) commence a voluntary case
        or other proceeding seeking liquidation, reorganization or other relief
        with respect to itself or its debts under any bankruptcy, insolvency or
        other similar law now or hereafter in effect or consent to any such
        relief or to the appointment of or taking possession of its property by
        any official in an involuntary case or other proceeding commenced
        against it, or (vi) take any action for the purpose of effecting any of
        the foregoing; or either Borrower, FIL or any Material Subsidiary shall
        be dissolved or liquidated in full or in part; or

               (g) Involuntary Proceedings. Proceedings for the appointment of a
        receiver, trustee, liquidator or custodian of FIL, either Borrower or
        any of their Subsidiaries or of all or a substantial part of the
        property thereof, or an involuntary case or other proceedings seeking
        liquidation, reorganization or other relief with respect to FIL, either
        Borrower or any of their Subsidiaries or the debts thereof under any
        bankruptcy, insolvency or other similar law now or hereafter in effect
        shall be commenced and an order for relief entered or such proceeding
        shall not be dismissed or discharged within sixty (60) days of
        commencement; or

               (h) Judgments. (i) One or more judgments, orders, decrees or
        arbitration awards requiring Borrowers and/or their Subsidiaries to pay
        an aggregate amount of $10,000,000 or more (exclusive of amounts covered
        by insurance issued by an insurer not an Affiliate of Borrowers and
        otherwise satisfying the requirements set forth in Subparagraph 5.01(d))
        shall be rendered against Borrowers and/or their Subsidiaries in
        connection with any single or related series of transactions, incidents
        or circumstances and the same shall not be satisfied, vacated or stayed
        for a period of sixty (60) consecutive days; (ii) any judgment, writ,
        assessment, warrant of attachment, tax lien or execution or similar
        process shall be issued or levied against a substantial part of the
        property of either Borrower or any of their Subsidiaries and the same
        shall not be released, stayed, vacated or otherwise dismissed within
        sixty (60) days after issue or levy; or (iii) any other judgments,
        orders, decrees, arbitration awards, writs, assessments, warrants of
        attachment, tax liens or executions or similar processes which, alone or
        in the aggregate, are reasonably and substantially likely to have a
        Material Adverse Effect are rendered, issued or levied; or

               (i) Credit Documents. Any Credit Document or any material term
        thereof shall cease to be, or be asserted by either Borrower or any of
        their Subsidiaries not to be, a legal, valid and binding obligation of
        either Borrower or any of their Subsidiaries enforceable in accordance
        with its terms; or

               (j) Employee Benefit Plans. Any Reportable Event which
        constitutes grounds for the termination of any Employee Benefit Plan by
        the PBGC or for the appointment of a trustee by the PBGC to administer
        any Employee Benefit Plan shall occur, or any Employee Benefit Plan
        shall be terminated within the meaning of Title IV of ERISA or a trustee
        shall be appointed by the PBGC to administer any Employee Benefit Plan;
        or

                                       44
<PAGE>   49

               (k)    Change of Control.  Any Change of Control shall occur; or

               (l) Material Adverse Effect. Any event(s) or condition(s) which
        is (are) reasonably and substantially likely to have a Material Adverse
        Effect shall occur or exist.

        6.02. Remedies. At any time after the occurrence and during the
continuance of any Event of Default (other than an Event of Default referred to
in Subparagraph 6.01(f) or 6.01(g)), Agent may, with the consent of the Required
Lenders, or shall, upon instructions from the Required Lenders, by written
notice to Borrowers, (a) terminate the Commitments and the obligations of
Lenders to make Loans and/or (b) declare all outstanding Obligations payable by
Borrowers to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes to the contrary notwithstanding. Upon
the occurrence or existence of any Event of Default described in Subparagraph
6.01(f) or 6.01(g), immediately and without notice, (1) the Commitments and the
obligations of Lenders to make Loans shall automatically terminate and (2) all
outstanding Obligations payable by Borrowers hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding. In addition to
the foregoing remedies, upon the occurrence or existence of any Event of
Default, Agent may exercise any other right, power or remedy available to it
under any of the Credit Documents or otherwise by law, either by suit in equity
or by action at law, or both.

        6.03. Lender Rate Contract Remedies. Notwithstanding any other provision
of this Section VI, each Lender or its Affiliate which has entered into a Lender
Rate Contract shall have the right, with prior notice to Agent, but without the
approval or consent of Agent or any other Lender, (a) to declare an event of
default, termination event or other similar event thereunder which will result
in the early termination of such Lender Rate Contract, (b) to determine net
termination amounts in accordance with the terms of such Lender Rate Contract
and to set-off amounts between Lender Rate Contracts of such Lender, and (c) to
prosecute any legal action against either Borrower or their Subsidiaries to
enforce net amounts owing to such Lender or its Affiliate under such Lender Rate
Contracts.

SECTION VII.      THE AGENT AND RELATIONS AMONG LENDERS.

        7.01. Appointment, Powers and Immunities. Each Lender hereby appoints
and authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, be a trustee for any Lender or have any fiduciary duty to
any Lender. Notwithstanding anything to the contrary contained herein Agent
shall not be required to take any action which is contrary to this Agreement or
any other Credit Document or any applicable Governmental Rule. Neither Agent nor
any Lender shall be responsible to any other Lender for any recitals,
statements, representations or warranties made by Borrowers or any of their
Subsidiaries contained in this Agreement or in any other Credit Document, for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Credit Document or for any failure by Borrowers
or any of their Subsidiaries to perform their respective obligations hereunder
or thereunder. Agent may employ agents and attorneys-in-fact and shall not be
responsible to any Lender for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of
its directors, officers, employees, agents or advisors shall be responsible to
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Agreement, Agent shall take such action with
respect to the Credit Documents as shall be directed by the Required Lenders.

        7.02. Reliance by Agent. Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent with reasonable care. As to any other matters not
expressly provided for by this Agreement, Agent shall not be required to take
any action or exercise any

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<PAGE>   50

discretion, but shall be required to act or to refrain from acting upon
instructions of the Required Lenders and shall in all cases be fully protected
by Lenders in acting, or in refraining from acting, hereunder or under any other
Credit Document in accordance with the instructions of the Required Lenders, and
such instructions of the Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of Lenders.

        7.03. Defaults. Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default unless Agent has received a written notice from a
Lender or either Borrower, referring to this Agreement, describing such Default
and stating that such notice is a "Notice of Default". If Agent receives such a
notice of the occurrence of a Default, Agent shall give prompt notice thereof to
Lenders. Agent shall take such action with respect to such Default as shall be
reasonably directed by the Required Lenders; provided, however, that until Agent
shall have received such directions, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of Lenders.

        7.04. Indemnification. Without limiting the Obligations of Borrowers
hereunder, each Lender agrees to indemnify Agent, ratably in accordance with
their Proportionate Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of this
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof; provided, however, that no Lender shall be liable for
any of the foregoing to the extent they arise from Agent's gross negligence or
willful misconduct. Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
obligations of each Lender under this Paragraph 7.04 shall survive the payment
and performance of the Obligations, the termination of this Agreement and any
Lender ceasing to be a party to this Agreement (with respect to events which
occurred prior to the time such Lender ceased to be a Lender hereunder).

        7.05. Non-Reliance. Each Lender represents that it has, independently
and without reliance on Agent, or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
business, prospects, management, financial condition and affairs of Borrowers
and their Subsidiaries and its own decision to enter into this Agreement and
agrees that it will, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decisions in taking or not
taking action under this Agreement. Neither Agent nor any of its affiliates nor
any of their respective directors, officers, employees, agents or advisors shall
(a) be required to keep any Lender informed as to the performance or observance
by Borrowers or any of their Subsidiaries of the obligations under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of Borrowers or any of their
Subsidiaries; (b) have any duty or responsibility to provide any Lender with any
credit or other information concerning Borrowers or any of their Subsidiaries
which may come into the possession of Agent, except for notices, reports and
other documents and information expressly required to be furnished to Lenders by
Agent hereunder; or (c) be responsible to any Lender for (i) any recital,
statement, representation or warranty made by Borrowers or any officer, employee
or agent of Borrowers in this Agreement or in any of the other Credit Documents,
(ii) the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Credit Document, (iii) the value or
sufficiency of the Collateral or the validity or perfection of any of the liens
or security interests intended to be created by the Credit Documents, or (iv)
any failure by Borrowers to perform its obligations under this Agreement or any
other Credit Document.

        7.06. Resignation or Removal of Agent. Agent may resign at any time by
giving thirty (30) days prior written notice thereof to Borrowers and Lenders,
and Agent may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Agent, which Agent, if not a Lender, shall be
reasonably acceptable to Borrowers; provided, however, that Borrowers shall have
no right to approve a successor Agent if a Default has occurred and is
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from the duties and obligations
thereafter arising hereunder. After any retiring Agent's

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<PAGE>   51

resignation or removal hereunder as Agent, the provisions of this Section VII
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.

        7.07. Agent in its Individual Capacity. Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of banking
or other business with Borrowers and their Subsidiaries and affiliates as though
Agent were not Agent hereunder. With respect to Loans, if any, made by Agent in
its capacity as a Lender, Agent in its capacity as a Lender shall have the same
rights and powers under this Agreement and the other Credit Documents as any
other Lender and may exercise the same as though it were not Agent, and the
terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender.

        7.08. Documentation Agent, Managing Agents and Co-Agent. Documentation
Agent, Managing Agents and Co-Agent do not assume any responsibility or
obligation under this Agreement or any of the other Credit Documents or any
duties as agents for the Lenders. The title "Documentation Agent", "Managing
Agent" and "Co-Agent" implies no fiduciary responsibility on the part of any
Documentation Agent, Managing Agent and Co-Agent to any Person, and the use of
such title does not impose on any Documentation Agent, Managing Agent and
Co-Agent any duties or obligations under this Agreement or any of the other
Credit Documents.

SECTION VIII.     MISCELLANEOUS.

        8.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
either Borrower, any Lender or Agent under this Agreement or the other Credit
Documents shall be in writing and faxed, mailed or delivered, if to either
Borrower or Agent, at its respective facsimile number or address set forth below
or, if to any Lender, at the address or facsimile number specified for such
Lender in Part B of Schedule I (or to such other facsimile number or address for
any party as indicated in any notice given by that party to the other parties).
All such notices and communications shall be effective (a) when sent by an
overnight courier service of recognized standing, on the second Business Day
following the deposit with such service; (b) when delivered by hand, upon
delivery; (c) when faxed, upon confirmation of receipt; or (d) by any other
means, upon receipt; provided, however, that any notice delivered to Agent under
Section II shall not be effective until received by Agent.

               Agent:        ABN AMRO Bank N.V.
                             Syndications Group
                             1325 Avenue of the Americas, 9th Floor
                             New York, NY  10019
                             U.S.A.
                             Attn:  Linda Boardman
                             Tel. No: (212) 314-1724
                             Fax. No: (212) 314-1712

                             With a copy in each case to:

                             ABN AMRO Bank N.V.
                             101 California Street, Suite 4550
                             San Francisco, CA  94111-5812
                             Attn:  Mathew Harvey
                             Tel: (415) 984-3733
                             Fax: (415) 362-3524

               Borrower:     Flextronics International USA, Inc.
                             2090 Fortune Drive
                             San Jose, CA  95131
                             Attn:  Treasurer
                             Tel. No:  (408) 576-7233
                             Fax. No:  (408) 526-9215

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<PAGE>   52

               Borrower:     The DII Group, Inc.
                             2090 Fortune Drive
                             San Jose, CA  95131
                             Attn:  Treasurer
                             Tel. No:  (408) 576-7233
                             Fax. No:  (408) 526-9215

Each Notice of Borrowing, Notice of Interest Period Selection and Notice of Term
Loan Conversion shall be given by the applicable Borrower to Agent's New York
office located at the address referred to above during such office's normal
business hours; provided, however, that any such notice received by Agent after
11:00 a.m. (California time) on any Business Day shall be deemed received by
Agent on the next Business Day. In any case where this Agreement authorizes
notices, requests, demands or other communications by Borrowers to Agent or any
Lender to be made by telephone or facsimile, Agent or any Lender may
conclusively presume that anyone purporting to be a person designated in any
incumbency certificate or other similar document received by Agent or a Lender
is such a person.

        8.02. Expenses. Borrowers jointly and severally agree to pay on demand,
whether or not any Loan is made hereunder, (a) all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by Agent in
connection with the syndication of the Loans, the preparation, negotiation,
execution and delivery of, and the exercise of its duties under, this Agreement
and the other Credit Documents, and the preparation, negotiation, execution and
delivery of amendments and waivers hereunder and thereunder and (b) all
reasonable fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Agent and Lenders in the enforcement or attempted enforcement of any
of the Obligations or in preserving any of Agent's or Lenders' rights and
remedies (including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Credit Documents or
the Obligations or any bankruptcy or similar proceeding involving Borrowers or
any of their Subsidiaries). As used herein, the term "reasonable attorneys' fees
and expenses" shall include, without limitation, allocable costs and expenses of
Agent's and Lenders' in-house legal counsel and staff. The obligations of
Borrowers under this Paragraph 8.02 shall survive the payment and performance of
the Obligations and the termination of this Agreement.

        8.03. Indemnification. To the fullest extent permitted by law, Borrowers
jointly and severally agree to protect, indemnify, defend and hold harmless
Agent, Lenders and their Affiliates and their respective directors, officers,
employees, agents and advisors ("Indemnitees") from and against any and all
liabilities, losses, damages or expenses of any kind or nature and from any
suits, claims or demands (including in respect of or for reasonable attorney's
fees and other expenses) arising on account of or in connection with any matter
or thing or action or failure to act by Indemnitees, or any of them, arising out
of or relating to the Credit Documents or any transaction contemplated thereby,
including without limitation any use by Borrowers of any proceeds of the Loans,
except to the extent such liability arises from the willful misconduct or gross
negligence of such Indemnitee. Upon receiving knowledge of any suit, claim or
demand asserted by a third party that Agent or any Lender believes is covered by
this indemnity, Agent or such Lender shall give Borrowers notice of the matter
and an opportunity to defend it, at Borrowers' sole cost and expense, with legal
counsel satisfactory to Agent or such Lender, as the case may be. Agent or such
Lender may also require Borrowers to defend the matter. Any failure or delay of
Agent or any Lender to notify Borrowers of any such suit, claim or demand shall
not relieve Borrowers of their obligations under this Paragraph 8.03 but shall
reduce such obligations to the extent of any increase in those obligations
caused solely by any such failure or delay which is unreasonable. The
obligations of Borrowers under this Paragraph 8.03 shall survive the payment and
performance of the Obligations and the termination of this Agreement.

        8.04. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement or any other Credit Document may be amended or waived, and any
consent under this Agreement or any other Credit Document may be given, if such
amendment, waiver or consent is in writing and is signed by Borrowers and the
Required Lenders (or Agent on behalf of the Required Lenders with the written
approval of the Required Lenders); provided, however that:

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<PAGE>   53

               (a) Any amendment, waiver or consent which would (i) increase the
        Total Facility A Commitment, (ii) postpone, delay or extend the Facility
        A Revolving Loan Maturity Date, (iii) reduce the principal of or
        interest on the Facility A Loans, the Facility A Commitment Fees or any
        other fees or amounts payable for the account of all Facility A Lenders
        hereunder or postpone, delay or extend the scheduled date for payment of
        any such principal, interest, fees or amounts must be in writing and
        signed or approved in writing by all Facility A Lenders;

               (b) Any amendment, waiver or consent which would (i) increase the
        Total Facility B Commitment, (ii) postpone, delay or extend the Facility
        B Revolving Loan Maturity Date or the Term Loan Maturity Date, (iii)
        reduce the principal of or interest on the Facility B Loans, the
        Facility B Commitment Fees or any other fees or amounts payable for the
        account of all Facility B Lenders hereunder or postpone, delay or extend
        the scheduled date for payment of any such principal, interest, fees or
        amounts must be in writing and signed or approved in writing by all
        Facility B Lenders;

               (c) Any amendment, waiver or consent which would (i) reduce the
        principal of or interest on the Loans or any fees or other amounts
        payable for the account of all Lenders hereunder or extend the scheduled
        date for payment of any such principal, interest, fees or amounts, (ii)
        reduce any fees or other amounts payable for the account of all Lenders
        hereunder or postpone, delay or extend the scheduled date for payment of
        any such fees or amounts, (iii) amend this Paragraph 8.04, (iv) amend
        the definition of Required Lenders, or (v) release any substantial part
        of the Collateral or any Guarantor (except for releases as provided in
        Paragraph 2.15), must be in writing and signed or approved in writing by
        all Lenders;

               (d) Any amendment, waiver or consent which would (i) increase or
        decrease the Facility A Commitment of any Facility A Lender (except for
        a pro rata decrease in the Facility A Commitments of all Facility A
        Lenders) or (ii) increase or decrease the Facility B Commitment of any
        Facility B Lender (except for a pro rata decrease in the Facility B
        Commitments of all Facility B Lenders) must be in writing and signed by
        such Lender; and

               (e) Any amendment, waiver or consent which affects the rights or
        obligations of Agent must be in writing and signed by Agent.

No failure or delay by Agent or any Lender in exercising any right under this
Agreement or any other Credit Document shall operate as a waiver thereof or of
any other right hereunder or thereunder nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right hereunder or thereunder. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.

        8.05.  Successors and Assigns.

               (a) Binding Effect. This Agreement and the other Credit Documents
        shall be binding upon and inure to the benefit of Borrowers, Lenders,
        Agent, all future holders of the Notes and their respective successors
        and permitted assigns, except that neither Borrower may assign or
        transfer any of its rights or obligations under any Credit Document
        without the prior written consent of Agent and each Lender.

               (b) Participations. Any Lender may at any time sell to one or
        more banks or other financial institutions ("Participants")
        participating interests in any Loan owing to such Lender, any Note held
        by such Lender, any Commitment of such Lender or any other interest of
        such Lender under this Agreement and the other Credit Documents. In the
        event of any such sale by a Lender of participating interests, such
        Lender's obligations under this Agreement shall remain unchanged, such
        Lender shall remain solely responsible for the performance thereof, such
        Lender shall remain the holder of its Notes for all purposes under this
        Agreement and Borrowers and Agent shall continue to deal solely and
        directly with such Lender in connection with such Lender's rights and
        obligations under this Agreement. Any agreement pursuant to which any
        such sale is effected may require the selling Lender to obtain the
        consent of the Participant in order for such Lender to agree in writing
        to any amendment, waiver or consent of a type specified in Subparagraph
        8.04(a), Subparagraph 8.04(b), Subparagraph 8.04(c) or Subparagraph
        8.04(d) to the extent applicable but may not otherwise require the
        selling Lender to obtain the consent of such Participant to any

                                       49
<PAGE>   54

        other amendment, waiver or consent hereunder. Borrowers also agree that
        any Lender which has transferred any participating interest in its
        Commitments or Loans shall, notwithstanding any such transfer, be
        entitled to the full benefits accorded such Lender under Paragraph 2.12,
        Paragraph 2.13, and Paragraph 2.14, as if such Lender had not made such
        transfer.

               (c) Assignments. Any Lender may, at any time, sell and assign to
        any other Lender or any Eligible Assignee (individually, an "Assignee
        Lender") all or a portion of its rights and obligations under this
        Agreement and the other Credit Documents (such a sale and assignment to
        be referred to herein as an "Assignment") pursuant to an assignment
        agreement in the form of Exhibit F (an "Assignment Agreement"), executed
        by each Assignee Lender and such assignor Lender (an "Assignor Lender")
        and delivered to Agent for its acceptance and recording in the Register;
        provided, however, that:

                      (i) Without the written consent of Agent and, if no
               Default has occurred and is continuing, FIL (which consent of
               Agent and FIL shall not be unreasonably withheld), no Lender may
               make any Assignment of its Commitment or Loans to any Assignee
               Lender which is not, immediately prior to such Assignment, a
               Lender hereunder or an Affiliate thereof;

                      (ii) Without the written consent of Agent and, if no
               Default has occurred and is continuing, FIL (which consent of
               Agent and FIL shall not be unreasonably withheld), no Facility A
               Lender may make any Assignment of its Facility A Commitment and
               Facility A Loans to any Assignee Lender if, after giving effect
               to such Assignment, the Facility A Commitment (or, after the
               termination of the Facility A Commitments, the Facility A Loans)
               of such Lender or such Assignee Lender would be less than Five
               Million Dollars ($5,000,000), except that a Facility A Lender may
               make an Assignment which reduces its Facility A Commitment (or,
               after the termination of the Facility A Commitments, its Facility
               A Loans) to zero without the written consent of FIL and
               Administrative Agent;

                      (iii) Without the written consent of Agent and, if no
               Default has occurred and is continuing, FIL (which consent of
               Agent and FIL shall not be unreasonably withheld), no Facility B
               Lender may make any Assignment of its Facility B Commitment and
               Facility B Loans to any Assignee Lender if, after giving effect
               to such Assignment, the Facility B Commitment (or, after the
               termination of the Facility B Commitments, the Facility B Loans)
               of such Lender or such Assignee Lender would be less than Five
               Million Dollars ($5,000,000), except that a Facility B Lender may
               make an Assignment which reduces its Facility B Commitment (or,
               after the termination of the Facility B Commitments, its Facility
               B Loans) to zero without the written consent of FIL and
               Administrative Agent;

                      (iv) Without the written consent of Agent and, if no
               Default has occurred and is continuing, FIL (which consent of
               Agent and FIL shall not be unreasonably withheld), no Facility A
               Lender may make any Assignment of its Facility A Commitment and
               Facility A Loans which does not assign and delegate an equal pro
               rata interest in such Facility A Lender's Facility A Commitment,
               Facility A Loans and all other rights, duties and obligations of
               such Facility A Lender under this Agreement and the other Credit
               Documents relating to Facility A;

                      (v) Without the written consent of Agent and, if no
               Default has occurred and is continuing, FIL (which consent of
               Agent and FIL shall not be unreasonably withheld), no Facility B
               Lender may make any Assignment of its Facility B Commitment and
               Facility B Loans which does not assign and delegate an equal pro
               rata interest in such Facility B Lender's Facility B Commitment,
               Facility B Loans and all other rights, duties and obligations of
               such Facility B Lender under this Agreement and the other Credit
               Documents relating to Facility B; and

                      (vi) Any Assignor Lender which is, or which has an
               Affiliate which is, a party to a Lender Rate Contract may not
               make an Assignment of all of its Commitments or all of its Loans
               to an Assignee Lender unless such Assignee Lender or its
               Affiliate shall also assume all obligations of such Assignor
               Lender or its Affiliate with respect to such Lender Rate
               Contract.

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<PAGE>   55

        Upon such execution, delivery, acceptance and recording of each
        Assignment Agreement, from and after the Assignment Effective Date
        determined pursuant to such Assignment Agreement, (A) each Assignee
        Lender thereunder shall be a Lender hereunder with Commitments or Loans
        as set forth on Attachment 1 to such Assignment Agreement (under the
        caption "Commitments or Loans After Assignment") and shall have the
        rights, duties and obligations of such a Lender under this Agreement and
        the other Credit Documents, and (B) the Assignor Lender thereunder shall
        be a Lender with Commitments or Loans as set forth on Attachment 1 to
        such Assignment Agreement (under the caption "Commitments or Loans After
        Assignment"), or, if the Commitments or Loans of the Assignor Lender
        have been reduced to zero, the Assignor Lender shall cease to be a
        Lender and to have any obligation to make any Loan; provided, however,
        that any such Assignor Lender which ceases to be a Lender shall continue
        to be entitled to the benefits of any provision of this Agreement which
        by its terms survives the termination of this Agreement. Each Assignment
        Agreement shall be deemed to amend Schedule I to the extent, and only to
        the extent, necessary to reflect the addition of each Assignee Lender,
        the deletion of each Assignor Lender which reduces its Commitments or
        Loans to zero, and the resulting adjustment of Commitments or Loans
        arising from the purchase by each Assignee Lender of all or a portion of
        the rights and obligations of an Assignor Lender under this Agreement
        and the other Credit Documents. On or prior to the Assignment Effective
        Date determined pursuant to each Assignment Agreement, Borrowers, at
        their own expense, shall, if requested by Assignee Lenders, execute and
        deliver to Agent, in exchange for the surrendered Notes, if any, of the
        Assignor Lender thereunder, new Notes to the order of each Assignee
        Lender thereunder and, if the Assignor Lender is continuing as a Lender
        hereunder, new Notes to the order of the Assignor Lender. The Notes
        surrendered by the Assignor Lender shall be returned by Agent to
        Borrowers marked "replaced". Each Assignee Lender which becomes a Lender
        and was not previously such a Lender hereunder shall, prior to becoming
        such a Lender, deliver such certificates and other evidence as is
        required by Subparagraph 2.13(b).

               (d) Register. Agent shall maintain at its address referred to in
        Paragraph 8.01 a copy of each Assignment Agreement delivered to it and a
        register (the "Register") for the recordation of the names and addresses
        of Lenders and the Commitments or Loans of each Lender from time to
        time. The entries in the Register shall be conclusive in the absence of
        manifest error, and Borrowers, Agent and Lenders may treat each Person
        whose name is recorded in the Register as the owner of the Commitments
        or Loans recorded therein for all purposes of this Agreement. The
        Register shall be available for inspection by Borrowers or any Lender at
        any reasonable time and from time to time upon reasonable prior notice.

               (e) Registration. Upon its receipt of an Assignment Agreement
        executed by an Assignor Lender and an Assignee Lender (and, to the
        extent required by Subparagraph 8.05(c), by Borrowers and Agent)
        together with payment to Agent by Assignor Lender of a registration and
        processing fee of $3,000, Agent shall (i) promptly accept such
        Assignment Agreement and (ii) on the Effective Date determined pursuant
        thereto record the information contained therein in the Register and
        give notice of such acceptance and recordation to Lenders and Borrowers.
        Agent may, from time to time at its election, prepare and deliver to
        Lenders and Borrowers a revised Schedule I reflecting the names,
        addresses and respective Commitments or Loans of all Lenders then
        parties hereto.

               (f) Confidentiality. Subject to Paragraph 8.11, Agent and Lenders
        may disclose the Credit Documents and any financial or other information
        relating to Borrowers, FIL or any Subsidiary to each other or to any
        potential Participant or Assignee Lender.

               (g) Pledges to Federal Reserve Banks. Notwithstanding any other
        provision of this Agreement, any Lender may at any time assign all or a
        portion of its rights under this Agreement and the other Credit
        Documents to a Federal Reserve Bank. No such assignment shall relieve
        the assigning Lender from its obligations under this Agreement and the
        other Credit Documents.

        8.06.  Setoff; Security Interest.

               (a) Setoff. In addition to any rights and remedies of Lenders
        provided by law, each Lender shall have the right, with the prior
        consent of Agent but without prior notice to or consent of Borrowers,
        any such notice and consent being expressly waived by Borrowers to the
        extent permitted by applicable

                                       51
<PAGE>   56

        law, upon the occurrence and during the continuance of an Event of
        Default, to set-off and apply against the Obligations of either Borrower
        any amount owing from such Lender to such Borrower. The aforesaid right
        of set-off may be exercised by such Lender against either Borrower or
        against any trustee in bankruptcy, debtor in possession, assignee for
        the benefit of creditors, receiver or execution, judgment or attachment
        creditor of such Borrower or against anyone else claiming through or
        against such Borrower or such trustee in bankruptcy, debtor in
        possession, assignee for the benefit of creditors, receiver, or
        execution, judgment or attachment creditor, notwithstanding the fact
        that such right of set-off may not have been exercised by such Lender at
        any prior time. Each Lender agrees promptly to notify the applicable
        Borrower after any such set-off and application made by such Lender,
        provided that the failure to give such notice shall not affect the
        validity of such set-off and application.

               (b) Security Interest. As security for the Obligations, each
        Borrower hereby grants to Agent and each Lender, for the benefit of all
        Lenders, a continuing security interest in any and all deposit accounts
        or moneys of such Borrower now or hereafter maintained with such Lender.
        Each Lender shall have all of the rights of a secured party with respect
        to such security interest.

        8.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.

        8.08. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.

        8.09. Jury Trial. EACH OF BORROWERS, LENDERS AND AGENT, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.

        8.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

        8.11. Borrowers' Liabilities. Each Borrower is jointly and severally
liable for the payment and performance of all other Obligations under this
Agreement and the other Credit Documents, and each Borrower is liable for the
payment and performance of all Obligations under this Agreement and the other
Credit Documents as provided in the Guaranty.

        8.12. Confidentiality. Neither any Lender nor Agent shall disclose to
any Person any information with respect to Borrowers or any of their
Subsidiaries which is furnished pursuant to this Agreement or under the other
Credit Documents, except that any Lender or Agent may disclose any such
information (a) to its own directors, officers, employees, auditors, counsel and
other advisors and to its Affiliates; (b) to any other Lender or Agent; (c)
which is otherwise available to the public; (d) if required or appropriate in
any report, statement or testimony submitted to any Governmental Authority
having or claiming to have jurisdiction over such Lender or Agent; (e) if
required in response to any summons or subpoena; (f) in connection with any
enforcement by Lenders and Agent of their rights under this Agreement or the
other Credit Documents or any litigation among the parties relating to the
Credit Documents or the transactions contemplated thereby; (g) to comply with
any Requirement of Law applicable to such Lender or Agent; (h) to any Assignee
Lender or Participant or any prospective Assignee Lender or Participant,
provided that such Assignee Lender or Participant or prospective Assignee Lender
or Participant agrees to be bound by this Paragraph 8.12; or (i) otherwise with
the prior consent of the applicable Borrower; provided, however, that (i) any
Lender or Agent served with any summons or subpoena demanding the disclosure of
any such information shall use reasonable efforts to notify Borrowers promptly
of such summons or subpoena if not prohibited by any Requirement of Law and, if
requested by Borrowers and not disadvantageous to such Lender or Agent, to
cooperate with Borrowers in obtaining a protective order restricting such
disclosure, and (ii) any

                                       52
<PAGE>   57

disclosure made in violation of this Agreement shall not affect the obligations
of Borrowers and their Subsidiaries under this Agreement and the other Credit
Documents.

        8.13. Consent to Jurisdiction. Each Borrower irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of California and the
courts of the United States of America located in the Northern District of
California and agrees that any legal action, suit or proceeding arising out of
or relating to this Agreement or any of the other Credit Documents may be
brought against such party in any such courts. Final judgment against either
Borrower in any such action, suit or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the judgment, or in
any other manner provided by law. Nothing in this Subparagraph 8.13 shall affect
the right of Agent or any Lender to commence legal proceedings or otherwise sue
either Borrower in any other appropriate jurisdiction, or concurrently in more
than one jurisdiction, or to serve process, pleadings and other papers upon
either Borrower in any manner authorized by the laws of any such jurisdiction.
Each Borrower agrees that process served either personally or by registered mail
shall, to the extent permitted by law, constitute adequate service of process in
any such suit. Each Borrower irrevocably waives to the fullest extent permitted
by applicable law (a) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceeding in any court
referred to in the first sentence above; (b) any claim that any such action,
suit or proceeding has been brought in an inconvenient forum; (c) its right of
removal of any matter commenced by any other party in the courts of the State of
California to any court of the United States of America; (d) any immunity which
it or its assets may have in respect of its obligations under this Agreement or
any other Credit Document from any suit, execution, attachment (whether
provisional or final, in aid of execution, before judgment or otherwise) or
other legal process; and (e) any right it may have to require the moving party
in any suit, action or proceeding brought in any of the courts referred to above
arising out of or in connection with this Agreement or any other Credit Document
to post security for the costs of such Borrower or to post a bond or to take
similar action.

        8.14. Usury. In no event shall any provision of this Agreement or any
other Credit Document ever obligate either Borrower to pay or allow any Lender
to collect interest on any Loan or any other Obligation of either Borrower
hereunder at a rate greater than the maximum non-usurious rate permitted by
applicable law (herein referred to as the "highest lawful rate"), or obligate
either Borrower to pay any taxes, assessments, charges, insurance premiums or
other amounts to the extent that such payments, when added to the interest
payable on the Loans or any other Obligations, would be held to constitute the
payment by either Borrower of interest at a rate greater than the highest lawful
rate. This provision shall control over any provision to the contrary. Without
limiting the generality of the foregoing, in the event the maturity of all or
any part of the principal amount of the Obligations of either Borrower shall be
accelerated for any reason, then such principal amount so accelerated shall be
credited with any interest theretofore paid thereon in advance and remaining
unearned at the time of such acceleration. If, pursuant to the terms of this
Agreement, any funds are applied to the payment of any part of the principal
amount of the Obligations of either Borrower prior to the maturity thereof, then
(a) any interest which would otherwise thereafter accrue on the principal amount
so paid by such application shall be canceled, and (b) the Obligations of either
Borrower remaining unpaid after such application shall be credited with the
amount of all interest, if any, theretofore collected on the principal amount so
paid by such application and remaining unearned at the date of said application;
and if the funds so applied shall be sufficient to pay in full all the
Obligations of such Borrower, then the Lenders shall refund to such Borrower all
interest theretofore paid thereon in advance and remaining unearned at the time
of such acceleration. Regardless of any other provision in this Agreement or any
other Credit Document, neither Borrower shall be required to pay any unearned
interest on any Obligations or any portion thereof, or be required to pay
interest thereon at a rate in excess of the highest lawful rate construed by
courts having competent jurisdiction thereof.

        8.15. Effect. On the Closing Date and upon the repayment in full of all
existing monetary obligations outstanding under the Existing FIUI Credit
Agreement, (a) the Existing FIUI Credit Agreement as well as the Existing FIUI
Credit Documents shall be terminated and deemed to have been replaced by this
Agreement and the other Credit Documents; and (b) all Liens created pursuant to
the Existing FIUI Credit Agreement and the other FIUI Credit Documents shall
terminate and be released; provided, however, that nothing contained herein
shall have any effect on Borrower's obligations to pay amounts (if any) payable
under Subparagraph 2.10(c), Subparagraph 2.10(d), Subparagraph 2.11(a),
Paragraph 2.12, Paragraph 8.02, or Paragraph 8.03 of the Existing FIUI Credit
Agreement which by their terms expressly provide that they shall survive the
payment and performance of the Obligations and the termination of the Existing
FIUI Credit Agreement. Agent (as agent under the Existing FIUI

                                       53
<PAGE>   58
Credit Agreement), from time to time, upon request by Borrower shall, without
further consideration other than reimbursement for any costs and expenses,
execute, deliver and acknowledge all such documents, agreements, certificates
and instruments and do such acts as Borrower may reasonably require to more
effectively evidence or effectuate the termination of such Liens.

                       [The first signature page follows.]

                                       54
<PAGE>   59

        IN WITNESS WHEREOF, Borrowers, Agent, Documentation Agent, Managing
Agents, Co-Agent and Lenders have caused this Agreement to be executed as of the
day and year first above written.

BORROWERS:                             FLEXTRONICS INTERNATIONAL U.S.A., INC.

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       THE DII GROUP, INC.

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

AGENT:                                 ABN AMRO BANK N.V.,
                                       As Agent

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                      S-1
<PAGE>   60
DOCUMENTATION AGENT:                FLEET NATIONAL BANK,
                                    As Documentation Agent

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

MANAGING AGENTS:                       BANK OF AMERICA, NATIONAL ASSOCIATION,
                                       As a Managing Agent

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       CITICORP USA, INC.,
                                       As a Managing Agent

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                      S-2

<PAGE>   61

CO-AGENT AND LENDERS:               ABN AMRO BANK N.V.,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    FLEET NATIONAL BANK,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    BANK OF AMERICA, NATIONAL ASSOCIATION,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    CITICORP USA, INC.,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                      S-3

<PAGE>   62
                           THE BANK OF NOVA SCOTIA,
                           As a Co-Agent and a Lender

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE INC.,
                           As a Lender

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           BANQUE NATIONALE DE PARIS,
                           As a Lender

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           DEN DANKSE BANK AKTIESELSKAB,
                           As a Lender

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                           By:
                              -----------------------------------------
                              Name:
                                   ------------------------------------
                              Title:
                                    -----------------------------------

                                      S-4

<PAGE>   63

                                    THE FUJI BANK, LIMITED, LOS ANGELES AGENCY,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    THE INDUSTRIAL BANK OF JAPAN, LIMITED,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    THE SUMITOMO BANK, LIMITED,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    WELLS FARGO BANK, N.A.,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                      S-5

<PAGE>   64

                                    THE DAI-ICHI KANGYO BANK, LTD.,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    ALLIED IRISH BANK,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    BANCA DI ROMA S.P.A. - SINGAPORE BRANCH,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    BANK HAPOALIM, B.M.,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                      S-6

<PAGE>   65

                                    COMERICA BANK,
                                    As a Lender

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                      S-7

<PAGE>   66

                                   SCHEDULE II

                                  PRICING GRID

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                             APPLICABLE
                               MARGIN       APPLICABLE
    FIL'S                       FOR         MARGIN FOR
    DEBT/        PRICING     BASE RATE         LIBOR        FACILITY A      FACILITY B
    EBITDA       PERIOD    BORROWINGS AND BORROWINGS AND  COMMITMENT FEE  COMMITMENT FEE
    RATIO        LEVEL        PORTIONS    LIBOR PORTIONS    PERCENTAGE      PERCENTAGE
------------------------------------------------------------------------------------------
<S>              <C>       <C>            <C>              <C>           <C>
    <1.00           1            0%           0.625%          0.175%          0.150%
    -

    >1.00,
    <1.50           2            0%           0.750%          0.175%          0.150%
    -

    >1.50,
    <2.00           3            0%           0.875%          0.200%          0.175%
    -

    >2.00,
    <2.50           4            0%           1.000%          0.225%          0.200%
    -

    >2.50,
    <3.00           5            0%           1.250%          0.300%          0.250%
    -

    >3.00           6            0%           1.750%          0.375%          0.300%
------------------------------------------------------------------------------------------
</TABLE>

                                   EXPLANATION

1.      The Applicable Margin For Base Rate Borrowings, Base Rate Portions,
        LIBOR Borrowings, LIBOR Portions, the Facility A Commitment Fee
        Percentage and the Facility B Commitment Fee Percentage will be set for
        each Pricing Period and will vary depending upon whether such period is
        a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period,
        a Level 5 Period or a Level 6 Period (each a "Pricing Period Level").
        The applicable Pricing Period Level will be determined based on FIL's
        corresponding Debt/EBITDA Ratio for the immediately preceding
        consecutive four-quarter period.

2.      The first Pricing Period, which commences on the date of this Agreement
        and ends 45 days after the quarter ended June 30, 2000, will be a Level
        4 Period.

3.      The second Pricing Period, which commences 45 days after the end of June
        30, 2000 calendar quarter and ends 45 days after the quarter ended
        September 30, 2000, will be a Level 1 Period, a Level 2 Period, a Level
        3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period,
        depending upon FIL's Debt/EBITDA Ratio for the consecutive four-quarter
        period ending on June 30, 2000.

4.      Each Pricing Period thereafter will commence 45 days after the end of
        the immediately preceding quarter and will end 45 days after the end of
        the next applicable quarter and will be a Level 1 Period, a Level 2
        Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level
        6 Period depending upon FIL's Debt/EBITDA Ratio for the consecutive
        four-quarter period ending on the last day of the immediately preceding
        quarter.

5.      Level 2 pricing will apply during any Pricing Period (other than the
        first Pricing Period) in which FIL's senior unsecured long-term debt
        rating from S&P or Moody's is equal to or better than either BBB- or
        Baa3. Such pricing adjustment (if any) occurring as a result of such
        debt rating will take place when FIL notifies Agent that such debt
        rating has been achieved, and will continue until such debt rating drops
        below BBB- or Baa3 in which case the pricing will be calculated as set
        forth above.

                                      II-1
<PAGE>   67

6.      Examples:

               (a) FIL's Debt/EBITDA Ratio is 1.76 for the consecutive
        four-quarter period ending on June 30, 2000, and FIL's senior unsecured
        long-term debt rating from S&P or Moody's is less than either BBB- of
        Baa3. The Pricing Period commencing 45 days after the quarter ended June
        30, 2000 through the date which is 45 days after the quarter ended
        September 30, 2000 will be a Level 3 Period, and the Applicable Margin
        for LIBOR Borrowings and the LIBOR Portions during such Pricing Period
        will be 0.875%.

               (b) FIL's Debt/EBITDA Ratio is 2.10 for the consecutive
        four-quarter period ending on September 30, 2000, and FIL's senior
        unsecured long-term debt rating from S&P or Moody's is less than either
        BBB- of Baa3. The Pricing Period commencing 45 days after the quarter
        ended September 30, 2000 through the date which is 45 days after the
        quarter ended December 31, 2000 will be a Level 4 Period, and the
        Applicable Margin for LIBOR Borrowings and the LIBOR Portions during
        such Pricing Period will be 1.000%.

               (c) FIL's senior unsecured long-term debt rating from S&P or
        Moody's is at least equal to BBB- or Baa3. Commencing after FIL notifies
        Agent that such debt rating has been achieved, Level 2 pricing will
        apply, and the Applicable Margin for LIBOR Borrowings and the LIBOR
        Portions during such Pricing Period will be 0.7500%.

                                      II-2

<PAGE>   68

                                  SCHEDULE 3.01

                          INITIAL CONDITIONS PRECEDENT

A.      PRINCIPAL CREDIT DOCUMENTS.

               (1) The Credit Agreement, duly executed by each Borrower, each
        Lender, Agent, Documentation Agent, each Managing Agent and Co-Agent;

               (2) Such Revolving Notes as the Lenders shall request, each duly
        executed by the applicable Borrower;

               (3) The Guaranty, duly executed by FIL, each Eligible Material
        Subsidiary, Flextronics Holdings UK Limited and Flextronics Singapore
        Pte Ltd., with such changes thereto as may be appropriate based on the
        law of the applicable jurisdictions; and

               (4) Pledge Agreements of FIL and Flextronics Holdings UK Limited,
        each, duly executed by such Person, with such changes thereto as may be
        appropriate based on the laws of the applicable jurisdictions.

B.      FIUI CORPORATE DOCUMENTS.

               (1) The Certificate of Incorporation of FIUI, certified as of a
        recent date prior to the Closing Date by the Secretary of State of
        California;

               (2) A Certificate of Good Standing (or comparable certificate)
        for FIUI, certified as of a recent date prior to the Closing Date by the
        Secretary of State of California;

               (3) A certificate of the Secretary or an Assistant Secretary of
        FIUI, dated the Closing Date, certifying (a) that attached thereto is a
        true and correct copy of the Bylaws of FIUI as in effect on the Closing
        Date; (b) that attached thereto are true and correct copies of
        resolutions duly adopted by the Board of Directors of FIUI and
        continuing in effect, which (i) authorize the execution, delivery and
        performance by FIUI of this Agreement and the other Credit Documents
        executed or to be executed by FIUI and the consummation of the
        transactions contemplated hereby and thereby and (ii) designate the
        officers authorized so to execute, deliver and perform on behalf of
        FIUI; and (c) that there are no proceedings for the dissolution or
        liquidation of FIUI; and

               (4) A certificate of the Secretary or an Assistant Secretary of
        FIUI, dated the Closing Date, certifying the incumbency, signatures and
        authority of the officers of FIUI authorized to execute, deliver and
        perform this Agreement, the other Credit Documents and all other
        documents, instruments or agreements related thereto executed or to be
        executed by FIUI.

C.      DII CORPORATE DOCUMENTS.

               (1) The Certificate of Incorporation of DII, certified as of a
        recent date prior to the Closing Date by the Secretary of State of
        Delaware;

               (2) A Certificate of Good Standing (or comparable certificate)
        for DII, certified as of a recent date prior to the Closing Date by the
        Secretary of State of Delaware;

               (3) A certificate of the Secretary or an Assistant Secretary of
        DII, dated the Closing Date, certifying (a) that attached thereto is a
        true and correct copy of the Bylaws of DII as in effect on the Closing
        Date; (b) that attached thereto are true and correct copies of
        resolutions duly adopted by the Board of Directors of DII and continuing
        in effect, which (i) authorize the execution, delivery and performance
        by DII of this Agreement and the other Credit Documents executed or to
        be executed by DII and the

                                     3.01-1
<PAGE>   69

        consummation of the transactions contemplated hereby and thereby and
        (ii) designate the officers authorized so to execute, deliver and
        perform on behalf of DII; and (c) that there are no proceedings for the
        dissolution or liquidation of DII; and

               (4) A certificate of the Secretary or an Assistant Secretary of
        DII, dated the Closing Date, certifying the incumbency, signatures and
        authority of the officers of DII authorized to execute, deliver and
        perform this Agreement, the other Credit Documents and all other
        documents, instruments or agreements related thereto executed or to be
        executed by DII.

D.      OTHER MATERIAL SUBSIDIARY CORPORATE DOCUMENTS.

               (1) The Certificate of Incorporation (or comparable certificate)
        of each Eligible Material Subsidiary, any Subsidiary executing a Pledge
        Agreement or the Guaranty, and any Subsidiary whose shares are being
        pledged pursuant to a Pledge Agreement, certified as of a recent date
        prior to the Closing Date by the Secretary of State (or comparable
        public official) of its jurisdiction of incorporation (or, if any such
        Subsidiary is organized under the laws of any jurisdiction outside the
        United States, such other evidence as Agent may request to establish
        that such Person is duly organized and existing under the laws of such
        jurisdiction), together with an English translation thereof (if
        appropriate);

               (2) To the extent such jurisdiction has the legal concept of a
        corporation being in good standing and a Governmental Authority in such
        jurisdiction issues any evidence of such good standing, a Certificate of
        Good Standing (or comparable certificate) for each Eligible Material
        Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty,
        and any Subsidiary whose shares are being pledged pursuant to a Pledge
        Agreement, certified as of a recent date prior to the Closing Date by
        the Secretary of State (or comparable public official) of its
        jurisdiction of incorporation (or, if any such Person is organized under
        the laws of any jurisdiction outside the United States, such other
        evidence as Agent may request to establish that such Person is duly
        qualified to do business and in good standing under the laws of such
        jurisdiction), together with an English translation thereof (if
        appropriate);

               (3) A certificate of the Secretary or an Assistant Secretary (or
        comparable officer) of each Eligible Material Subsidiary, any Subsidiary
        executing a Pledge Agreement or the Guaranty, and any Subsidiary whose
        shares are being pledged pursuant to a Pledge Agreement, dated the
        Closing Date, certifying (a) that attached thereto is a true and correct
        copy of the Bylaws of such Subsidiary as in effect on the Closing Date
        (or, if any such Subsidiary is organized under the laws of any
        jurisdiction outside the United States, any comparable document provided
        for in the respective corporate laws of that jurisdiction); (b) (except
        in the case of a Subsidiary which is not executing any Credit Documents)
        that attached thereto are true and correct copies of resolutions duly
        adopted by the Board of Directors of such Subsidiary (or other
        comparable enabling action) and continuing in effect, which (i)
        authorize the execution, delivery and performance by such Person of the
        Credit Documents to be executed by such Person and the consummation of
        the transactions contemplated thereby and (ii) designate the officers,
        directors and attorneys authorized so to execute, deliver and perform on
        behalf of such Person; and (c) that there are no proceedings for the
        dissolution or liquidation of such Person, together with a certified
        English translation thereof (if appropriate); and

               (4) A certificate of the Secretary or an Assistant Secretary (or
        comparable officer) of each Eligible Material Subsidiary and any
        Subsidiary executing a Pledge Agreement or the Guaranty, dated the
        Closing Date, certifying the incumbency, signatures and authority of the
        officers, directors and attorneys of such Person authorized to execute,
        deliver and perform the Credit Documents to be executed by such Person,
        together with a certified English translation thereof (if appropriate).

E.      FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.

               (1) A copy of the audited consolidated and consolidating
        Financial Statements of FIL and its Subsidiaries for the fiscal year
        ended March 31, 1999, audited by Arthur Andersen LLP, together with a
        copy of the unqualified opinion delivered by such accountants in
        connection with such Financial Statements;

                                     3.01-2

<PAGE>   70

               (2) A copy of the unaudited Financial Statements of FIL and its
        Subsidiaries for the fiscal quarter ended December 31, 1999 and for the
        fiscal year to such date (prepared on a consolidated and consolidating
        basis), certified by the chief financial officer, treasurer, controller
        or principal accounting officer of FIL to present fairly the financial
        condition, results of operations and other information reflected therein
        and to have been prepared in accordance with GAAP (subject to normal
        year-end audit adjustments);

               (3) A copy of the 10-K report filed by FIL with the Securities
        and Exchange Commission for the fiscal year ended March 31, 1999;

               (4) A copy of the 10-Q report filed by FIL with the Securities
        and Exchange Commission for the quarter ended December 31, 1999;

               (5) The consolidated plan and forecast of FIL and its
        Subsidiaries for the fiscal year to end March 31, 2001 (reflecting among
        other events the anticipated Borrowings under this Agreement), including
        quarterly cash flow projections and quarterly projections of FIL's
        compliance with the financial tests and ratios specified in the FIL
        Credit Agreement; and

               (6) Such other financial, business and other information
        regarding FIL, either Borrower or any of their Subsidiaries as Agent or
        any Lender may reasonably request, including information as to possible
        contingent liabilities, tax matters, environmental matters and
        obligations for employee benefits and compensation.

F.      COLLATERAL DOCUMENTS.

               (1) The stock certificates representing all of the outstanding
        capital stock of each Subsidiary pledged to Agent pursuant to a Pledge
        Agreement and existing on the Closing Date, other than subsidiaries
        whose stock is not in certificated form, together with undated stock
        powers, duly executed by the Borrower or Subsidiary that owns such
        stock, in blank and attached thereto;

               (2) Any other items required by any applicable jurisdiction;

               (3) Such other documents, instruments and agreements as Agents
        may reasonably request to establish and perfect the Liens granted to
        Agent or any Lender in this Agreement, the Security Documents and the
        other Credit Documents; and

               (4) Such other evidence as Agent may request to establish that
        the Liens granted to Agent or any Lender in this Agreement, the Security
        Documents and the other Credit Documents are perfected and prior to the
        Liens of other Persons in the Collateral, except for any such Liens
        which are expressly permitted by the Credit Agreement to be prior.

G.      OPINIONS.  Favorable written opinions from each of the following counsel
for Borrowers and their Subsidiaries, each dated the Closing Date, addressed to
Agent for the benefit of Agent and Lenders, covering such legal matters as Agent
may reasonably request and otherwise in form and substance satisfactory to
Agent:

               (1)    Fenwick & West, counsel for FIL and its Subsidiaries;

               (2)    Bruckhaus Westrick Heller L`ber, Austrian counsel for FIL
                      and its Subsidiaries;

               (3)    Mayer, Brown & Platt, English counsel for FIL and its
                      Subsidiaries;

               (4)    Foo, Teo & Associates, Labuan counsel for FIL and its
                      Subsidiaries;

               (5)    Cuesta Campos Y Asociados, S.C., Mexican counsel for FIL
                      and its Subsidiaries;

                                     3.01-3

<PAGE>   71

               (6)    Allen & Gledhill, Singapore counsel for FIL and its
                      Subsidiaries;

               (7)    Magnusson Wahlin Advokatbyra, Swedish counsel for FIL and
                      its Subsidiaries; and

               (8)    Curtis Mallet-Prevost, US counsel for DII and its
                      Subsidiaries.

H.      OTHER ITEMS.

               (1)    A duly completed and timely delivered Notice of Borrowing
                      for the applicable Borrowing;

               (2)    Copies of the acquisition agreement or similar agreement
                      entered into in connection with the DII Acquisition, duly
                      executed by FIL and DII, together with all exhibits and
                      schedules thereto;

               (3)    Evidence satisfactory to Agent and the Lenders that the
                      DII Acquisition has been effected in accordance with all
                      applicable Governmental Rules;

               (4)    Copies of such other documents, instruments and agreements
                      executed by FII, DII or any other Person in connection
                      with the DII Acquisition as Agent or any Lender may
                      reasonably request;

               (5)    An organization chart for FIL, FIUI, DII and their
                      Subsidiaries, setting forth the relationship among such
                      Persons, certified by the Secretary or an Assistant
                      Secretary of FIL;

               (6)    Evidence of the amounts owing to the lenders and agent
                      under the Existing FIUI Credit Agreement on the Closing
                      Date and instructions for the payment of such amounts;

               (7)    Evidence of the amounts owing on the Closing Date to the
                      lenders and agent under any existing credit or loan
                      agreement or similar financing agreement of DII and
                      instructions for the payment of such amounts;

               (8)    A certificate of the Chief Financial Officer of each
                      Borrower, addressed to Agent and dated the Closing Date,
                      certifying that:

                      (a) The representations and warranties set forth in
               Paragraph 4.01 and in the other Credit Documents are true and
               correct in all material respects as of such date (except for such
               representations and warranties made as of a specified date, which
               shall be true as of such date); and

               (b)    No Default has occurred and is continuing as of such date;

               (9)    All fees and expenses payable to Agent and Lenders on or
                      prior to the Closing Date (including all fees payable to
                      Agent pursuant to the Agent's Fee Letter);

               (10)   All fees and expenses of Agent's counsels through the
                      Closing Date; and

               (11)   Such other evidence as Agent or any Lender may reasonably
                      request to establish the accuracy and completeness of the
                      representations and warranties and the compliance with the
                      terms and conditions contained in this Agreement and the
                      other Credit Documents.

                                     3.01-4

<PAGE>   72

                                SCHEDULE 4.01(o)

                                  SUBSIDIARIES

A.      PRIOR TO THE CLOSING OF THE DII ACQUISITION:

<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>
FLEXTRONICS               Singapore
INTERNATIONAL SINGAPORE
PTE. LTD.

FLEXTRONICS SINGAPORE     Singapore        No       6,700,000 auth @     100%     Flextronics
PTE. LTD.                                              S$1/share                  International
36 Robinson Road                                        4,600,000                    Ltd.
#18-01 City House                                   issued + paid up
Singapore 068877

FLEXTRONICS (MALAYSIA)     Malaysia        No          RM4,025,400       100%     Flextronics
SDN. BHD.                                              authorized                  Singapore
7th Floor, Wisma                                       RM2,725,000                 Pte. Ltd.
Hamzah-Kwong Hing                                        paid up
No 1, Leboh Ampang
50100 KL, Malaysia

DTM LATIN AMERICA (L),      Labuan         No            10,000          100%     Flextronics
LTD.                                                 shares $10,000               International
Level 10, Wisma                                            $2                        Ltd.
Oceanic, Jalan OKK                                       paid up
Awang Besar
87007 Labuan F.T.
Malaysia

FLEXTRONICS                 Labuan         Yes           10,000          100%     Flextronics
INTERNATIONAL MARKETING                                shares 10000               International
(L) LTD.                                                authorized                   Ltd.
Level 10, Wisma Oceanic,                                 $10,000
Jalan OKK Awang Besar                                    paid up
87007 Labuan F.T.
Malaysia

FLEXTRONICS                 Labuan         Yes           10,000          100%     Flextronics
INTERNATIONAL LATIN                                  shares $10,000               International
AMERICA (L), LTD.                                          $2                        Ltd.
Level 10, Wisma Oceanic,                                 paid up
Jalan OKK Awang Besar
87007 Labuan F.T.
Malaysia

ASTRON TECHNOLOGIES LTD.  Mauritius        No             US$1M          100%     Flextronics
6th Floor, Li Wan Po                                  auth'd US$100K              International
House                                                    paid up                     Ltd.
12 Remy Ollier Street
Port Lois, Mauritius

FLEXTRONICS               Hong Kong        No          HK4,000,000       100%     Flextronics
MANUFACTURING (HK) LTD.                                authorized                 International
Unit B, 11/F., Block A,                                   HK2                        Ltd.
Wo                                                       paid up
Kee Hong Building,
585-609
Castle Peak Road, Kwai
Chung,
New Territories, Hong
Kong
</TABLE>

                                     4.01-1

<PAGE>   73

<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>           <C>              <C>         <C>
FLEXTRONICS INDUSTRIAL       PRC           Yes        US$3,500,000       100%     Flextronics
(SHENZHEN) CO., LTD.                                   authorized                  Singapore
Blk C9, 2nd Industrial                                US$3,500,000                 Pte. Ltd.
Zone                                                     paid up
Xixiang, Shenzhen
People's Republic of
China

FLEXTRONICS COMPUTER         PRC           No         US$1,200,000       100%     Flextronics
(SHEKOU) LTD.                                          authorized                  Singapore
5/F. Nanshan Building                                 US$1,200,000                 Pte. Ltd.
Shekou Industrial Zone                                   paid up
Industrial 8 Road
Shenzhen. Guangdong,
China

ZHUHAI DAO MEN CHAO YI       PRC           No        RMB100,000,000    96.25%     Flextronics
ELECTRONICS CO., LTD.                                    auth'd                   Manufacturing
Sam Chow Industrial City                             RMB100,000,000                (HK) Ltd.
Jin An Town, Doumen,                                     paid up
Zhuhai
People's Republic of
China

ASTRON GROUP LTD.         Hong Kong        No          HK6,750,292     99.90%     Flextronics
6th Floor, Hole Weal                                   authorized                 Manufacturing
Ind. Bldg.                                             HK6,750,292                 (HK) Ltd.
22-28 Tai Chung Road                                     paid up
Tsuen Wan,
New Territories,
Hong Kong

FICO INVESTMENT HOLDING   Hong Kong        No           HK10,000          90%     Flextronics
LTD. HOLDING LTD.                                      authorized                 International
Rm 10, 18/F, Blk B                                      HK10,000                     Ltd.
Kong Nam Ind. Bldg.                                      paid up
603 Castle Peak Road
Tsuen Wan, New
Territories,
Hong Kong

FOREST KEYBOARD              PRC           No         HK 55 million      100%        FICO
MANUFACTURING                                         authorized HK               Investment
(SHENZHEN) LTD.                                     42,981,525 issued               Holding
Gong Ming Zhen                                                                       Ltd.
Chang Zhen Village
Industrial Zone
PRC

EUROPE

FLEXTRONICS                 Sweden         Yes        10,000,000 kr      100%        F.L.
INTERNATIONAL SWEDEN AB                                                           Tronics AB
Box 532
371 23 Karlskrona
Sweden

FLEXTRONICS GROUP           Sweden         No          100,000 kr        100%     Flextronics
SWEDEN AB                                                                          Holdings
Box 532                                                                             UK Ltd.
371 23 Karlskrona
Sweden
</TABLE>
                                     4.01-2

<PAGE>   74
<TABLE>
<CAPTION>
                        JURISDICTION                   ISSUED AND                   DIRECT
                             OF         MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY       ORGANIZATION   SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------        ------------   ----------     -------------   ----------  ----------
<S>                     <C>            <C>            <C>              <C>         <C>
FLEXTRONICS LIMITED        Scotland        No       Authorized 250,000   100%        FIUK
4 Livingstone Boulevard                               ordy shares @
Hamilton International                                   GBPound
Technology Park                                         Sterling1
Blantyre                                              Issued 60,000
Scotland G72 0BP                                      ordy shares @
                                                    GBPound Sterling1

FLEXTRONICS                England         No       Authorized 190,476   100%     Flextronics
INTERNATIONAL (UK) LTD.                               ordy shares @               International
4 Livingstone Boulevard                                  GBPound                     Ltd.
Hamilton International                                   Sterling1
Technology Park                                       Issued 186,588
Blantyre                                              ordy shares @
Scotland G72 0BP                                    GBPound Sterling1

FLEXTRONICS HOLDINGS       England         No       Authorized 500,000   100%     Flextronics
(UK) LTD.                                             ordy shares @               International
50 Stratton Street                                       GBPound                     Ltd.
London                                                  Sterling1
W1X 6NX                                               Issued 1,000
                                                      ordy shares @
                                                    GBPound Sterling1

FLEXTRONICS KFT            Hungary         No            $15,000         100%     FLX Cyprus
HU 9600, Sarvar                                                                      Ltd.
Ikervari ut 42
Hungary

FLEXTRONICS                Austria         No              ATS            92%     Flextronics
INTERNATIONAL GMBH                                   160,000,000.00               International
Wienerbergstrasse 7                                                                  Ltd.
1810 Vienna, Austria
FLEXTRONICS                Austria         No       ATS 25,000,000.00    100%     Flextronics

INTERNATIONAL GMBH                                                                International
Friesacher Strasse 3                                                                 GmbH
9330 Althofen, Austria
FLEXTRONICS                Hungary         Yes             HUF           100%     Flextronics

INTERNATIONAL KFT.                                   539,000,000.00               International
8660 Tab                                                                             GmbH
Munkas U. 28, Hungary
NEUTRONICS ECOPLAST        Hungary         No              HUF           100%     Flextronics

MUANYAGIPARI TERMEKEKET                              727,290,000.00               International
GYARTO KFT.                                                                          GmbH
9600  Sarvar
Ikervari u. 42, Hungary

NEUTRONICS COMPONENTS      Hungary         No        ATS 600,000.00      100%     Flextronics
ELEKTRONIKAI                                                                      International
ALKATRESZGYARTO                                                                      GmbH
VAMSZABADTERULETI KFT.
9600 Sarvar
Ikervari u. 42, Hungary

MECHA DESIGN S.R.L.         Italy          No              Lit            55%     Flextronics
Via G&A, Philips 12                                  160,000,000.00               International
20052 Monza, Italy                                                                   GmbH
</TABLE>

                                     4.01-3
<PAGE>   75
<TABLE>
<CAPTION>

                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
      SUBSIDIARY         ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>          <C>                <C>        <C>

FLEXTRONICS               Netherlands       No                            100%      Flextronics
INTERNATIONAL                                                                      International
EUROPE, B.V.                                                                           Ltd.
Koningslaan 34,
P.O.Box 74658,
1070 BR Amsterdam, the
Netherlands

FLX CYPRUS LTD. LTD.        Cyprus         No        auth'd: CYP       100% held    Flextronics
c/o Chrysanthou &                                   10,000 iss'd/     in trust by  International
Christoforou                                          paid up:         2 locals:       Ltd.
Corner Th. Dervis -                                  CYP 1,000         Christo-
Florinis Street                                                       fourou and
6th Floor                                                             Chrysanthou
P. O. Box 1675, CY-1512
Nicosia, Cyprus  1066

FLEXTRONICS                Finland         Yes        2000 shares,       100%        FHFin
INTERNATIONAL                                         506,000 Euros
FINDLAND OY
Patentti- ja
Reekisterihallitus
PRH/2 rekisteritoimisto
Arkadiankatu 6 A
00100 Helsinki, Finland

FLEXTRONICS                 France         No                             96%     Kyrel EMS Oyj
INTERNATIONAL FRANCE SA
2 rue Lavoisier
Z.I.Moncel-Les-Luneville
54 300 LUNEVILLE

FLEXTRONICS HOLDING        Finland         No          EURO 8,000        100%      F.L.Tronics
FINLAND OY                                                                         Holding AB
PO Box 23
FIN-39201 Kyroskoski
Finland

FLEXTRONICS                 Norway         No         100 shares @       100%        F.L.
INTERNATIONAL NORWAY AS                                 1,000 NOK                   Tronics
Televeien 1                                                                       Holding AB
4879 Grimstad, Norway

HTR TAB                    Hungary         No                            100%      Neutronics
8660 Tab                                                                              HTR
Munkas U. 28, Hungary                                                              Technikai
                                                                                  Rendszerszolg
                                                                                   altato Kft

HTR ZALA                   Hungary         No                            100%     Neutronics
8660 Tab                                                                              HTR
Munkas U. 28, Hungary                                                              Technikai
                                                                                  Rendszerszolg
                                                                                   altato Kft

HTR REAL ESTATE            Hungary         No                            100%     Neutronics
8660 Tab                                                                              HTR
Munkas U. 28, Hungary                                                              Technikai
                                                                                  Rendszerszolg
                                                                                   altato Kft

KOSKITUONTI OY             Finland         No                            100%     Kyrel EMS Oyj
Patentti- ja
Reekisterihallitus
PRH/2 rekisteritoimisto
Arkadiankatu 6 A
00100 Helsinki, Finland
</TABLE>
                                     4.01-4

<PAGE>   76
<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>

ALFATEL OH                 Finland         No                            100%      Kyrel EMS Oyj
Patentti- ja
Reekisterihallitus
PRH/2 rekisteritoimisto

Arkadiankatu 6 A
00100 Helsinki, Finland

KOSTRON OY                 Finland         No                            100%      Kyrel EMS
Patentti- ja                                                                          Oyj
Reekisterihallitus
PRH/2 rekisteritoimisto
Arkadiankatu 6 A
00100 Helsinki, Finland

IGROTTA AB                  Sweden         No                            100%     Flextronics
Box 532                                                                           International
371 23 Karlskrona                                                                  Sweden AB
Sweden

MOCTOL AB                   Sweden         No                            100%     Igrotta AB
Box 532
371 23 Karlskrona
Sweden

NOITALL AB                  Sweden         No                            100%     Igrotta AB
Box 532
371 23 Karlskrona
Sweden

TOLIPIG AB                  Sweden         No                            100%     Igrotta AB
Box 532
371 23 Karlskrona
Sweden

MARATHON BUSINESS PARK       USA           No                            100%     Flextronics
LLC                                                                               International
47951 Westinghouse Drive                                                            USA, Inc.
Fremont, CA 94539

MEXICO, BRASIL, OTHERS

FLEXTRONICS                 Mexico         Yes        $50,000 Fixed     99.90%    Flextronics
MANUFACTURING MEX, SA                                    Capital                  International
DE CV                                                                                Ltd.
Carretara Base Aerea
Militar
5850
Zapopan, Jalisco 45100
Mexico

DTM PRODUCTS DE MEXICO,     Mexico         No                           99.90%    Flextronics
S.A. DE C.V.                                                                      International
Carretara Base Aerea                                                                 Ltd.
Militar 5850
Zapopan, Jalisco 45100
Mxico
</TABLE>

                                     4.01-5

<PAGE>   77
<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>
                            Mexico         No         $50,000 Fixed       99%     Flextronics
                                                         Capital                  International
PARQUE DE TECNOLOGIA                                                                 Ltd.
ELECTRONICA, S.A. DE
C.V.
Carretara Base Aerea
Militar
5850
Zapopan, Jalisco 45100
Mexico

FLEXTRONICS                 Brazil         No                            100%     Flextronics
INTERNATIONAL                                                                     International
TECNOLOGIA LTDA                                                                      Ltd.
Al. Jurua, 548
Alphaville, Barueri
Sao Paulo, Brazil
06454-070

FLEXTRONICS DO BRASIL       Brazil         No                          99.90%         FIT
SERVICOS, LTDA
Av. das Nacoes Unidas,
12995, 18o. andar,
sala F, Sao Paulo,
Brazil, 04578-000

FLEXTRONICS                 Brazil         No           US 30,000        100%     Flextronics
INTERNATIONAL                                          authorized                 International
INDUSTRIAL, LTDA                                                                     Ltd.
FLEXTRONICS              Netherlands
INTERNATIONAL N.V.         Antilles
Landhuis Joonchi
Kaya Richard J. Beaujon
z/n
P.O. Box 837
Curacao, Netherlands
Antilles

UNITED STATES

FLEXTRONICS               California       Yes         999 shares        100%     Flextronics
INTERNATIONAL USA, INC.                                                           International
2090 Fortune Drive                                                                   Ltd.
San Jose, CA 95131
FLEXTRONICS               California       Yes                           100%     Flextronics
INTERNATIONAL             - 1500186                                               International
FREMONT, INC.                                                                      USA Inc.
47951 Westinghouse
  Drive
Fremont, CA 94539

FLEXTRONICS              California,       No                            100%     Flextronics
DISTRIBUTION, INC.           USA                                                  International
2241 Lundy Avenue                                                                    (USA)
San Jose, CA 95131                                                                 (FIUI-CA)

DTM PRODUCTS, INC.        Colorado,        No       1,000,000 Common     100%     Flextronics
6268 Monarch Park Place,     USA                      Stock$10,000                International
Niwot, CO  80503                                                                      USA
</TABLE>
                                     4.01-6

<PAGE>   78
<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>

PROACTIVE CORPORATION      Florida         No                            100%     Flextronics
6421 Congress Ave.,                                                               International
Suite 114                                                                           Technologia, Ltda.

PLEASE CONFIRM:
QCOM SP. ZO. O.             Poland                     PLN 780,000       100%     Flextronics
                                                                                  International
ul.Rzeznicka 54/56                                                                  Taby AB

PL-80-822 Gdansk

Poland
QCOM AB                     Sweden                   141,943 shares      100%        F.L.
                                                                                    Tronics
Gribbylundsvagen 15                                   (total of SEK               Holdings AB
                                                       1,419,430)
Box 7314

SE-187 14 Taby, Sweden
QCOM FINANS AB              Sweden                     100 shares        100%     Flextronics
                                                                                  International
Gribbylundsvagen 15                                   (SEK 100,000)                 Taby AB

Box 7314

SE-187 14 Taby, Sweden
FLEXTRONICS                 Poland                  40 shares at PLN     100%        F.L.
INTERNATIONAL POLAND                                    100 each                    Tronics
SP. ZO. O.                                                                        Holdings AB

Tczew

Poland
VASTBRIGHT

CABLETRON

FLEXTRONICS
INTERNATIONAL IRELAND

FLEXTRONICS
INTERNATIONAL NEW

HAMPSHIRE
FLEXTRONICS

INTERNATIONAL HOLLAND BV
FLEXTRONICS HOLDING

GERMANY GMBH
FLEXTRONICS HOLDING

GERMANY AND CO K.G.
FLEXTRONICS

INTERNATIONAL DENMARK
APS
FLEISCHER-TRADING,
SERVICOS E

CONSULTADORIA LDA
FLEXTRONICS HOLDING GmBH
</TABLE>

                                     4.01-7

<PAGE>   79
<TABLE>
<CAPTION>
                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
      SUBSIDIARY         ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>

FLEXTRONICS TECHNOLOGY
GmBH

IN USA:
CBA
SUMMIT
EMC
</TABLE>

                                     4.01-8
<PAGE>   80

B.  After the Closing of the DII Acquisition:

To be completed by FII within 30 days of the Closing Date

<TABLE>
<CAPTION>

                         JURISDICTION                  ISSUED AND                   DIRECT
                            OF          MATERIAL       OUTSTANDING    PERCENTAGE   OWNER OF
       SUBSIDIARY        ORGANIZATION  SUBSIDIARY     SHARE CAPITAL    OWNERSHIP    SHARES
      ----------         ------------  ----------     -------------   ----------  ----------
<S>                      <C>           <C>            <C>              <C>         <C>
</TABLE>

                                     4.01-9

<PAGE>   81

                                    EXHIBIT A

                       NOTICE OF REVOLVING LOAN BORROWING

                                     [Date]

ABN AMRO Bank N.V.
   as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY  10019
U.S.A.
Attn:  Linda Boardman

        1. Reference is made to that certain Credit Agreement, dated as of April
3, 2000 (the "Credit Agreement"), among Flextronics International USA, Inc. and
The DII Group, Inc. (each a "Borrower" and collectively the "Borrowers"), the
financial institutions listed in Schedule I to the Credit Agreement (the
"Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity,
"Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.

        2. Pursuant to Subparagraph 2.02(a) of the Credit Agreement, the
undersigned Borrower hereby irrevocably requests a Revolving Loan Borrowing to
be made upon the following terms:

               (a)    The requested Borrowing is to be under Facility [__];

               (b)    The principal amount of such Borrowing are to be
                      __________;

               (c)    Such Borrowing is to consist of [Base Rate] [LIBOR] Loans;

               (d)    If such Borrowing is to consist of LIBOR Loans, the
                      initial Interest Period for such Borrowing is to be
                      __________ month[s]; and

               (e)    The date of such Borrowing is to be __________, ____.

        3. The undersigned Borrower hereby certifies to Lenders and Agent that,
on the date of this Notice of Revolving Loan Borrowing and after giving effect
to the requested Revolving Loan Borrowing:

               (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true as of such
        date); and

               (b)    No Default has occurred and is continuing.

        4.     Please disburse the proceeds of the requested Revolving Loan
               Borrowing to___________________________________________________
               _______________________________________________________________.

                                      A-1

<PAGE>   82

        IN WITNESS WHEREOF, the undersigned Borrower has executed this Notice of
Revolving Loan Borrowing on the date set forth above.

                                            [_________________________________]

                                            By:
                                               --------------------------------
                                               Name:
                                                    ----------------------------
                                                Title:
                                                      --------------------------

                                      A-2

<PAGE>   83

                                    EXHIBIT B

                          NOTICE OF TERM LOAN BORROWING

                                     [Date]

ABN AMRO Bank N.V.
  as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY  10019
U.S.A.
Attn:  Linda Boardman

        1. Reference is made to that certain Credit Agreement, dated as of April
3, 2000 (the "Credit Agreement"), among Flextronics International USA, Inc. and
The DII Group, Inc. (each a "Borrower" and collectively the "Borrowers"), the
financial institutions listed in Schedule I to the Credit Agreement (the
"Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity,
"Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.

        2. Pursuant to Subparagraph 2.01(b) of the Credit Agreement, the
undersigned Borrower[s] hereby irrevocably request[s] [a] Term Loan Borrowing[s]
to be made on the Facility B Revolving Loan Maturity Date upon the following
terms:

               (a) The principal amount of such Borrowing is to be $__________;
        and

               (b) Such Borrowing is to consist initially of the following
        Portion[s] [specify for each Portion the initial amount and Type and for
        each LIBOR Portion the initial Interest Period]:
<TABLE>
<CAPTION>
                        Portion                Portion              Interest
                         Amount                  Type                Period
                        -------                --------            -----------
<S>                    <C>                    <C>                  <C>
                       $________              __________           __ month[s]
                       $________              __________           __ month[s]
                       $________              __________           __ month[s]
                       $________              __________           __ month[s]

</TABLE>

        3. The undersigned Borrower[s] hereby certif[ies][y] to Lenders and
Agent that, on the date of this Notice of Term Loan Borrowing and after giving
effect to the requested Term Loan Borrowing:

               (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true as of such
        date); and

               (b)    No Default has occurred and is continuing.

        4. Please disburse the proceeds of the requested Term Loan Borrowing
first to Lenders in such amounts as may be necessary to repay the principal
amount of all Revolving Loans outstanding on the Facility B Revolving Loan
Maturity Date and the balance, if any, to______________________________________
______________________________________________________________________________.

                                      B-1

<PAGE>   84

        IN WITNESS WHEREOF, the undersigned Borrower[s] [has][have] executed
this Notice of Term Loan Borrowing on the date set forth above.

                                            [_________________________________]

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                      B-2

<PAGE>   85

                                  EXHIBIT C(1)

                               REVOLVING LOAN NOTE

______________, ________                                        April __, 2000

        FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay
to the order of ____________________, a ____________________ ("Lender"), the
aggregate outstanding principal balance of all Revolving Loans made by Lender to
Borrower pursuant to the Credit Agreement referred to below (as amended from
time to time, the "Credit Agreement"), on or before the Facility [A] [B]
Revolving Loan Maturity Date specified in the Credit Agreement; and to pay
interest on said sum, or such lesser amount, at the rates and on the dates
provided in the Credit Agreement.

        Borrower shall make all payments hereunder, for the account of Lender's
Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in
Dollars as required by the Credit Agreement and in same day or immediately
available funds.

        Borrower hereby authorizes Lender to record on the schedule(s) annexed
to this note the date and amount of each Revolving Loan, the Facility pursuant
to which made, and the date and amount of each payment or prepayment of
principal made by Borrower and agrees that all such notations shall constitute
prima facie evidence of the matters noted; provided, however, that the failure
of Lender to make any such notation shall not affect Borrower's obligations
hereunder.

        This note is one of the Revolving Loan Notes referred to in the Credit
Agreement, dated as of April 3, 2000, among Borrower, [FIUI] [DII], Lender and
the other lenders from time to time parties thereto (collectively, the
"Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms
of the Credit Agreement, including the rights of prepayment and the rights of
acceleration of maturity set forth therein. Terms used herein have the meanings
assigned to those terms in the Credit Agreement, unless otherwise defined
herein.

        The transfer, sale or assignment of any rights under or interest in this
note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.

                                     C(1)-1

<PAGE>   86

        Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due. Borrower
hereby waives notice of presentment, demand, protest or notice of any other
kind. This note shall be governed by and construed in accordance with the laws
of the State of California.

                                            [_____________]

                                            By:
                                               ---------------------------------
                                                Name:
                                                     ---------------------------
                                                   Title:
                                                         -----------------------

                                     C(1)-2

<PAGE>   87

                         LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>

<S>      <C>                    <C>                     <C>
                                                           Amount of
                               Amount of                Principal Paid
         Date                     Loan                    or Prepaid
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</TABLE>

                                     C(1)-3
<PAGE>   88

                                  EXHIBIT C(2)

                                 TERM LOAN NOTE

--------------, --------                                        ----------, ----

        FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay
to the order of ____________________, a ____________________ ("Lender"), the
principal amount of the Term Loan made by Lender to Borrower pursuant to the
Credit Agreement referred to below (as amended from time to time, the "Credit
Agreement"), in a single installment on the Term Loan Maturity Date specified in
the Credit Agreement; and to pay interest on said sum at the rates and on the
dates provided in the Credit Agreement.

        Borrower shall make all payments hereunder, for the account of Lender's
Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in
Dollars as required by the Credit Agreement and in same day or immediately
available funds.

        This note is one of the Term Loan Notes referred to in the Credit
Agreement, dated as of April 3, 2000, among Borrower, [FIUI] [DII], Lender and
the other lenders from time to time parties thereto (collectively, the
"Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms
of the Credit Agreement, including the rights of prepayment and the rights of
acceleration of maturity set forth therein. Terms used herein have the meanings
assigned to those terms in the Credit Agreement, unless otherwise defined
herein.

        The transfer, sale or assignment of any rights under or interest in this
note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.

                                     C(2)-1

<PAGE>   89

        Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due. Borrower
hereby waives notice of presentment, demand, protest or notice of any other
kind. This note shall be governed by and construed in accordance with the laws
of the State of California.

                                            [_____________]

                                            By:
                                               ---------------------------------
                                                Name:
                                                     ---------------------------
                                                   Title:
                                                         -----------------------

                                     C(2)-2

<PAGE>   90

                                    EXHIBIT D

                                    GUARANTY

        THIS GUARANTY, dated as of April 3, 2000, is executed by each of the
undersigned (each such entity and each entity which hereafter executes and
delivers a Subsidiary Joinder in substantially the form of Attachment 1 hereto
to be referred to herein as a "Guarantor"), in favor of ABN AMRO BANK N.V.,
acting as agent (in such capacity, and each successor thereto in such capacity,
"Agent") for the financial institutions which are from time to time parties to
the Credit Agreement referred to in Recital A below (collectively, "Lenders").

                                    RECITALS

        A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as amended
from time to time, the "Credit Agreement"), among Flextronics International USA,
Inc. and The DII Group, Inc. (each a "Borrower" and collectively, the
"Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit
facilities to Borrowers upon the terms and subject to the conditions set forth
therein. Each Guarantor (other than FIL) is a direct or indirect Subsidiary of
FIL and expects to derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement.

        B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of (1) this Guaranty, duly executed by each existing Eligible Material
Subsidiary, and (2) Subsidiary Joinders, duly executed by each future Eligible
Material Subsidiary.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Guarantor hereby agrees with Agent, for the ratable benefit
of Lenders and Agent, as follows:

        1. DEFINITIONS AND INTERPRETATION.

               (a)Definitions. When used in this Guaranty, the following terms
        shall have the following respective meanings:

                      "Agent" shall have the meaning given to that term in the
               introductory paragraph hereof.

                      "Aggregate Guaranty Payments" shall mean, with respect to
               any Guarantor at any time, the aggregate net amount of all
               payments made by such Guarantor under this Guaranty (including,
               without limitation, under Paragraph 5 hereof) at or prior to such
               time.

                      "Alternative Currency" shall mean any currency (other than
               United States Dollars).

                       "Borrowers" shall have the meaning given to that term in
               the Recital A hereof.

                      "Credit Agreement" shall have the meaning given to that
               term in the Recital A hereof.

                      "Debtor Relief Proceeding" shall mean any suit, action,
               case or other proceeding commenced by, against or for any
               Borrower or its property seeking the dissolution, liquidation,
               reorganization, rearrangement or other relief of such Borrower or
               its debts under any applicable bankruptcy, insolvency or debtor
               relief law or other similar Governmental Rule now or hereafter in
               effect or seeking the appointment of a receiver, trustee,
               liquidator, custodian or other similar official for such Borrower
               or any substantial part of its property or any general assignment
               by any

                                       1

<PAGE>   91

                      Borrower for the benefit of its creditors, whether or not
               any such suit, action, case or other proceeding is voluntary or
               involuntary.

                      "Disallowed Post-Commencement Interest and Expenses" shall
               mean interest computed at the rate provided in the Credit
               Agreement and claims for reimbursement, costs, expenses or
               indemnities under the terms of any of the Credit Documents
               accruing or claimed at any time after the commencement of any
               Debtor Relief Proceeding, if the claim for such interest,
               reimbursement, costs, expenses or indemnities is not allowable,
               allowed or enforceable against Borrowers in such Debtor Relief
               Proceeding.

                      "Dollar Equivalent" shall mean, as to any amount
               denominated in an Alternative Currency as of any date of
               determination, the amount of Dollars that would be required to
               purchase the amount of such Alternative Currency based upon the
               spot selling rate at which ABN AMRO's London office offers to
               sell such Alternative Currency for Dollars in the London foreign
               exchange market at approximately 11:00 a.m. London time on such
               date for delivery two (2) Business Days later.

                       "Fair Share" shall mean, with respect to any Guarantor at
               any time, an amount equal to (i) a fraction, the numerator which
               is the Maximum Guaranty Amount of such Guarantor and the
               denominator of which is the aggregate Maximum Guaranty Amounts of
               all Guarantors, multiplied by (ii) the aggregate amount paid by
               all Funding Guarantors under this Guaranty at or prior to such
               time.

                      "FMM Process Agent" shall have the meaning given to that
               term in Subparagraph 6(l)(iii) hereof.

                      "Fair Share Shortfall" shall mean, with respect to any
               Guarantor at any time, the amount, if any, by which the Fair
               Share of such Guarantor at such time exceeds the Aggregate
               Guaranty Payments of such Guarantor at such time.

                      "FIL" shall have the meaning given to that term in the
               Recital A hereof.

                      "Funding Guarantor" shall have the meaning given to that
               term in Paragraph 5 hereof.

                      "Guaranteed Obligations" shall mean and include, with
               respect to any Guarantor, all loans, advances, debts,
               liabilities, and obligations, howsoever arising, owed by any
               Borrower (other than such Guarantor in its capacity as a Borrower
               if such Guarantor is a Borrower) to Agent or any Lender of every
               kind and description (whether or not evidenced by any note or
               instrument and whether or not for the payment of money)
               individual or joint and several, direct or indirect, absolute or
               contingent, due or to become due, now existing or hereafter
               arising pursuant to the terms of the Credit Documents, including
               all interest, fees, charges, expenses, attorneys' fees and
               accountants' fees chargeable to any Borrower or payable by any
               Borrower thereunder.

                      "Guarantor" shall have the meaning given to that term in
               the introductory paragraph hereof.

                      "Lenders" shall have the meaning given to that term in the
               introductory paragraph hereof.

                      "Maximum Guaranty Amount" shall mean, with respect to any
               Guarantor at any time, (i) the full amount of the Guaranteed
               Obligations at such time or (ii) if any court of competent
               jurisdiction determines in any action to enforce this Guaranty
               that enforcement against such Guarantor for the full amount of
               the Guaranteed Obligations is not lawful under or would be
               subject to avoidance under Section 548 of the United States
               Bankruptcy Code or any applicable provision of any comparable law
               of any state or other jurisdiction, then the maximum amount
               lawful and not subject to such avoidance.

                                       2

<PAGE>   92

                      "Mexican Guarantor" shall mean Flextronics Manufacturing
               Mex, S.A. de C.V. and its successors or assigns.

                      "Subordinated Obligations" shall have the meaning given to
               that term in Paragraph 4 hereof.

                      "Subsidiary Joinder" shall mean an instrument
               substantially in the form of Attachment 1 hereto.

                      "Taxes" shall have the meaning given to such term in
               Subparagraph 6(h).

        Unless otherwise defined herein, all other capitalized terms used herein
        and defined in the Credit Agreement shall have the respective meanings
        given to those terms in the Credit Agreement.

               (b) Other Interpretive Provisions. The rules of construction set
        forth in Section I of the Credit Agreement shall, to the extent not
        inconsistent with the terms of this Guaranty, apply to this Guaranty and
        are hereby incorporated by reference. Each Guarantor acknowledges
        receipt of copies of the Credit Agreement and the other Credit
        Documents.

        2. GUARANTY.

               (a) Payment Guaranty. Each Guarantor unconditionally guarantees
        and promises to pay and perform as and when due, whether at stated
        maturity, upon acceleration or otherwise, any and all of the Guaranteed
        Obligations. If any Debtor Relief Proceeding relating to any Borrower is
        commenced, each Guarantor further unconditionally guarantees and
        promises to pay and perform, upon the demand of Agent, any and all of
        the Guaranteed Obligations (including any and all Disallowed
        Post-Commencement Interest and Expenses) in accordance with the terms of
        the Credit Documents, whether or not such obligations are then due and
        payable by any Guarantor and whether or not such obligations are
        modified, reduced or discharged in such Debtor Relief Proceeding. This
        Guaranty is a guaranty of payment and not of collection.

               (b) Continuing Guaranty. This Guaranty is an irrevocable
        continuing guaranty of the Guaranteed Obligations which shall continue
        in effect until all obligations of Lenders to extend credit to all
        Borrowers have terminated and all of the Guaranteed Obligations have
        been fully paid. If any payment on any Guaranteed Obligation is set
        aside, avoided or rescinded or otherwise recovered from Agent or any
        Lender, such recovered payment shall constitute a Guaranteed Obligation
        hereunder and, if this Guaranty was previously released or terminated,
        it automatically shall be fully reinstated, as if such payment was never
        made.

               (c) Joint, Several and Independent Obligations. The liability of
        each Guarantor hereunder is joint and several and is independent of the
        Guaranteed Obligations. A separate action or actions may be brought and
        prosecuted against each Guarantor for the full amount of the Guaranteed
        Obligations irrespective of whether action is brought against any
        Borrower, any other Guarantor or any other guarantor of the Guaranteed
        Obligations or whether any Borrower, any other Guarantor or any other
        guarantor of the Guaranteed Obligations is joined in any such action or
        actions.

               (d) Fraudulent Transfer Limitation. If, in any action to enforce
        this Guaranty, any court of competent jurisdiction determines that
        enforcement against any Guarantor for the full amount of the Guaranteed
        Obligations is not lawful under or would be subject to avoidance under
        Section 548 of the United States Bankruptcy Code or any applicable
        provision of any comparable law of any state or other jurisdiction, the
        liability of such Guarantor under this Guaranty shall be limited to the
        maximum amount lawful and not subject to such avoidance.

               (e) Termination. Notwithstanding any termination of this Guaranty
        in accordance with Paragraph 3 hereof, this Guaranty shall continue to
        be in full force and effect and applicable to any Guaranteed

                                       3
<PAGE>   93

        Obligations arising thereafter which arise because prior payments of
        Guaranteed Obligations are rescinded or otherwise required to be
        surrendered by Agent or any Lender after receipt.

        3. AUTHORIZATIONS, WAIVERS, ETC.

               (a) Authorizations. Each Guarantor authorizes Agent and Lenders,
        in their discretion, without notice to such Guarantor, irrespective of
        any change in the financial condition of any Borrower, such Guarantor,
        any other Guarantor or any other guarantor of the Guaranteed Obligations
        since the date hereof, and without affecting or impairing in any way the
        liability of such Guarantor hereunder, from time to time to:

                      (i) Create new Guaranteed Obligations and renew,
               compromise, extend, accelerate or otherwise change the time for
               payment or performance of, or otherwise amend or modify the
               Credit Documents or change the terms of the Guaranteed
               Obligations or any part thereof, including increase or decrease
               of the rate of interest thereon;

                      (ii) Take and hold security for the payment or performance
               of the Guaranteed Obligations and exchange, enforce, waive or
               release any such security; apply such security and direct the
               order or manner of sale thereof; and purchase such security at
               public or private sale;

                      (iii) Otherwise exercise any right or remedy they may have
               against any Borrower, such Guarantor, any other Guarantor, any
               other guarantor of the Guaranteed Obligations or any security,
               including, without limitation, the right to foreclose upon any
               such security by judicial or nonjudicial sale;

                      (iv) Settle, compromise with, release or substitute any
               one or more makers, endorsers or guarantors of the Guaranteed
               Obligations; and

                      (v) Assign the Guaranteed Obligations, this Guaranty or
               the other Credit Documents in whole or in part to the extent
               provided in the Credit Agreement and the other Credit Documents.

               (b) Waivers.  Each Guarantor hereby waives:

                      (i) Any right to require Agent or any Lender to (A)
               proceed against any Borrower, any other Guarantor or any other
               guarantor of the Guaranteed Obligations, (B) proceed against or
               exhaust any security received from any Borrower, such Guarantor,
               any other Guarantor or any other guarantor of the Guaranteed
               Obligations or otherwise marshal the assets of any Borrower, such
               Guarantor, any other Guarantor or any other guarantor of the
               Guaranteed Obligations or (C) pursue any other remedy in Agent's
               or any Lender's power whatsoever;

                      (ii) Any defense arising by reason of the application by
               any Borrower of the proceeds of any borrowing;

                      (iii) Any defense resulting from the absence, impairment
               or loss of any right of reimbursement, subrogation, contribution
               or other right or remedy of Guarantor against any Borrower, any
               other Guarantor, any other guarantor of the Guaranteed
               Obligations or any security, whether resulting from an election
               by Agent or any Lender to foreclose upon security by nonjudicial
               sale, or otherwise;

                      (iv) Any setoff or counterclaim of any Borrower or any
               defense which results from any disability or other defense of any
               Borrower or the cessation or stay of enforcement from any cause
               whatsoever of the liability of any Borrower (including, without
               limitation, the lack of validity or enforceability of any of the
               Credit Documents);

                                      -4-
<PAGE>   94

                      (v) Any defense based upon any law, rule or regulation
               which provides that the obligation of a surety must not be
               greater or more burdensome than the obligation of the principal;

                      (vi) Until all obligations of Agent or any Lender to
               extend credit to all Borrowers have terminated and all of the
               Guaranteed Obligations have been fully paid, any right of
               subrogation, reimbursement, indemnification or contribution and
               other similar right to enforce any remedy which Agent, Lenders or
               any other Person now has or may hereafter have against any
               Borrower on account of the Guaranteed Obligations, and any
               benefit of, and any right to participate in, any security now or
               hereafter received by Agent, any Lender or any other Person on
               account of the Guaranteed Obligations;

                      (vii) All presentments, demands for performance, notices
               of non-performance, notices delivered under the Credit Documents,
               protests, notice of dishonor, and notices of acceptance of this
               Guaranty and of the existence, creation or incurring of new or
               additional Guaranteed Obligations and notices of any public or
               private foreclosure sale;

                      (viii) The benefit of any statute of limitations to the
               extent permitted by law;

                      (ix) Any appraisement, valuation, stay, extension,
               moratorium redemption or similar law or similar rights for
               marshalling;

                      (x) Any right to be informed by Agent or any Lender of the
               financial condition of any Borrower, any other Guarantor or any
               other guarantor of the Guaranteed Obligations or any change
               therein or any other circumstances bearing upon the risk of
               nonpayment or nonperformance of the Guaranteed Obligations;

                      (xi) Until all obligations of Agent or any Lender to
               extend credit to any Borrower have terminated and all of the
               Guaranteed Obligations have been fully paid, any right to revoke
               this Guaranty;

                      (xii) Any defense arising from an election for the
               application of Section 1111(b)(2) of the United States Bankruptcy
               Code which applies to the Guaranteed Obligations;

                      (xiii) Any defense based upon any borrowing or grant of a
               security interest under Section 364 of the United States
               Bankruptcy Code; and

                      (xiv) Any right it may have to a fair value hearing to
               determine the size of a deficiency judgment following any
               foreclosure on any security for the Guaranteed Obligations.

        Without limiting the scope of any of the foregoing provisions of this
        Paragraph 3, each Guarantor hereby further waives (A) all rights and
        defenses arising out of an election of remedies by Agent or any Lender,
        even though that election of remedies, such as a nonjudicial foreclosure
        with respect to security for a Guaranteed Obligation, has destroyed such
        Guarantor's rights of subrogation and reimbursement against any Borrower
        by the operation of Section 580d of the Code of Civil Procedure or
        otherwise, (B) all rights and defenses such Guarantor may have by reason
        of protection afforded to any Borrower with respect to the Guaranteed
        Obligations pursuant to the antideficiency or other laws of California
        limiting or discharging the Guaranteed Obligations, including, without
        limitation, Section 580a, 580b, 580d, or 726 of the California Code of
        Civil Procedure, and (C) all other rights and defenses available to such
        Guarantor by reason of Sections 2787 to 2855, inclusive, Section 2899 or
        Section 3433 of the California Civil Code or Section 3605 of the
        California Commercial Code.

               (c) The Mexican Guarantor hereby expressly agrees that any rights
        or privileges that it might have under the laws of Mexico shall not be
        applicable to this Guaranty, including, but not limited to, any benefit
        of "orden," "excusion," "division," "quita," "novacion," "prorroga,"
        "espera" or "modificacion," provided in Articles 2813, 2814, 2816, 2817,
        2818, 2820, 2821, 2822, 2823, 2827, 2836,

                                       5

<PAGE>   95
        2840, 2842, 2844, 2845, 2846, 2847, 2848, and 2849 of the Civil Code of
        the Federal District of Mexico and the corresponding articles of the
        Civil Codes in all States of the United Mexican States ("Mexico"), which
        are not reproduced herein by express declaration that the contents of
        such articles are known to the Mexican Guarantor.

               (d) Financial Condition of Borrowers, Etc. Each Guarantor is
        fully aware of the financial condition and affairs of each Borrower.
        Each Guarantor has executed this Guaranty without reliance upon any
        representation, warranty, statement or information concerning Borrowers
        furnished to such Guarantor by Agent or any Lender and has,
        independently and without reliance on Agent or any Lender, and based on
        such documents and information as it has deemed appropriate, made its
        own appraisal of the financial condition and affairs of each Borrower
        and of other circumstances affecting the risk of nonpayment or
        nonperformance of the Guaranteed Obligations. Each Guarantor is in a
        position to obtain, and assumes full responsibility for obtaining, any
        additional information about the financial condition and affairs of each
        Borrower and of other circumstances affecting the risk of nonpayment or
        nonperformance of the Guaranteed Obligations and will, independently and
        without reliance upon Agent or any Lender, and based on such documents
        and information as it shall deem appropriate at the time, continue to
        make its own appraisals and decisions in taking or not taking action in
        connection with this Guaranty.

        4. SUBORDINATION. Each Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to such Guarantor by each Borrower (the
"Subordinated Obligations") to the Guaranteed Obligations as provided in this
Paragraph 4.

               (a) Prohibited Payments, Etc. Except during the continuance of a
        Default (including the commencement and continuation of any Debtor
        Relief Proceeding relating to either Borrower), each Guarantor may
        receive regularly scheduled payments from Borrowers on account of
        Subordinated Obligations. After the occurrence and during the
        continuance of any Default (including the commencement and continuation
        of any Debtor Relief Proceeding relating to either Borrower), however,
        unless Agent otherwise agrees, no Guarantor shall demand, accept or take
        any action to collect any payment on account of the Subordinated
        Obligations.

               (b) Prior Payment of Guaranteed Obligations. In any Debtor Relief
        Proceeding relating to either Borrower, each Guarantor agrees that Agent
        and Lenders shall be entitled to receive payment of all Guaranteed
        Obligations (including any and all Disallowed Post-Commencement Interest
        and Expenses) before such Guarantor receives payment of any Subordinated
        Obligations.

               (c) Turn-Over. After the occurrence and during the continuance of
        any Default (including the commencement and continuation of any Debtor
        Relief Proceeding relating to either Borrower), each Guarantor shall, if
        Agent so requests, collect, enforce and receive payments on account of
        the Subordinated Obligations as trustee for Agent and Lenders and
        deliver such payments to Agent on account of the Guaranteed Obligations
        (including any and all Disallowed Post-Commencement Interest and
        Expenses), together with any necessary endorsements or other instruments
        of transfer, but without reducing or affecting in any manner the
        liability of such Guarantor under the other provisions of this Guaranty.

               (d) Agent Authorization. After the occurrence and during the
        continuance of any Default (including the commencement and continuation
        of any Debtor Relief Proceeding relating to any Borrower), Agent is
        authorized and empowered (but without any obligation to so do), in its
        discretion, (i) in the name of each Guarantor, to collect and enforce,
        and to submit claims in respect of, Subordinated Obligations and to
        apply any amounts received thereon to the Guaranteed Obligations
        (including any and all Disallowed Post-Commencement Interest and
        Expenses), and (ii) to require each Guarantor (A) to collect and
        enforce, and to submit claims in respect of, Subordinated Obligations
        and (B) to pay any amounts received on such obligations to Agent for
        application to the Guaranteed Obligations (including any and all
        Disallowed Post-Commencement Interest and Expenses).

        5. CONTRIBUTION AMONG GUARANTORS. Guarantors desire to allocate among
themselves, in a fair and equitable manner, their rights of contribution from
each other when any payment is made by any Guarantor under this Guaranty.
Accordingly, if any payment is made by any Guarantor under this Guaranty (a
"Funding Guarantor")

                                       6
<PAGE>   96
that exceeds its Fair Share, the Funding Guarantor shall be entitled to a
contribution from each other Guarantor in the amount of such other Guarantor's
Fair Share Shortfall, so that all such contributions shall cause each
Guarantor's Aggregate Guaranty Payments to equal its Fair Share. The amounts
payable as contributions hereunder shall be determined by the Funding Guarantor
as of the date on which the related payment or distribution is made by the
Funding Guarantor, and such determination shall be binding on the other
Guarantors absent manifest error. The allocation and right of contribution among
Guarantors set forth in this Paragraph 5 shall not be construed to limit in any
way the liability of any Guarantor under this Guaranty or the amount of the
Guaranteed Obligations.

        6. MISCELLANEOUS.

               (a) Notices. Except as otherwise provided herein, all notices,
        requests, demands, consents, instructions or other communications to or
        upon any Guarantor or Agent under this Guaranty or the other Credit
        Documents shall be in writing and faxed, mailed or delivered, if to
        Agent, at its facsimile number or address set forth below, or, if to any
        Guarantor, at its facsimile number or address set forth below its
        signature below or in the respective Subsidiary Joinder for such
        Guarantor (or to such other facsimile number or address for any party as
        indicated in any notice given by that party to the other parties). All
        such notices and communications shall be effective (i) when sent by any
        overnight courier service of recognized standing, on the second Business
        Day following the deposit with such service; (ii) when mailed, first
        class postage prepaid and addressed through the United States Postal
        Service, upon receipt; (iii) when delivered by hand, upon delivery; and
        (iv) when faxed, upon confirmation of receipt.

               Agent:        ABN AMRO Bank N.V.
                             Syndications Group
                             1325 Avenue of the Americas, 9th Floor
                             New York, NY  10019
                             U.S.A.
                             Attn:  Linda Boardman
                             Tel. No: (212) 314-1724
                             Fax. No: (212) 314-1712

                             With a copy to:
                             ABN AMRO Bank N.V.
                             101 California Street, Suite 4550 San Francisco, CA
                             94111-5812 U.S.A.
                             Attn:  Mathew Harvey
                             Tel No: (415) 984-3733
                             Fax No: (415) 362-3524

               (b) Payments.

                      (i) Each Guarantor shall make all payments of the
               Guaranteed Obligations to Agent, or its order, at the office of
               Agent and at the times specified in the Credit Documents for the
               payment of such Guaranteed Obligations. Each Guarantor shall make
               all other payments hereunder at such office as Agent may
               designate. Each payment shall be made in same day or immediately
               available funds not later than 11:00 a.m.(local time of the
               office of Agent at which such payment is to be made) on the date
               due.

                      (ii) Each Guarantor shall make all payments of the
               Guaranteed Obligations hereunder in the currency in which such
               Guaranteed Obligations are required to be paid by either Borrower
               pursuant to the Credit Documents and shall make all other
               payments hereunder in Dollars; provided, however, that, if Agent
               shall request a Guarantor to pay any amount hereunder which would
               otherwise be payable in another currency in the lawful currency
               of the United States, such Guarantor shall pay to Agent the
               Dollar Equivalent of such amount.

                                       7
<PAGE>   97

                      (iii) If any sum due from any Guarantor under this
               Guaranty or any other Credit Document to which such Guarantor is
               a party or any order, judgment or award given or rendered in
               relation hereto or thereto has to be converted from the currency
               (the "first currency") in which the same is payable hereunder or
               thereunder into another currency (the "second currency") for the
               purpose of (A) making or filing a claim or proof against such
               Guarantor with any Governmental Authority, (B) obtaining an order
               or judgment in any court or other tribunal or (C) enforcing any
               order or judgment given or made in relation hereto, such
               Guarantor shall, to the fullest extent permitted by law,
               indemnify and hold harmless each of the Persons to whom such sum
               is due from and against any loss suffered as a result of any
               discrepancy between (1) the rate of exchange used for such
               purpose to convert the amounts in question from the first
               currency into the second currency and (2) the rate or rates of
               exchange at which such Person may, using reasonable efforts in
               the ordinary course of business, purchase the first currency with
               the second currency upon receipt of a sum paid to it in
               satisfaction, in whole or in part, of any such order, judgment,
               claim or proof. The foregoing indemnity shall constitute a
               separate obligation of each Guarantor distinct from its other
               obligations hereunder and shall survive the giving or making of
               any judgment or order in relation to all or any of such
               obligations.

                      (iv) If any amounts required to be paid by any Guarantor
               under this Guaranty or any order, judgment or award given or
               rendered in relation hereto remain unpaid after such amounts are
               due, such Guarantor shall pay interest on the aggregate,
               outstanding balance of such amounts from the date due until those
               amounts are paid in full at a per annum rate equal to:

                             (1) In the case of amounts payable in Dollars, the
Base Rate plus two percent (2.00%), such rate to change from time to time as the
Base Rate shall change.

                             (2) In the case of amounts payable in any other
currency, the Overnight Rate for such currency plus three percent (3.0%), such
rate to change from time to time as the Overnight Rate shall change.

               (c) Expenses. Each Guarantor shall pay on demand (i) all
        reasonable and documented fees and expenses, including reasonable
        attorneys' fees and expenses, incurred by Agent in connection with the
        preparation, execution and delivery of, and the exercise of its duties
        under, this Guaranty and the preparation, execution and delivery of
        amendments and waivers hereunder and (ii) all reasonable and documented
        fees and expenses, including reasonable attorneys' fees and expenses,
        incurred by Agent and Lenders in connection with the enforcement or
        attempted enforcement of this Guaranty or any of the Guaranteed
        Obligations or in preserving any of Agent's or Lenders' rights and
        remedies (including, without limitation, all such fees and expenses
        incurred in connection with any "workout" or restructuring affecting the
        Credit Documents or the Guaranteed Obligations or any bankruptcy or
        similar proceeding involving Guarantor, any other Guarantor, any
        Borrower, or any of their affiliates).

               (d) Waivers; Amendments. This Guaranty may not be amended or
        modified, nor may any of its terms be waived, except by written
        instruments signed by each Guarantor and Agent. Each waiver or consent
        under any provision hereof shall be effective only in the specific
        instances for the purpose for which given. No failure or delay on
        Agent's or any Lender's part in exercising any right hereunder shall
        operate as a waiver thereof or of any other right nor shall any single
        or partial exercise of any such right preclude any other further
        exercise thereof or of any other right.

               (e) Successors and Assigns. This Guaranty shall be binding upon
        and inure to the benefit of Agent, Lenders, Guarantors and their
        respective successors and assigns; provided, however, that no Guarantor
        may assign or transfer any of its rights and obligations under this
        Guaranty without the prior written consent of Agent and Lenders, and,
        provided, further, that Agent or any Lender may sell, assign and
        delegate their respective rights and obligations hereunder only as
        permitted by the Credit Agreement. All references in this Guaranty to
        any Person shall be deemed to include all permitted successors and
        assigns of such Person.

                                       8
<PAGE>   98

               (f) Cumulative Rights, etc. The rights, powers and remedies of
        Agent and Lenders under this Guaranty shall be in addition to all
        rights, powers and remedies given to Agent and Lenders by virtue of any
        applicable law, rule or regulation of any Governmental Authority, the
        Credit Agreement, any other Credit Document or any other agreement, all
        of which rights, powers, and remedies shall be cumulative and may be
        exercised successively or concurrently without impairing Agent's or any
        Lender's rights hereunder. Each Guarantor waives any right to require
        Agent or any Lender to proceed against any Person or to exhaust any
        Collateral or to pursue any remedy in Agent's or such Lender's power.

               (g) Setoff; Security Interest.

                      (i) In addition to any rights and remedies of Lenders
               provided by law, each Lender shall have the right, with the prior
               consent of Agent but without prior notice to or consent of any
               Guarantor, any such notice and consent being expressly waived by
               each Guarantor to the extent permitted by applicable law, upon
               the occurrence and during the continuance of an Event of Default,
               to set-off and apply against the obligations of each Guarantor
               any amount owing from such Lender to such Guarantor. The
               aforesaid right of set-off may be exercised by such Lender
               against a Guarantor or against any trustee in bankruptcy, debtor
               in possession, assignee for the benefit of creditors, receiver or
               execution, judgment or attachment creditor of such Guarantor or
               against anyone else claiming through or against such Guarantor or
               such trustee in bankruptcy, debtor in possession, assignee for
               the benefit of creditors, receiver, or execution, judgment or
               attachment creditor, notwithstanding the fact that such right of
               set-off may not have been exercised by such Lender at any prior
               time. Each Lender agrees promptly to notify the applicable
               Guarantor after any such set-off and application made by such
               Lender, provided that the failure to give such notice shall not
               affect the validity of such set-off and application.

                      (ii) As security for the obligations of each Guarantor
               hereunder, each Guarantor hereby grants to Agent and each Lender,
               for the benefit of all Lenders, a continuing security interest in
               any and all deposit accounts or moneys of such Guarantor now or
               hereafter maintained with such Lender. Each Lender shall have all
               of the rights of a secured party with respect to such security
               interest.

               (h) Payments Free of Taxes. All payments made by each Guarantor
        under this Guaranty shall be made free and clear of, and without
        deduction or withholding for or on account of, all present and future
        Non-Excluded Taxes. If any Non-Excluded Taxes are required to be
        withheld from any amounts payable to Agent or any Lender hereunder, the
        amounts so payable to Agent or such Lender shall be increased to the
        extent necessary to yield to Agent or such Lender (after payment of all
        Non-Excluded Taxes) interest or any such other amounts payable hereunder
        at the rates or in the amounts specified in this Guaranty or the other
        Credit Documents, as applicable. Whenever any Non-Excluded Taxes are
        payable by any Guarantor, as promptly as possible thereafter, such
        Guarantor shall send to Agent for its own account or for the account of
        such Lender, as the case may be, a certified copy of an original
        official receipt received by such Guarantor showing payment thereof. If
        Guarantors fail to pay any Non-Excluded Taxes when due to the
        appropriate taxing authority or fail to remit to Agent the required
        receipts or other required documentary evidence, Guarantors shall
        indemnify Agent and Lenders for any taxes (including interest or
        penalties) that may become payable by Agent or any Lender as a result of
        any such failure. The obligations of Guarantors under this Subparagraph
        6(h) shall survive the payment and performance of the Guaranteed
        Obligations and the termination of this Guaranty. Nothing contained in
        this Subparagraph 6(h) shall require Agent or any Lender to make
        available any of its tax returns (or any other information relating to
        its taxes which it deems to be confidential).

               (i) Partial Invalidity. If at any time any provision of this
        Guaranty is or becomes illegal, invalid or unenforceable in any respect
        under the law or any jurisdiction, neither the legality, validity or
        enforceability of the remaining provisions of this Guaranty nor the
        legality, validity or enforceability of such provision under the law of
        any other jurisdiction shall in any way be affected or impaired thereby.

               (j) Jury Trial. EACH OF GUARANTORS, LENDERS AND AGENT, TO THE
        FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
        ALL RIGHT

                                       9
<PAGE>   99

               TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
        PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY.

               (k) Counterparts. This Guaranty may be executed in any number of
        identical counterparts, any set of which signed by all the Guarantors
        shall be deemed to constitute a complete, executed original for all
        purposes.

               (l) Governing Law, Consent to Jurisdiction, Etc.

                      (i) This Guaranty shall be governed by and construed in
               accordance with the laws of the State of California, except for
               the purposes of any suit or legal action brought in Mexico in
               which case it shall be governed by the laws of Mexico.

                      (ii) Each Guarantor irrevocably submits to the
               non-exclusive jurisdiction of the courts of the State of
               California and the courts of the United States of America located
               in the Northern District of California and, in respect of the
               Mexican Guarantor, the Mexican Guarantor and the Agent, on behalf
               of Lenders, also irrevocably submit to the jurisdictions of the
               courts of the Federal District of Mexico, Mexico, and agrees that
               any legal action, suit or proceeding arising out of or relating
               to this Guaranty or any of the other Credit Documents may be
               brought against such party in any such courts. Final judgment
               against a Guarantor in any such action, suit or proceeding shall
               be conclusive and may be enforced in any other jurisdiction by
               suit on the judgment, a certified or exemplified copy of which
               shall be conclusive evidence of the judgment, or in any other
               manner provided by law. Nothing in this Subparagraph 6(l) shall
               affect the right of Agent or any Lender to commence legal
               proceedings or otherwise sue any Guarantor in any other
               appropriate jurisdiction, or concurrently in more than one
               jurisdiction, or to serve process, pleadings and other papers
               upon any Guarantor in any manner authorized by the laws of any
               such jurisdiction. Subject to and except as otherwise provided in
               paragraph (iii) below in respect of the Mexican Guarantor, each
               Guarantor agrees that process served either personally or by
               registered mail shall, to the extent permitted by law,
               constitutes adequate service of process in any such suit. Without
               limiting the foregoing, each Guarantor hereby appoints, in the
               case of any such action or proceeding brought in the courts of or
               in the State of California, CT Corporation, with offices on the
               date hereof at 818 West Seventh Street, Los Angeles, California
               90017, to receive for it and on its behalf, service of process in
               the State of California with respect thereto, provided each
               Guarantor may appoint any other person, reasonably acceptable to
               Agent, with offices in the State of California to replace such
               agent for service of process upon delivery to Agent of a
               reasonably acceptable agreement of such new agent agreeing so to
               act. Each Guarantor irrevocably waives to the fullest extent
               permitted by applicable law (A) any objection which it may have
               now or in the future to the laying of the venue of any such
               action, suit or proceeding in any court referred to in the first
               sentence above; (B) any claim that any such action, suit or
               proceeding has been brought in an inconvenient forum; (C) its
               right of removal of any matter commenced by any other party in
               the courts of the State of California to any court of the United
               States of America; (D) any immunity which it or its assets may
               have in respect of its obligations under this Agreement or any
               other Credit Document from any suit, execution, attachment
               (whether provisional or final, in aid of execution, before
               judgment or otherwise) or other legal process; and (E) any right
               it may have to require the moving party in any suit, action or
               proceeding brought in any of the courts referred to above arising
               out of or in connection with this Agreement or any other Credit
               Document to post security for the costs of any Guarantor or to
               post a bond or to take similar action.

                      (iii) The Mexican Guarantor hereby irrevocably appoints CT
               Corporation, Los Angeles Agency, (the "FMM Process Agent"), with
               an office on the date hereof in 818 West Seventh Street, Los
               Angeles, California 90017, in the case of any action, suit or
               proceeding arising out of or relating to this Guaranty or any of
               the other Credit Documents brought in the courts of or in the
               State of California, as its agent to receive for it and on its
               behalf service of process in the State of California with respect
               thereto. Such service may be made by mailing or delivering a copy
               of such process to the Mexican Guarantor in care of the FMM
               Process Agent at the FMM Process Agent's above address, and the
               Guarantor hereby irrevocably authorizes and directs the

                                       10
<PAGE>   100

               FMM Process Agent to accept such service on its behalf; provided,
               that for any notice or service of process to be effective under
               Mexican law, such notice or service of process shall be deemed to
               have been given or made when delivered either (i) personally,
               return receipt requested, (ii) by courier delivery or certified
               mail, return receipt requested, or (iii) by facsimile followed by
               personal or courier delivery, return receipt requested. The
               Mexican Guarantor agrees that a final judgment in any such
               proceeding shall be conclusive and may be enforced in other
               jurisdictions by suit on the judgment or in any other manner
               provided by law. For purposes of perfecting the appointment of
               the FMM Process Agent under the applicable laws of Mexico, the
               Mexican Guarantor agrees to execute and deliver the power of
               attorney attached hereto as Attachment 2, formalized before a
               notary public in Mexico and duly recorded at the Public Registry
               of Commerce (Registro Publico de Comercio) of the corporate
               domicile of the Mexican Guarantor, and to execute and deliver any
               and all other documents (including Mexican notarial deeds) as may
               be required by the Agent in its sole discretion.

                       [The first signature page follows.]

                                       11
<PAGE>   101

               IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed as of the day and year first above written.

                                FLEXTRONICS INTERNATIONAL LTD., acting
                                through its Hong Kong branch

                                By:
                                   --------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                Address:
                                Room 908, Dominion Center
                                43-59 Queens Road East
                                Wanchai, Hong Kong
                                Attn: Chief Financial Officer

                                Telephone: (___) ___-____
                                Facsimile: (408) 428-1300

                                With a copy to:

                                2090 Fortune Drive
                                San Jose, CA, 95131
                                U.S.A.
                                Attn: Treasurer

                                Telephone: (___) ___-____
                                Facsimile: (408) 428-1300

                                FLEXTRONICS INTERNATIONAL LATIN AMERICA (L)
                                LTD.

                                By:
                                   --------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                Address:
                                Level 10, Wisma Oceanic
                                Jalan OKK Awang Besar
                                Labuan, F.T.
                                Malaysia
                                Attn: ___________________
                                Telephone: (___) ___-____
                                Facsimile: (___) ___-____

                                FLEX INTERNATIONAL MARKETING (L) LTD.

                                       12
<PAGE>   102

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:
                                               Level 10, Wisma Oceanic
                                               Jalan OKK Awang Besar
                                               Labuan, F.T.
                                               Malaysia
                                               Attn: ___________________
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                               FLEXTRONICS MANUFACTURING MEX,
                                               S.A. DE C.V.

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:
                                               Carretara Base Aerea Militar 5850
                                               Zapopan, Jalisco 4500
                                               Mexico
                                               Attn: ___________________
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                               FLEXTRONICS SINGAPORE PTE LTD.

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:
                                               36 Robinson Road
                                               #18-01 City House
                                               Singapore  068877
                                               Attn: ___________________
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                       13
<PAGE>   103

                                               FLEXTRONICS HOLDINGS UK LIMITED

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:
                                               50 Stratton Street
                                               London  W1X 6NX
                                               England
                                               Attn: ___________________
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                               FLEXTRONICS INTERNATIONAL USA,
                                               INC.

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:
                                               2090 Fortune Drive
                                               San Jose, California 95131
                                               U.S.A.
                                               Attn: Treasurer
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                               DOVATRON INTERNATIONAL, INC.

                                               By:
                                                  -----------------------------
                                                     Name:
                                                          ---------------------
                                                     Title:
                                                           --------------------

                                               Address:

                                               Attn: ___________________
                                               Telephone: (___) ___-____
                                               Facsimile: (___) ___-____

                                       14
<PAGE>   104

                                  ATTACHMENT 1

                               SUBSIDIARY JOINDER

               THIS SUBSIDIARY JOINDER (this "Agreement"), dated as of
____________, ____, is executed by [NEW ELIGIBLE MATERIAL SUBSIDIARY], a
_________ [corporation] [partnership] [etc.] ("New Subsidiary") in favor of ABN
AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in
such capacity, "Agent") for the financial institutions which are from time to
time parties to the Credit Agreement referred to in Recital A below
(collectively, the "Lenders").

                                    RECITALS

               A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as
amended from time to time, the "Credit Agreement"), among Flextronics
International USA, Inc. ("FIUI") and The DII Group, Inc. ("DII", and together
with FIUI, each a "Borrower" and collectively the "Borrowers"), Lenders and
Agent, Lenders have agreed to extend certain credit facilities to Borrowers upon
the terms and subject to the conditions set forth therein.

               B. Lenders' obligations to extend the credit facilities to
Borrowers under the Credit Agreement are subject, among other conditions, to
receipt by Agent of (1) a Guaranty, dated as of April 3, 2000, duly executed by
each existing Eligible Material Subsidiary and any other Subsidiary designated
as a Guarantor from time to time, and (2) Subsidiary Joinders, duly executed by
each future Eligible Material Subsidiary.

               C. New Subsidiary is a new Eligible Material Subsidiary and
expects to derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.

                                    AGREEMENT

               NOW, THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, New Subsidiary hereby agrees with Agent, for the ratable
benefit of Lenders and Agent, as follows:

               1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined
herein, all capitalized terms used herein and defined in the Guaranty shall have
the respective meanings given to those terms in the Guaranty. New Subsidiary
acknowledges receipt of copies of the Guaranty, the Credit Agreement and the
other Credit Documents.

               2. REPRESENTATIONS AND WARRANTIES. On and as of the date of this
Agreement (the "Effective Date") and for the ratable benefit of the Agent and
Lenders, New Subsidiary hereby makes each of the representations and warranties
made by each Guarantor in the Guaranty.

               3. AGREEMENT TO BE BOUND. New Subsidiary agrees that, on and as
of the Effective Date, it shall become a Guarantor under the Guaranty and shall
be bound by all the provisions of the Guaranty to the same extent as if New
Subsidiary had executed the Guaranty on the Closing Date.

               4. WAIVER. Without limiting the generality of the waivers in the
Guaranty, New Subsidiary specifically agrees to be bound by the Guaranty and
waives any right to notice of acceptance of its execution of this Agreement and
of its agreement to be bound by the Guaranty.

               5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.

                                     (1)-1

<PAGE>   105

               IN WITNESS WHEREOF, New Subsidiary has caused this Agreement to
be executed by its duly authorized officer.

                                          [NEW SUBSIDIARY]

                                          By:
                                             -----------------------------------
                                                Name:
                                                     ---------------------------
                                                Title:
                                                      --------------------------

                                          Address:
                                          [_________________________]
                                          [_________________________]
                                          [_________________________]
                                          Attn: [___________________]
                                          Telephone: [(___) ___-____]
                                          Facsimile: [(___) ___-____]

                                     (1)-2

<PAGE>   106

                                  ATTACHMENT 2

                                                    To be executed and delivered
                                           by the Guarantor in the presence of,
                                                         and to be certified by,
                                                        a Mexican Notary Public

FORM OF SPECIAL IRREVOCABLE POWER OF ATTORNEY

               [__________________], S.A. DE C.V. (the "Grantor"), a sociedad
anonima de capital variable duly incorporated and validly existing under the
laws of the United Mexican States ("Mexico"), hereby grants an irrevocable power
of attorney for litigation and collections in favor of [____________________]
(the "Attorney-In-Fact"), in terms of the first paragraph of article 2554 of the
Civil Code for the Federal District of Mexico and the corresponding articles of
the Civil Codes of all States of Mexico. This power of attorney is limited in
its scope but is as broad as necessary and may be exercised in any jurisdiction,
so that the Attorney-In-Fact, in the name and on behalf of the Grantor, receives
any and all notices and service of process of any nature in connection with any
suits, actions, proceedings and judgments of all kinds, including, without
limitation, judicial, administrative or arbitration proceedings in any way
relating to the Guaranty Agreement (the "Guaranty Agreement") dated
[___________], 2000 entered into by and among the Grantor, the other Guarantors,
the Lenders party thereto and ABN AMRO Bank N.V. as agent. The Grantor hereby
appoints as its domicile to receive any notices relating thereto,
[_______________] United States of America, or any other domicile of the
Attorney-In-Fact notified to the Grantor. This Power of Attorney is granted in
satisfaction of a condition set forth in the Guaranty Agreement, and it is
therefore irrevocable, in accordance with article 2596 of the Civil Code for the
Federal District of Mexico and the corresponding Articles of the Civil Code of
all States of Mexico.

                                     (2)-1
<PAGE>   107

                                  ATTACHMENT 2

                                                   To be executed and delivered
                                            by the Guarantor in the presence of,
                                                         and to be certified by,
                                                         a Mexican Notary Public

FORM SPECIAL IRREVOCABLE POWER OF ATTORNEY

"NUMERO
LIBRO
FOLIO

               En la Ciudad de [_________] a los [____________] dias de mes de
[___________] de mil novecientos noventa y nueve, yo, el Licenciado
[__________________________], titular de la Notaria numero [____________] del
[_______________], hago constar el PODER ESPECIAL IRREVOCABLE, que se consigna
al tenor de la siguiente:

                                 CLAUSULA UNICA

Por medio del presente instrumento, la sociedad denominada [__________________],
SOCIEDAD ANONIMA DE CAPITAL VARIABLE (la "Otorgante"), representada como ha
quedado dicho, otorga en favor de la sociedad denominada [_______________], un
poder especial irrevocable para pleitos y cobranzas, en los terminos de primer
parrafo del Articulo dos mil quinientos cincuenta y cuatro del Codigo Civil para
el Distrito Federal y correlativos de los Estados de la Republica, que es
limitado en cuanto a su objeto, pero tan amplio como sea necesario, para ser
ejercido en cualquier jurisdiccion y a efecto de que, en nombre y representacion
de la Otorgante, reciba toda clase de notificaciones y emplazamientos de
cualquier naturaleza en relacion con cualquier demanda, accion, procedimiento o
juicio, incluyendo sin limitacion alguna procedimientos judiciales,
administrativos o arbitrales, derivados del Contrato de Garantia (Guaranty
Agreement; el "Contrato de Garantia") de fecha [___] de [_______] de 2000,
celebrado entre la Otorgante, las acreditantes (Lenders) ahi descritas y ABN
AMRO Bank N.V. como agente administrativo. La Otorgante senala como domicilio
convencional para recibir cualesquiera de las notificaciones o emplazamientos
antes citados el ubicado en [___________________________], Estados Unidos de
America, o cualquier otro domicilio que en el futuro designe
[__________________________]. El presente poder es irrevocable, en virtud de que
se otorga en cumplimiento de una condicion prevista en el Contrato de Garantia
en terminos del Articule 2596 del Codigo Civil para el Distrito Federal y
correlativos de los Estados de la Republica.

                                     D(1)-1
<PAGE>   108

                                    EXHIBIT E

                                PLEDGE AGREEMENT

        THIS PLEDGE AGREEMENT, dated as of [ ], is executed by
[____________________], a [________] ("Pledgor"), in favor of ABN AMRO BANK
N.V., acting as agent (in such capacity and each successor thereto acting in
such capacity, "Agent") for the financial institutions which are from time to
time parties to the Credit Agreement referred to in Recital A below
(collectively, "Lenders").

                                    RECITALS

        A. Pursuant to a Credit Agreement, dated as of April 3, 2000 (as amended
from time to time, the "Credit Agreement"), among Flextronics International USA,
Inc. ("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a
"Borrower" and collectively the "Borrowers"), Lenders and Agent, Lenders have
agreed to extend certain credit facilities to Borrowers upon the terms and
subject to the conditions set forth therein.

        B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of this Agreement, duly executed by Pledgor.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Agent, for the ratable benefit of
Lenders and Agent, as follows:

        1. DEFINITIONS AND INTERPRETATION.

               (a) Definitions. When used in this Agreement, the following terms
        shall have the following respective meanings:

                      "Agent" shall have the meaning given to that term in the
               introductory paragraph hereof.

                      "Collateral" shall have the meaning given to that term in
               Paragraph 2 hereof.

                      "Credit Agreement" shall have the meaning given to that
               term in Recital A hereof.

                      "Equity Securities" of any Person shall mean (a) all
               common stock, preferred stock, participations, shares,
               partnership interests or other equity interests in and of such
               Person (regardless of how designated and whether or not voting or
               non-voting) and (b) all warrants, options and other rights to
               acquire any of the foregoing.

                      "Lenders" shall have the meaning given to that term in the
               introductory paragraph hereof.

                      "Pledged Shares" shall mean collectively the Equity
               Securities pledged to Agent pursuant to Paragraph 2 hereof.

                      "Pledgor" shall have the meaning given to that term in the
               introductory paragraph hereof.

                      "Secured Obligations" shall mean and include all loans,
               advances, debts, liabilities, and obligations, howsoever arising,
               owed by Pledgor to Agent or any Lender of every kind and
               description (whether or not evidenced by any note or instrument
               and whether or not for the payment of money) individual or joint
               and several, direct or indirect, absolute or contingent, due

                                      E-1
<PAGE>   109

               or to become due, now existing or hereafter arising pursuant to
               the terms of the Credit Documents, including all interest, fees,
               charges, expenses, attorneys' fees and accountants' fees
               chargeable to Pledgor or payable by Pledgor thereunder.

                      "Subsidiary" of any Person shall mean (a) any corporation
               of which more than 50% of the issued and outstanding Equity
               Securities having ordinary voting power to elect a majority of
               the Board of Directors of such corporation (irrespective of
               whether at the time capital stock of any other class or classes
               of such corporation shall or might have voting power upon the
               occurrence of any contingency) is at the time directly or
               indirectly owned or controlled by such Person, by such Person and
               one or more of its other Subsidiaries or by one or more of such
               Person's other Subsidiaries, (b) any partnership, joint venture,
               limited liability company or other association of which more than
               50% of the equity interest having the power to vote, direct or
               control the management of such partnership, joint venture or
               other association is at the time owned and controlled by such
               Person, by such Person and one or more of the other Subsidiaries
               or by one or more of such Person's other Subsidiaries or (c) any
               other Person included in the Financial Statements of such Person
               on a consolidated basis.

                      "UCC" shall mean the Uniform Commercial Code as in effect
               in the State of California from time to time.

        Unless otherwise defined herein, all other capitalized terms used herein
        and defined in the Credit Agreement shall have the respective meanings
        given to those terms in the Credit Agreement, and all terms defined in
        the UCC shall have the respective meanings given to those terms in the
        UCC.

               (b) Other Interpretive Provisions. The rules of construction set
        forth in Section I of the Credit Agreement shall, to the extent not
        inconsistent with the terms of this Agreement, apply to this Agreement
        and are hereby incorporated by reference.

        2. PLEDGE. As security for the Secured Obligations, Pledgor hereby
pledges and assigns to Agent (for the ratable benefit of Lenders and Agent) and
grants to Agent (for the ratable benefit of Lenders and Agent) a security
interest in all right, title and interest of Pledgor in and to the property
described in subparagraphs (a) - (d) below, whether now owned or hereafter
acquired (collectively and severally, the "Collateral"):

               (a) All of the Equity Securities described in Attachment 1
        hereto, whether certificated or uncertificated;

               (b) All dividends, cash, instruments and other property from time
        to time received, receivable or otherwise distributed or distributable
        in respect of or in exchange for any of the property described in
        subparagraph (a) above; and

               (c) All proceeds of the foregoing.

        3. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to
Lenders and Agent as follows:

               (a) Pledgor is the record legal and beneficial owner of the
        Collateral (or, in the case of after-acquired Collateral, at the time
        Pledgor acquires rights in the Collateral, will be the record legal and
        beneficial owner thereof). No other Person has (or, in the case of
        after-acquired Collateral, at the time Pledgor acquires rights therein,
        will have) any right, title, claim or interest (by way of Lien, purchase
        option or otherwise) in, against or to the Collateral.

               (b) Agent has (or in the case of after-acquired Collateral, at
        the time Pledgor acquires rights therein, will have) a first priority
        perfected security interest in the Collateral.

                                      E-2

<PAGE>   110

               (c) All Pledged Shares have been (or in the case of
        after-acquired Pledged Shares, at the time Pledgor acquires rights
        therein, will have been) duly authorized, validly issued and fully paid
        and are (or in the case of after-acquired Pledged Shares, at the time
        Pledgor acquires rights therein, will be) non-assessable.

               (d) Pledgor has delivered to Agent, together with all necessary
        stock powers, endorsements, assignments and other necessary instruments
        of transfer, the originals of all Pledged Shares, other certificated
        securities, other Collateral and all certificates, instruments and other
        writings evidencing the same.

               (e) Set forth in Attachment 1 hereto is a true, complete and
        accurate list, as of the date of this Agreement, of all Equity
        Securities of Ineligible Material Subsidiaries owned directly by
        Pledgor.

        4. COVENANTS.  Pledgor hereby agrees as follows:

               (a) Pledgor, at Pledgor's expense, shall promptly procure,
        execute and deliver to Agent all documents, instruments and agreements
        and perform all acts which are necessary or desirable, or which Agent
        may request, to establish, maintain, preserve, protect and perfect the
        Collateral, the Lien granted to Agent therein and the first priority of
        such Lien or to enable Agent to exercise and enforce its rights and
        remedies hereunder with respect to any Collateral. Without limiting the
        generality of the preceding sentence, Pledgor shall (i) procure, execute
        and deliver to Agent all stock powers, endorsements, assignments,
        financing statements and other instruments of transfer requested by
        Agent, (ii) deliver to Agent promptly upon receipt the originals of all
        Pledged Shares, other certificated securities, other Collateral and all
        certificates, instruments and other writings evidencing the same and
        (iii) cause the Lien of Agent to be recorded or registered in the books
        of any financial intermediary or clearing corporation requested by
        Agent.

               (b) Pledgor shall pay promptly when due all taxes and other
        Governmental Charges, all Liens and all other charges now or hereafter
        imposed upon, relating to or affecting any Collateral.

               (c) Pledgor shall appear in and defend any action or proceeding
        which may affect its title to or Agent's interest in the Collateral.

               (d) Pledgor shall not surrender or lose possession of (other than
        to Agent), sell, encumber, lease, rent, option, or otherwise dispose of
        or transfer any Collateral or right or interest therein except as
        permitted in the Credit Agreement, and, notwithstanding any provision of
        the Credit Agreement, Pledgor shall keep the Collateral free of all
        Liens.

        5. VOTING RIGHTS AND DIVIDENDS PRIOR TO DEFAULT. Unless an Event of
Default has occurred and is continuing:

               (a) Pledgor may exercise or refrain from exercising any and all
        voting and other consensual rights pertaining to the Pledged Shares or
        any part thereof; provided, however, that Pledgor shall not exercise or
        refrain from exercising any such rights where the consequence of such
        action or inaction would be (i) to impair any Collateral, the Lien
        granted to Agent therein, the first priority of such Lien or Agent's
        rights and remedies hereunder with respect to any Collateral or (ii)
        otherwise inconsistent with the terms of this Agreement and the other
        Credit Documents.

        (b) Pledgor may receive and retain all dividends and interest paid in
        cash in respect of the Pledged Shares, except for any such dividends and
        interest paid in connection with a partial or total liquidation or
        dissolution or in connection with a reduction of capital, capital
        surplus or paid-in-surplus. Pledgor shall promptly deliver to Agent to
        hold as Collateral all dividends and interest which Pledgor is not
        entitled to receive and retain pursuant to the preceding sentence, in
        the same form as so received (with any

                                      E-3

<PAGE>   111

        necessary endorsement), and, until so delivered, shall hold such
        dividends and interest in trust for the benefit of Agent, segregated
        from the other property or funds of Pledgor.

        6. AUTHORIZED ACTION BY AGENT. Pledgor hereby irrevocably appoints Agent
as its attorney-in-fact and agrees that Agent may perform (but Agent shall not
be obligated to and shall incur no liability to Pledgor or any third party for
failure so to do) any act which Pledgor is obligated by this Agreement to
perform, and to exercise such rights and powers as Pledgor might exercise with
respect to the Collateral, including, without limitation, the right to (a)
collect by legal proceedings or otherwise and endorse, receive and receipt for
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral; (c) insure, process, preserve and enforce the
Collateral; (d) make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any Indebtedness of Pledgor
relating to the Collateral; and (f) execute UCC financing statements and other
documents, instruments and agreements required hereunder; provided, however,
that Agent may exercise such powers only after the occurrence and during the
continuance of an Event of Default. Pledgor agrees to reimburse Agent upon
demand for all reasonable and documented costs and expenses, including
reasonable and documented attorneys' fees, Agent may incur while acting as
Pledgor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Secured Obligations. Pledgor agrees that such care as Agent
gives to the safekeeping of its own property of like kind shall constitute
reasonable care of the Collateral when in Agent's possession; provided, however,
that Agent shall not be required to make any presentment, demand or protest, or
give any notice and need not take any action to preserve any rights against any
prior party or any other Person in connection with the Secured Obligations or
with respect to the Collateral.

        7. EVENTS OF DEFAULT.

               (a) Event of Default. Pledgor shall be deemed in default under
        this Agreement upon the occurrence and during the continuance of an
        Event of Default, as that term is defined in the Credit Agreement.

               (b) Voting Rights and Dividends. Upon the occurrence and during
        the continuance of an Event of Default:

                      (i) All rights of Pledgor to exercise the voting and other
               consensual rights which it would otherwise be entitled to
               exercise pursuant to subparagraph 5(a) hereof and to receive the
               dividends and interest payments which it would otherwise be
               authorized to receive and retain pursuant to subparagraph 5(a)
               hereof shall cease and all such rights shall thereupon become
               vested in Agent which shall thereupon have the sole right, but
               not the obligation, to exercise such voting and other consensual
               rights and to receive and hold as Collateral such dividends and
               interest payments.

                      (ii) Pledgor shall promptly deliver to Agent to hold as
               Collateral all dividends and interest received by Pledgor after
               the occurrence and during the continuance of any Event of
               Default, in the same form as so received (with any necessary
               endorsement), and, until so delivered, shall hold such dividends
               and interest in trust for the benefit of Agent, segregated from
               the other property or funds of Pledgor.

        (c) Other Rights and Remedies. In addition to all other rights and
        remedies granted to Agent by this Agreement, the Credit Agreement, the
        other Credit Documents, the UCC and other applicable Governmental Rules,
        Agent may, upon the occurrence and during the continuance of any Event
        of Default, exercise any one or more of the following rights and
        remedies: (i) collect, receive, appropriate or realize upon the
        Collateral or otherwise foreclose or enforce Agent's security interests
        in any or all Collateral in any manner permitted by applicable
        Governmental Rules or in this Agreement; (ii) notify any or all issuers
        of or transfer or paying agents for the Collateral or any applicable
        clearing corporation, financial intermediary or other Person to register
        the Collateral in the name of Agent or its nominee and/or to pay all
        dividends, interest and other amounts payable in respect of the
        Collateral directly to Agent; (iii) sell or

                                      E-4
<PAGE>   112

        otherwise dispose of any or all Collateral at one or more public or
        private sales, whether or not such Collateral is present at the place
        of sale, for cash or credit or future delivery, on such terms and in
        such manner as Agent may determine; and (iv) require Pledgor to assemble
        all records and information relating to the Collateral and make it
        available to Agent at a place to be designated by Agent. In any case
        where notice of any sale or disposition of any Collateral is required,
        Pledgor hereby agrees that seven (7) days notice of such sale or
        disposition is reasonable.

               (d) Securities Laws.

                      (i) Pledgor acknowledges and recognizes that Agent may be
               unable to effect a public sale of all or a part of the Pledged
               Shares and may be compelled to resort to one or more private
               sales to a restricted group of purchasers who will be obligated
               to agree, among other things, to acquire the Pledged Shares for
               their own account, for investment and not with a view to the
               distribution or resale thereof. Pledgor acknowledges that any
               such private sales may be at prices and on terms less favorable
               to Agent than those of public sales, and agrees that such private
               sales shall be deemed to have been made in a commercially
               reasonable manner and that Agent has no obligation to delay sale
               of any Pledged Shares to permit the issuer thereof to register it
               for public sale under the Securities Act of 1933, as amended, or
               under any state securities law.

                      (ii) Upon the occurrence and during the continuance of an
               Event of Default and at Agent's request, Pledgor shall, and shall
               cause all issuers of Collateral and all officers and directors
               thereof and all other necessary Persons to, execute and deliver
               all documents, instruments and agreements and perform all other
               acts necessary or, in the opinion of Agent, advisable to sell the
               Collateral in any public or private sale, including any acts
               requested by Agent to (A) register any Collateral under the
               Securities Act of 1933, (B) qualify any Collateral under any
               state securities or "Blue Sky" laws or (C) otherwise permit any
               such sale to be made in full compliance with all applicable
               Governmental Rules.

        8. MISCELLANEOUS.

               (a) Notices. Except as otherwise specified herein, all notices,
        requests, demands, consents, instructions or other communications to or
        upon Pledgor or Agent under this Agreement shall be given as provided in
        Paragraph 8.01 of the Credit Agreement.

               (b) Waivers; Amendments. Any term, covenant, agreement or
        condition of this Agreement may be amended or waived only as provided in
        the Credit Agreement. No failure or delay by Agent or any Lender in
        exercising any right hereunder shall operate as a waiver thereof or of
        any other right nor shall any single or partial exercise of any such
        right preclude any other further exercise thereof or of any other right.
        Unless otherwise specified in any such waiver or consent, a waiver or
        consent given hereunder shall be effective only in the specific instance
        and for the specific purpose for which given.

               (c) Successors and Assigns. This Agreement shall be binding upon
        and inure to the benefit of Agent, Lenders, Pledgor and their respective
        successors and assigns; provided, however, that Pledgor may not assign
        or transfer any of its rights and obligations under this Agreement
        without the prior written consent of Agent and Lenders, and, provided,
        further, that Agent or any Lender may sell, assign and delegate their
        respective rights and obligations hereunder only as permitted by the
        Credit Agreement. All references in this Agreement to any Person shall
        be deemed to include all permitted successors and assigns of such
        Person.

               (d) Cumulative Rights, etc. The rights, powers and remedies of
        Agent and Lenders under this Agreement shall be in addition to all
        rights, powers and remedies given to Agent and Lenders by virtue of any
        applicable law, rule or regulation of any Governmental Authority, the
        Credit Agreement, any other Credit Document or any other agreement, all
        of which rights, powers, and remedies shall be cumulative and may be
        exercised successively or concurrently without impairing Agent's or any
        Lender's rights hereunder.

                                      E-5

<PAGE>   113

               Pledgor waives any right to require Agent or any Lender to
        proceed against any Person or to exhaust any Collateral or to pursue any
        remedy in Agent's or such Lender's power.

               (e) Partial Invalidity. If at any time any provision of this
        Agreement is or becomes illegal, invalid or unenforceable in any respect
        under the law of any jurisdiction, neither the legality, validity or
        enforceability of the remaining provisions of this Agreement nor the
        legality, validity or enforceability of such provision under the law of
        any other jurisdiction shall in any way be affected or impaired thereby.

               (f) Governing Law.

                      (i) This Agreement shall be governed by and construed in
               accordance with the laws of the State of California without
               reference to conflicts of laws rules (except to the extent
               otherwise provided in the UCC).

                      (ii) The Pledgor agrees that for the exclusive benefit of
               the Agent, the Documentation Agent, the Managing Agents, the
               Co-Agent and the Lenders, any suit, action or proceeding by the
               Agent, the Documentation Agent, the Managing Agents, the Co-Agent
               and the Lenders arising our of or in connection with this
               Agreement may be brought by the Agent, the Documentation Agent,
               the Managing Agents, the Co-Agent or the Lenders in any competent
               court of the State of California or any federal court of the
               United States of America sitting in the State of California, and
               the Pledgor submits to the non-exclusive jurisdiction of each
               such court. The Pledgor further agrees, for the non-exclusive
               benefit of the Agent, the Documentation Agent, the Managing
               Agents, the Co-Agent and the Lenders, that nothing contained in
               this paragraph (f) shall limit the right of the Agent, the
               Documentation Agent, the Managing Agents, the Co-Agent or the
               Lenders to take suit, action or proceedings against Pledgor in
               any other competent jurisdiction. Pledgor irrevocably waives any
               right it may have to the trial by jury of such proceedings in any
               such court.

                          [The signature page follows.]

                                      E-6

<PAGE>   114

        IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed as
of the day and year first above written.

                                            [____________________]

                                            By:
                                               ---------------------------------
                                                  Name:
                                                       -------------------------
                                                  Title:
                                                        ------------------------

                                      E-7

<PAGE>   115

                                  ATTACHMENT 1
                               TO PLEDGE AGREEMENT

                                 PLEDGED SHARES

<TABLE>
<CAPTION>

                                               Classes of      Voting       Issued and    Shares Owned         Shares
                             Jurisdiction       Equity           Or        Outstanding         by            Pledged to
       Subsidiary          Of Organization     Securities    Non-Voting       Shares         Pledgor           Agent
       ----------          ---------------     ----------    ----------    -----------    ------------       ----------
<S>                        <C>                 <C>             <C>          <C>           <C>               <C>

</TABLE>

                               E(1)-1

<PAGE>   116

                                    EXHIBIT F

                              ASSIGNMENT AGREEMENT

        THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of
Attachment 1 hereto, by and among:

               (1) The bank designated under item A of Attachment 1 hereto as
        the Assignor Lender ("Assignor Lender"); and

               (2) Each bank designated under item B of Attachment 1 hereto as
        an Assignee Lender (individually, an "Assignee Lender").

                                    RECITALS

        A. Assignor Lender is one of the Lenders which is a party to the Credit
Agreement dated as of April 3, 2000, among Flextronics International USA, Inc.
("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a
"Borrower" and collectively the "Borrowers"), Assignor Lender and the other
financial institutions parties thereto (collectively, the "Lenders") and ABN
AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). (Such credit
agreement, as amended, supplemented or otherwise modified in accordance with its
terms from time to time to be referred to herein as the "Credit Agreement").

        B. Assignor Lender wishes to sell, and Assignee Lender wishes to
purchase, all or a portion of Assignor Lender's rights under the Credit
Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement.

                                    AGREEMENT

        Now, therefore, the parties hereto hereby agree as follows:

        1. Definitions. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit Agreement
have the respective meanings given to those terms in the Credit Agreement.

        2. Sale and Assignment. Subject to the terms and conditions of this
Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate
to each Assignee Lender and each Assignee Lender hereby agrees to purchase,
accept and assume the rights, obligations and duties of a Lender under the
Credit Agreement and the other Credit Documents with Commitments or Loans equal
to the respective amounts set forth under the caption "Commitments or Loans
Assigned" opposite such Assignee Lender's name on Attachment 1 hereto. Such
sale, assignment and delegation shall become effective on the date designated in
Attachment 1 hereto (the "Assignment Effective Date"), which date shall be,
unless Agent shall otherwise consent, at least five (5) Business Days after the
date following the date counterparts of this Assignment Agreement are delivered
to Agent in accordance with Paragraph 3 hereof.

        3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5)
counterparts of this Assignment Agreement (to each of which is attached a fully
completed Attachment 1), each of which has been executed by Assignor Lender and
each Assignee Lender (and, to the extent required by Subparagraph 8.05(c) of the
Credit Agreement, by Borrowers and Agent) and (b) payment to Agent of the
registration and processing fee specified in Subparagraph 8.05(e) of the Credit
Agreement by Assignor Lender, Agent will transmit to Borrowers, Assignor Lender
and each Assignee Lender an Assignment Effective Notice substantially in the
form of Attachment 2 hereto, fully completed (an "Assignment Effective Notice").

                                      F-1

<PAGE>   117

        4. Assignment Effective Date. At or before 12:00 noon (California time)
on the Assignment Effective Date, each Assignee Lender shall pay to Assignor
Lender, in immediately available or same day funds, an amount equal to the
purchase price, as agreed between Assignor Lender and such Assignee Lender (the
"Purchase Price"), for each portion of a Commitment or Loan purchased by such
Assignee Lender hereunder. Effective upon receipt by Assignor Lender of each
Purchase Price payable by each Assignee Lender, the sale, assignment and
delegation to such Assignee Lender of such Commitments or Loans as described in
Paragraph 2 hereof shall become effective.

        5. Payments After the Assignment Effective Date. Assignor Lender and
each Assignee Lender hereby agree that Agent shall, and hereby authorize and
direct Agent to, allocate amounts payable under the Credit Agreement and the
other Credit Documents as follows:

               (a) All principal payments made after the Assignment Effective
        Date with respect to each portion of a Loan assigned to an Assignee
        Lender pursuant to this Assignment Agreement shall be payable to such
        Assignee Lender.

               (b) All interest, fees and other amounts accrued after the
        Assignment Effective Date with respect to each portion of a Loan
        assigned to an Assignee Lender pursuant to this Assignment Agreement
        shall be payable to such Assignee Lender.

Assignor Lender and each Assignee Lender shall make any separate arrangements
between themselves which they deem appropriate with respect to payments between
them of amounts paid under the Credit Documents on account of the Commitments or
Loans assigned to such Assignee Lender, and neither Agent nor Borrowers shall
have any responsibility to effect or carry out such separate arrangements.

        [6. Delivery of Notes. On or prior to the Assignment Effective Date,
Assignor Lender will deliver to Agent the Notes payable to Assignor Lender. On
or prior to the Assignment Effective Date, Borrowers will deliver to Agent new
Notes for each Assignee Lender and Assignor Lender, in each case in principal
amounts reflecting, in accordance with the Credit Agreement, their respective
Commitments (as adjusted pursuant to this Assignment Agreement). As provided in
Subparagraph 8.05(c) of the Credit Agreement, each such new Note shall be dated
the Closing Date. Promptly after the Assignment Effective Date, Agent will send
to each of Assignor Lender and the Assignee Lenders its new Notes and will send
to Borrowers the superseded Notes payable to Assignor Lender, marked
"Replaced."]

        7. Delivery of Copies of Credit Documents. [Concurrently with the
execution and delivery hereof, Assignor Lender will provide to each Assignee
Lender (if it is not already a Lender party to the Credit Agreement) conformed
copies of all documents delivered to Assignor Lender on or prior to the Closing
Date in satisfaction of the conditions precedent set forth in the Credit
Agreement.]

        8. Further Assurances. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.

        9. Further Representations, Warranties and Covenants. Assignor Lender
and each Assignee Lender further represent and warrant to and covenant with each
other, Agent and Lenders as follows:

               (a) Other than the representation and warranty that it is the
        legal and beneficial owner of the interest being assigned hereby free
        and clear of any adverse claim, Assignor Lender makes no representation
        or warranty and assumes no responsibility with respect to any
        statements, warranties or representations made in or in connection with
        the Credit Agreement or the other Credit Documents or the execution,
        legality, validity, enforceability, genuineness, sufficiency or value of
        the Credit Agreement or the other Credit Documents furnished or the
        Collateral or any security interest therein.

                                      F-2

<PAGE>   118

               (b) Assignor Lender makes no representation or warranty and
        assumes no responsibility with respect to the financial condition of
        Borrowers or any of their oblations under the Credit Agreement or any
        other Credit Documents.

               (c) Each Assignee Lender confirms that it has received a copy of
        the Credit Agreement and such other documents and information as it has
        deemed appropriate to make its own credit analysis and decision to enter
        into this Assignment Agreement.

               (d) Each Assignee Lender will, independently and without reliance
        upon Agent, Assignor Lender or any other Lender and based upon such
        documents and information as it shall deem appropriate at the time,
        continue to make its own credit decisions in taking or not taking action
        under the Credit Agreement and the other Credit Documents.

               (e) Each Assignee Lender appoints and authorizes Agent to take
        such action as Agent on its behalf and to exercise such powers under the
        Credit Agreement and the other Credit Documents as Agent is authorized
        to exercise by the terms thereof, together with such powers as are
        reasonably incidental thereto, all in accordance with Section VII of the
        Credit Agreement.

               (f) Each Assignee Lender agrees that it will perform in
        accordance with their terms all of the obligations which by the terms of
        the Credit Agreement and the other Credit Documents are required to be
        performed by it as a Lender.

               (g) Attachment 1 hereto sets forth administrative information
        with respect to each Assignee Lender.

        10. Effect of this Assignment Agreement. On and after the Assignment
Effective Date, (a) each Assignee Lender shall be a Lender with Commitments or
Loans as set forth under the caption "Commitments or Loans After Assignment"
opposite such Assignee Lender's name on Attachment 1 hereto and shall have the
rights, duties and obligations of such a Lender under the Credit Agreement and
the other Credit Documents and (b) Assignor Lender shall be a Lender with
Commitments or Loans as set forth under the caption "Commitments or Loans After
Assignment" opposite Assignor Lender's name on Attachment 1 hereto and shall
have the rights, duties and obligations of such a Lender under the Credit
Agreement and the other Credit Documents, or, if the Commitments or Loans of
Assignor Lender have been reduced to $0, Assignor Lender shall cease to be a
Lender and shall have no further obligation to make any Loans.

        11. Miscellaneous. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.

                                      F-3
<PAGE>   119

        IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in Attachment 1 hereto.

                                                                            , as
                                            --------------------------------
                                            Assignor Lender

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                                            , as
                                            --------------------------------
                                            Assignor Lender

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                                            , as
                                            --------------------------------
                                            Assignor Lender

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                                            , as
                                            --------------------------------
                                            Assignor Lender

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                      F-4

<PAGE>   120
CONSENTED TO AND ACKNOWLEDGED BY:

---------------------------------

By:
   --------------------------------
      Name:
           ------------------------
      Title:
            -----------------------

                                  ,
----------------------------------
As Agent

By:
   --------------------------------
      Name:
           ------------------------
      Title:
            -----------------------

ACCEPTED FOR RECORDATION
  IN REGISTER:

                                 ,
---------------------------------
As Agent

By:
   --------------------------------
      Name:
           ------------------------
      Title:
            -----------------------

                                      F-5

<PAGE>   121

                                  ATTACHMENT 1

                             TO ASSIGNMENT AGREEMENT

                                     PART A

<TABLE>
<CAPTION>

                                              Commitments or Loans                          Commitments or Loans
                                                    Assigned                                  After Assignment
                                     ----------------------------------------      ---------------------------------------
                                                               Facility B                                   Facility B
                                        Facility A            Commitment/             Facility A           Commitment/
                                        Commitment                Loan                Commitment               Loan
                                     ------------------     -----------------      -----------------     -----------------
                Assignor Lender:
              ----------------------
              <S>                     <C>                    <C>                    <C>                   <C>
                 --------------        $------------         $------------          $------------         $------------

                Assignee Lenders:
              ----------------------

                 --------------        $------------         $------------          $------------         $------------
                 --------------        $------------         $------------          $------------         $------------
                 --------------        $------------         $------------          $------------         $------------
                 --------------        $------------         $------------          $------------         $------------

</TABLE>

                                     F(1)-1

<PAGE>   122

                                     PART B

[ASSIGNEE PARTICIPANT]

Domestic Lending Office:

Euro-Dollar Lending Office:

Address for Notices:

Wiring Instructions:

                                     PART C

                    ASSIGNMENT EFFECTIVE DATE ________, ____

                                     F(1)-2

<PAGE>   123

                                  ATTACHMENT 2
                             TO ASSIGNMENT AGREEMENT

                                     FORM OF
                           ASSIGNMENT EFFECTIVE NOTICE

        Reference is made to the Credit Agreement, dated as of April 3, 2000,
among Flextronics International USA, Inc. ("FIUI") and The DII Group, Inc.
("DII", and together with FIUI, each a "Borrower" and collectively the
"Borrowers"), the financial institutions parties thereto (the "Lenders") and ABN
AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Agent hereby
acknowledges receipt of five executed counterparts of a completed Assignment
Agreement, a copy of which is attached hereto. [Note: Attach copy of Assignment
Agreement.] Terms defined in such Assignment Agreement are used herein as
therein defined.

        1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________.

        2. Pursuant to such Assignment Agreement, Assignor Lender is required to
deliver to Agent on or before the Assignment Effective Date the Notes payable to
Assignor Lender.

        3. Pursuant to such Assignment Agreement, Borrowers are required to
deliver to Agent on or before the Assignment Effective Date the following Notes,
each dated _________________ [Insert appropriate date]:

        [Describe each new Note for Assignor Lender and each Assignee Lender as
to principal amount.]

        4. Pursuant to such Assignment Agreement, each Assignee Lender is
required to pay its Purchase Price to Assignor Lender at or before 12:00 Noon [(
time)]on the Assignment Effective Date in immediately available funds.

                                            Very truly yours,

                                            ABN AMRO BANK N.V.
                                               as Agent

                                            By:
                                               ---------------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                     F(2)-1<PAGE>   1
                                                                   EXHIBIT 10.01

                                  OFFICE LEASE

THIS LEASE is made on the 28 day of March, 2000 by and between DLC Redwood City,
a California limited partnership (hereinafter called "Landlord"), NIKU, Inc. a
Delaware corporation (hereinafter called "Tenant").

        IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES
        AGREE AS FOLLOWS:

1.      Premises. Landlord leases to Tenant and Tenant leases from Landlord,
        upon the terms and conditions herein set forth, those certain premises
        (the "Premises") situated at 350 Convention Way which includes a 3 story
        Class "A" mid-rise office building of approximately 75,945 rentable
        square feet ("Building") and a 4 level parking garage (the Building and
        parking garage together "Complex") in the City of Redwood City, County
        of San Mateo, California, as outlined in Exhibit A, attached hereto and
        incorporated herein by this reference, and described as follows:

        Approximately seventy five thousand nine hundred forty-five (75,945)
        rentable square feet on the first, second and third floors of the
        complex (i.e.: 100% of the Building).

2.      Term. The term of this Lease shall commence on the date ("Commencement
        Date") which is the date that the Improvements are Substantially
        Completed, as these terms are hereinafter defined in Paragraph 6 and
        Exhibit C of this Lease which is attached hereto and made part hereof.

        Landlord shall send to Tenant a notification, in the form attached
        hereto as Exhibit B and incorporated herein by this reference, stating
        the Commencement Date, when it is ascertained.

        The term of the Lease shall end fifteen (15) years from the Commencement
        Date (the "Term"), unless sooner terminated pursuant to any provision
        hereof. Should the Lease not commence on the first (1st) day of the
        month, the Lease shall nonetheless terminate on the last day of the
        month, which is fifteen (15) years after the Commencement Date of the
        Term as provided herein.

3.      Rent. All sums payable to Landlord under this Lease, including but not
        limited to the sums set forth in this Paragraph 3, are deemed "Rent" for
        the Premises. All Rent shall be paid without deduction or offset, prior
        notice, abatement or demand, except as herein provided, to Landlord, c/o
        Dewey Land Company, 999 Baker Way, Suite 300 San Mateo, CA 94404
        Attention: Accounting, or at such other place as may be designated from
        time to time by Landlord.

        A.      Basic Rent. Tenant shall pay to Landlord, as basic rent ("Basic
                Rent") for the Premises the amount ("Basic Rent") for the
                initial year of the Lease Term of Four Hundred Thirty Two
                Thousand Eight Hundred Eighty-Six and 50/100ths Dollars
                ($432,886.50) ($5.70 per rentable square foot) per month in
                lawful money of the United States of America, subject to
                adjustment as provided in subparagraph 3.B, below.

                Basic Rent for the first month of the Term of this Lease shall
                be paid, in advance, on the execution hereof. Basic Rent shall,
                beginning with second month of the Term of this Lease, be due
                and payable in advance on the first day of such month and on the
                first (1st) day of each succeeding calendar month until the end
                of the term. Rent for any period during the Term hereof which is
                for less than one (1) full month shall be a pro rata portion of
                the monthly Rent payment.

                Tenant acknowledges that late payment by Tenant to Landlord of
                Basic Rent or any other payment due Landlord will cause Landlord
                to incur costs not contemplated by this Lease, the exact amount
                of such costs being extremely difficult and impracticable to
                fix. Such costs include, without limitation, processing and
                accounting charges, and late charges that may be imposed on
                Landlord by the terms of any encumbrance and note secured by any
                encumbrance covering the Premises. Therefore, if any installment
                of Rent or other payment due from Tenant is not received by
                Landlord within three (3) days following the date it is due and
                payable, Tenant shall pay to Landlord, in addition to the Rent
                due, and in addition to interest thereon as provided in
                Paragraph 14, an additional sum of ten percent (10%) of the
                overdue amount as a late charge. The parties agree that this
                late charge and interest represents a fair and reasonable
                estimate of the costs that Landlord will incur by reason of late
                payment by Tenant. Acceptance of any late charge shall not
                constitute a waiver of Tenant's default with respect to the
                overdue amount, nor prevent Landlord from exercising any of the
                other rights and remedies available to Landlord.

                                       1
<PAGE>   2

        B.      Basic Rent Increase. The Basic Rent shall be subject to
                adjustment as of the first day of the thirteenth month of the
                Term if the Term commenced on the first day of a calendar month,
                or the month in which the first anniversary of the Commencement
                Date occurs otherwise and annually thereafter each year
                ("Adjustment Date") as follows:

                The base for computing the adjustment is the Consumer Price
                Index, All Urban Consumers, San Francisco-Oakland-San Jose
                Metropolitan Area average (1982-1984=100), published by the
                United States Department of Labor, Bureau of Labor Statistics
                ("Index"), which is published most immediately preceding a date
                one (1) year prior to the Adjustment Date ("Beginning Index").
                The Index published most immediately preceding the Adjustment
                Date in question ("Extension Index") is to be used in
                determining the amount of the adjustment. If the Extension Index
                has increased over the Beginning Index, the Basic Rent for the
                following year (until the next Basic Rent adjustment) shall be
                set by multiplying the monthly Basic Rent applicable for the
                period immediately preceding the Adjustment Date by a fraction,
                the numerator of which is the Extension Index and the
                denominator of which is the Beginning Index. In no event shall
                the increase in Basic Rent on any Adjustment Date be less than
                three percent (3%) per year nor greater than six percent (6%)
                per year. In no event shall any delay by Landlord in notifying
                Tenant of the adjustment of Base Rent relieve Tenant of paying
                the adjusted Base Rent for any period prior to the date of
                notice from Landlord.

                If the Index is changed so that the base year differs from that
                in effect when the Term commences, the Index shall be converted
                in accordance with the conversion factor published by the United
                States Department of Labor, Bureau of Labor Statistics. If the
                Index is discontinued or revised during the Term, such other
                government index or computation with which it is replaced shall
                be used to obtain substantially the same result as would be
                obtained if the Index had not been discontinued or revised.

        C.      Additional Rent; Operating Expenses and Taxes. The parties
                acknowledge and agree that it is their intent to enter into an
                "absolute net" lease whereby the Basic Rent is net to Landlord
                of all expenses. Therefore, all expenses of maintenance, capital
                repair/replacement and operation of the Premises and Complex are
                to be paid and/or reimbursed by Tenant as Additional Rent as
                described in this Lease. For purposes of implementing this
                intention, the parties agree to the following:

                (1)     In addition to the Basic Rent, Tenant shall pay to
                        Landlord, as Additional Rent, Tenant's pro-rata share of
                        the Operating Expenses and Taxes as defined herein
                        (hereinafter "OPT"). Concurrently with each installment
                        of Basic Rent, Tenant shall pay one-twelfth (1/12) of
                        the Landlord's current estimate of OPT for the current
                        year. For the calendar year 2001 the monthly installment
                        of OPT is estimated to be $0.75 per rentable square
                        foot, per month, for a monthly sum Fifty Six Thousand
                        Nine Hundred Fifty Eight and 75/100ths Dollars
                        ($56,958.75) payable by Tenant hereunder. Landlord does
                        not guarantee this estimate.

                (2)     Tenant's proportionate share of Operating Expenses and
                        Taxes is agreed to be one hundred percent (100%).
                        Notwithstanding anything in this Lease to the contrary,
                        Landlord shall calculate Tenant's proportionate share of
                        the OPT (for purposes of both estimated and actual
                        calculations) as if the Building and Complex were fully
                        occupied regardless of the actual occupancy rate. If any
                        modifications are made to the Complex or the Building
                        which change Tenant's percentage of the rentable area of
                        the Building or the Complex, then Tenant's proportionate
                        share shall be adjusted.

                (3)     For purposes of this Lease, "Operating Expenses" shall
                        mean all direct costs of operating, maintaining and
                        managing the Building, Complex and the Premises
                        (including parking areas and parking garage) including,
                        but not limited to, all reasonable charges paid or
                        expenses incurred by Landlord for: repairs; maintenance;
                        utilities; water; capital improvements required to meet
                        the mandates of government regulations; exterior
                        cleaning and janitorial services; security services;
                        modifications or additional capital improvements or
                        replacement of existing building systems and equipment
                        to reduce the Operating Expenses; replacement of Complex
                        systems or components or Building sewer equipment
                        existing as of the Commencement Date when required
                        because of normal wear and tear regardless of whether
                        such items are capitalized or expensed; maintenance,
                        repair and replacement of landscaping, parking lot,
                        glazing, plumbing systems, electrical systems, security
                        systems, heating and air conditioning systems, energy
                        management systems, automatic fire extinguishing
                        systems, sculpture operating system, roofs, down spouts,
                        elevator equipment and controls, Building exterior and
                        interiors, ceilings, and Building exterior doors and

                                       2
<PAGE>   3

                        common area doors regardless of whether such items are
                        capitalized or expensed; rubbish removal or recycling;
                        property and liability insurance (including
                        deductibles); licenses, permits and inspections
                        including but not limited to business license or similar
                        taxes on rentals received; costs of supplies, tools and
                        equipment used in the repair or maintenance of the
                        Building, Complex and Premises; reasonable
                        administrative and property management fees equal to
                        four percent (4%) of Rent, and legal and accounting
                        expenses; amortization (together with interest at the
                        Interest Rate as defined in Paragraph 14 per annum on
                        the unamortized balance) on machinery and equipment used
                        to maintain the Complex, the Building, the parking areas
                        or the Premises; amortization (together with interest at
                        the Interest Rate per annum on the unamortized balance)
                        on other personal property used by Landlord in the
                        Building; and the reasonable cost of reasonably
                        contesting the validity or applicability of any
                        government enactments that may affect Operating
                        Expenses.

                (4)     "Taxes" shall mean all Real Property Taxes as hereafter
                        defined in Paragraph 7, but excluding all other taxes
                        which are paid by Landlord and which are to be
                        reimbursed by Tenant under this Lease.

Notwithstanding to the contrary of this Lease, OPT does not include the
following: (i) repairs, restoration or other work occasioned by condemnation, or
by fire, wind the elements or other casualty to the extent of any net insurance
proceeds received by Landlord under any insurance policy maintained by Landlord
covering the Building or Complex or any portion thereof (subject to landlord's
obligation to diligently and reasonably attempt to recover all proceeds and
awards available to cover such costs); (ii) any ground lease payments or any
interest or principal payments on any mortgage or other indebtedness of
Landlord, and points, commissions and legal fees associated with financing
covering the Building or the Complex; (iii) compensation paid to any employee of
Landlord other than maintenance and property management personnel below the
level of project manager, directly associated with the operation and maintenance
of the Building or Complex (it being agreed that the salaries of such management
personnel are covered by the management fee); (iv) any depreciation allowance or
expense; (v) repairs, alterations, additions, improvements or replacements made
to rectify or correct any non-compliance with any requirements of any
governmental authority as of the date of delivery of the Premises to Tenant;
(vi) damage and repairs necessitated by the gross negligence or willful
misconduct of Landlord or any of Landlord's Agents; (vii) Landlord's general
overhead expenses in excess of the property management fee; (viii) legal fees,
accountants' fees and other expenses incurred in connection with the defense of
Landlord's title to or Landlord's or Tenant's interest in the Complex or any
part thereof; (ix) charitable or political contributions of Landlord; (x) any
cost or expense related to the testing for, removal, transportation or storage
of Hazardous Materials (as defined below) from the Premises or Complex unless
such cost or expense arises due to the existence of Hazardous Materials arising
from the actions or inactions of Tenant or its Agents; (xi) interest, penalties
or other costs arising out of Landlord's failure to make timely payments of its
obligations, to the extent not caused by Tenant's default; (xii) any
environmental assessments, charges or liens arising in connection with the
remediation of Hazardous Materials from the building or Complex unless such cost
or expense arises due to the existence of Hazardous Materials arising from the
actions or inactions of Tenant or its Agents; and (xiii) cost to rebuild the
Complex due to an uninsured casualty.

Tenant shall pay its pro rata share of OPT as Additional Rent throughout the
Term of this Lease. From the Commencement Date, Tenant shall pay the amount
estimated by Landlord and set forth above in clause (1). Thereafter, prior to
the commencement of each calendar year during the Term of the Lease or within a
reasonable period thereafter, Landlord shall estimate Tenant's pro rata share of
such OPT for the following calendar year and Landlord shall notify Tenant of
such estimate in writing. Commencing on the first day of the next month for
which Landlord has notified Tenant of the revised estimated OPT, and on the
first day of every month thereafter, Tenant shall pay to Landlord, as Additional
Rent, one-twelfth (1/12th) of Tenant's estimated pro rata share of the yearly
OPT. If Landlord fails to furnish an estimate prior to the beginning of any
calendar year, the prior year's estimate of OPT shall remain in effect until a
revised estimate is made by Landlord. Within ninety (90) days after the end of
each calendar year for which Tenant has made estimated payments (the
"Reconciliation Date"), Landlord shall furnish Tenant a statement with respect
to such year, showing actual OPT charges for the past calendar year and the
total payments made by Tenant on the basis of Landlord's estimate. If Tenant's
actual pro rata share of the OPT exceeds the payments made by Tenant based on
Landlord's estimate, Tenant shall pay the deficiency to Landlord within ten (10)
days of Tenant's receipt of Landlord's statement. If the total payments by
Tenant based on Landlord's estimate exceed Tenant's actual pro rata share of the
OPT, Tenant's excess payment shall be credited toward future payments by Tenant
of Basic Rent and/or Additional Rent or refunded to Tenant within ten (10) days
of Landlord's statement to Tenant if no future Basic Rent or Additional Rent is
to become due. Landlord's failure to provide its estimate of OPT prior to the
commencement of any year or its failure to

                                       3
<PAGE>   4

        provide a reconciliation by the Reconciliation Date shall not be deemed
        a waiver of Landlord's right to issue an increased estimate of OPT or to
        collect an underpayment of OPT.

        Upon request by Tenant to Landlord, Landlord shall allow Tenant or
        Tenants representative to review, audit, and copy Landlord's records of
        OPT, at Landlord's office in place where the records are kept, at all
        reasonable times during normal business hours. Tenant shall reimburse
        Landlord within ten (10) days of Landlord's statement of expenses
        incurred by Landlord for such review to Tenant.

        All Lease provisions with respect to late charges and interest on unpaid
        Rent shall be applicable to Additional Rent, as well as to Basic Rent
        and all other monetary amounts due from Tenant under this Lease.

        D.      Monetary Obligations as Rent. All monetary amounts payable by
                Tenant to Landlord under this Lease including but not limited to
                Basic and Additional Rent, and amounts paid by Landlord to cure
                Tenant's default(s) shall be deemed "Rent" hereunder.

        E.      First Month's Rent. Landlord hereby acknowledges that upon
                Tenant's execution of the Lease, Tenant shall have deposited
                Four Hundred Eighty Nine Thousand Eight Hundred Forty-Five and
                25/100ths Dollars ($489,845.25) which represents a portion of
                First Month's Basic Rent of, and the estimated OPT for, the
                first month of which represents and shall be applied to the
                First Month's Basic Rent of, Four Hundred Thirty Two Thousand
                Eight Hundred Eighty Six and 50/100ths Dollars ($432,886.50) and
                the estimated OPT of Fifty Six Thousand Nine Hundred Fifty-Eight
                and 75/100ths Dollars ($56,958.75).

4.      Security Deposit. Landlord acknowledges that, upon Tenant's execution of
        this Lease, Tenant shall have deposited with Landlord a security deposit
        in the sum of Two Million Nine Hundred Forty Thousand and No/100ths
        Dollars ($2,940,000.00) in cash (the "Cash Deposit") and concurrently
        herewith Tenant shall deliver to Landlord a security deposit in the form
        of an irrevocable standby letter of credit payable to Landlord in the
        initial amount of Five Million Eight Hundred Seventy Eight Thousand One
        Hundred Forty Three and No/100ths Dollars ($5,878,143.00) (the "Letter
        of Credit") (together with the Cash Deposit, the "Security Deposit") to
        secure Tenant's full and faithful performance of each term, covenant,
        and condition of this Lease to be performed by Tenant. The Letter of
        Credit and any substitute Letter of Credit shall be issued in a form and
        by a bank approved by Landlord (the "Bank") in the amount required by
        this Section 4. Landlord shall hold the Letter of Credit as security for
        the performance by Tenant of all obligations on the part of Tenant to be
        kept and performed. Landlord shall have the right, from time to time
        without prejudice to any other remedy Landlord may have on account
        thereof, to draw upon the Letter of Credit and apply such funds to
        Landlord's damages arising from any Event of Default as herein defined
        on the part of Tenant, in which event Tenant shall restore the balance
        of the Letter of Credit to the amount required hereunder. Tenant shall
        maintain the Letter of Credit, or a substitute Letter of Credit from the
        Bank approved by Landlord, in accordance with the terms hereof, in full
        force and effect at all times during the entire Lease Term and for a
        period of thirty (30) days thereafter (the last day of such 30 day
        period shall be referred to herein as the "Return Date"). If the Letter
        of Credit shall expire before the Return Date, Tenant shall replace the
        Letter of Credit deposited with Landlord by providing Landlord with a
        substitute Letter of Credit at least thirty (30) days prior to the
        expiration date of the then effective Letter of Credit being held by
        Landlord, in the applicable amount required hereunder and the failure to
        do so shall constitute a default entitling Landlord to draw the full
        amount of the Letter of Credit and hold the proceeds thereof as a cash
        security deposit hereunder. No later than the Return Date, Landlord
        shall return the Security Deposit (as the same may have been reduced
        pursuant to this Section), or so much thereof as shall not have
        theretofore been applied in accordance with the terms of this Section or
        drawn upon by Landlord and applied by Landlord to cure any default of
        Tenant existing at the expiration or earlier termination of this Lease,
        or shall notify Tenant of any facts which constitute a default by Tenant
        under this Lease which entitles Landlord to retain some or all of the
        Security Deposit and further notify Tenant of the date by which Landlord
        shall have completed its determination of the amount of the Security
        Deposit to be retained which shall be no more than thirty (30) days
        thereafter. Notwithstanding the foregoing provisions of this Lease, if,
        as of the fourth (4th) anniversary date of the Commencement Date as well
        as, the ninth (9th) anniversary date of the Commencement Date
        thereafter: (1) there has been no breach of any undertaking by Tenant
        under this Lease beyond any applicable grace period; (2) Tenant is a
        publicly held company with a net worth of One Billion and no/100ths
        Dollars $1,000,000,000.00 or greater in accordance with GAAP (or such
        other accounting standard that has replaced GAAP); (3) Tenant has a
        pre-tax profit margin from normal operations excluding one-time events
        for the prior twelve (12) months of fifteen (15%) percent or greater;
        (4) All rent and other sums due under the Lease have been paid when due;
        and (5) Tenant is not, nor has ever been in default under the terms and
        conditions of this Lease, then the face amount of the Letter of Credit
        shall be reduced by One Million Nine Hundred Fifty Nine Thousand Three
        Hundred Eighty-One and No/100ths Dollars ($1,959,381.00). If Tenant
        fails to pay any Basic Rent, Additional Rent or any other monetary

                                       4
<PAGE>   5

       amount due from Tenant hereunder, or fails to keep or perform any term,
       covenant or condition on its part to be made or performed or kept under
       this Lease beyond any applicable grace period, then Landlord may, but
       shall not be obligated to, and without waiving or releasing Tenant from
       any obligation under this Lease, use, apply or retain the whole or any
       part of said security deposit (i) to the extent of any sum due to
       Landlord; or (ii) to make any required payment provided for hereunder on
       Tenant's behalf; or (iii) to compensate Landlord for any loss, damage,
       reasonable attorneys' fees or expense sustained by Landlord due to
       Tenant's default. Landlord shall be entitled to draw on the Letter of
       Credit before utilizing any cash Security Deposit. If the Security
       Deposit is so applied, Tenant shall, within ten (10) days of written
       demand by Landlord, remit to Landlord sufficient funds to restore the
       security deposit to its original sum, Tenant's failure to do so shall be
       a material breach of this Lease. No interest shall accrue on the security
       deposit held by Landlord, or shall Landlord be required to keep such
       security deposit separate from its general funds.

5.      Use of the Premises. The Premises shall be used exclusively for general
        office which may include software engineering and sales and any office
        use related thereto. Tenant shall not use, or permit the Premises or any
        part thereof to be used, for any purpose other than the purpose for
        which the Premises are hereby leased; and no use shall be made or
        permitted to be made of the Premises, nor acts done in, on or about the
        Premises, which will increase the existing rate of insurance upon the
        Complex, or cause a cancellation of any insurance policy covering the
        Complex, or any part thereof, nor shall Tenant sell or permit to be
        kept, used or sold, in or about the Premises, any article which may be
        prohibited by the standard form of fire insurance policies. Tenant shall
        not commit, or suffer to be committed, any waste upon the Premises, or
        any public or private nuisance, or other act or thing which may injure,
        annoy or disturb the quiet enjoyment of any occupant of neighboring
        properties or other tenant in the Complex nor, without limiting the
        generality of the foregoing, shall Tenant allow the Premises to be used
        for any improper, immoral, unlawful or objectionable purpose. Tenant
        shall not place any harmful liquids in the drainage system of the
        Premises or of the Complex. Tenant shall not place any loads upon the
        floors, walls, ceilings or roof which might endanger the structure, nor
        overload any electrical, mechanical or other systems.

        No waste materials or refuse shall be dumped upon or permitted to remain
        upon any part of the Premises outside the Building except in trash
        containers placed inside exterior enclosures approved for that purpose
        by Landlord, or inside the Building proper where designated by Landlord.
        No materials or articles of any nature shall be stored upon or permitted
        to remain outside of the Building. Subject to the provisions of
        Paragraph 34 of this Lease, Tenant shall not place anything or allow
        anything to be placed near the glass of any window, door, partition or
        wall which may appear unsightly from outside the Premises (including the
        common areas of the Complex). No loudspeaker or other device, system or
        apparatus which can be heard outside the Premises shall be used in or at
        the Premises without the prior written consent of Landlord which consent
        may be granted at Landlord's absolute discretion.

        Tenant covenants and agrees that no diminution of light, air or view by
        any structure which may be. hereafter erected, whether or not by
        Landlord, or use of the Complex by any other occupants or use of
        neighboring buildings or areas by others, shall in any way affect this
        Lease, entitle Tenant to any reduction of Rent hereunder, or result in
        any liability of Landlord to Tenant.

        Tenant shall comply with all the covenants, conditions and/or
        restrictions ("CC&R's") affecting the Premises and the Complex, and all
        rules and regulations affecting the Premises, which rules and
        regulations shall be enforced by Landlord in a non-discriminatory and
        non-arbitrary manner.

        The term "Hazardous Material" means any hazardous or toxic substance,
        material or waste, the storage, use or disposition of which is or
        becomes regulated by any governmental authority, including, but not
        limited to, municipal, county, the State of California or the United
        States government. The term "Hazardous Material" includes, without
        limitation, any material or substance which is (i) defined as a
        "hazardous waste", "extremely hazardous waste" or "restricted hazardous
        waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to
        Section 25140, of the California Health and Safety Code, Division 20,
        Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous
        substance" under Section 25136 of the California Health and Safety Code,
        Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance
        Account Act), (iii) defined as a "hazardous material", "hazardous
        substance" or "hazardous waste" under Section 25501 of the California
        Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials
        Release Response Plans and Inventory), (iv) defined as a "hazardous
        substance" under Section 25281 of the California Health and Safety Code,
        Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances),
        (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as
        hazardous or extremely hazardous pursuant to Article 11 of Title 22 of
        the California Administrative Code, Division 4, Chapter 20, (viii)
        designated as a "hazardous substance" pursuant to Section 311 of the
        Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix)
        defined as a "hazardous waste" pursuant to Section 1004 of the Federal
        Resource Conservation

                                       5
<PAGE>   6

        and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section
        6903), (x) defined as a "hazardous substance" pursuant to Section 101 of
        the Comprehensive Environmental Response Compensation and Liability Act,
        42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601) or (xi) listed
        or defined as "hazardous waste", "hazardous substance" or other similar
        designation by any regulatory scheme of the State of California or the
        United States government.

        Tenant, at its sole cost, shall comply with all laws and regulations
        relating to the storage, use and disposal of Hazardous Materials at the
        Complex. If Tenant does store, use or dispose of any Hazardous Materials
        at the Complex, Tenant shall notify Landlord, in writing, at least five
        (5) days prior to their first appearance at the Complex; provided,
        however, that Tenant shall have the right to store reasonable amounts of
        chemicals and/or solvents used for ordinary office equipment without
        notifying Landlord. Tenant shall be solely responsible for and shall
        defend, with counsel reasonably acceptable to Landlord indemnify and
        hold Landlord, and Landlord's partners, officers, employees, successors,
        assigns and agents, harmless from and against all claims, demands,
        damages, costs and liabilities, including reasonable attorneys' fees and
        costs, arising out of or in connection with the storage, use or disposal
        of Hazardous Materials by Tenant, its agents, employees, contractors or
        sublessees.

        If the presence of Hazardous Materials at the Complex caused or
        permitted by Tenant, its agents, employees, contractors, or sublessees
        results in or is likely to result in contamination or deterioration of
        water or soil resulting in a level of contamination greater than the
        safe levels established by any governmental agency having jurisdiction
        over such contamination, or if any investigation of conditions, or any
        clean-up, remedial removal or restoration work is required by any
        federal, state or local governmental agency or political subdivision
        ("Governmental Agency") because of the level of Hazardous Material in
        the soil or ground water or at the Complex caused or permitted by
        Tenant, its agents, employees, contractors or sublessees, then Tenant
        shall promptly, and at its sole cost, take any and all action necessary
        to investigate and clean up such contamination. Tenant shall further be
        solely responsible for, and shall defend, with counsel acceptable to
        Landlord, indemnify and hold Landlord and Landlord's, members, partners,
        officers, employees, successors, assigns and agents harmless from and
        against, all claims, demands, damages, costs and liabilities judgments
        or obligations, including attorneys' fees and costs, arising out of or
        in connection with any removal, clean-up and restoration work and
        materials required hereunder to return the Premises, the Complex or the
        surrounding properties to the condition existing prior to the appearance
        of the Hazardous Materials caused or permitted by Tenant, its agents,
        employees, contractors or sublessees.

        If the presence of Hazardous Materials at the Complex caused or
        knowingly permitted by Landlord, its agents, employees, contractors, or
        sublessees results in contamination of deterioration of water or soil
        resulting in a level of contamination greater than the safe levels
        established by any governmental agency having jurisdiction over such
        contamination, or if any investigation of conditions, or any clean-up,
        remedial removal or restoration work is required by any Governmental
        Agency because of the level of Hazardous Material in the soil or ground
        water or at the Complex, then Landlord shall promptly, and at its sole
        cost, take any and all action necessary to investigate and clean up such
        contamination. Landlord shall further be solely responsible for, and
        shall defend, with counsel reasonably acceptable to Tenant, indemnify
        and hold Tenant and Tenant's members, partners, officers, employees,
        successors, assigns and agents harmless from and against all claims,
        demands, damages, costs and liabilities, judgments or obligations,
        including reasonable attorneys' fees and costs, arising out of or in
        connection with any removal, clean-up and restoration work and materials
        required hereunder to return the Premises, the Complex or the
        surrounding properties to a condition as approved by the County of San
        Mateo or any other such agency having jurisdiction over these types of
        matters.

        If Landlord has good cause to believe that the Premises or the Complex
        have or may become contaminated by Hazardous Materials, Landlord may
        cause tests to be performed, including wells to be installed at the
        Complex, and may cause the soil or ground water to be tested to detect
        the presence of Hazardous Materials by the use of such tests as are then
        customarily used for such purposes. The cost of such tests of the
        installation, maintenance, repair and replacement of such wells shall be
        paid by Tenant provided that Tenant, its agents, employees, or
        contractors are a responsible party for such contamination by Hazardous
        Materials.

        The termination of the Lease shall not terminate the parties' respective
        rights and obligations under this Paragraph 5, and the parties hereto
        expressly agree that the provisions contained herein shall survive the
        termination of Tenant's leasehold estate.

        Tenant shall abide by all laws, ordinances and statutes, as they now
        exist or may hereafter be enacted by legislative bodies having
        jurisdiction thereof, relating to its use and occupancy of the Premises.

                                       6
<PAGE>   7

        The provisions of this Paragraph 5 are for the benefit of the Landlord
        only and shall not be construed to be for the benefit of any other
        person or occupant of the Complex.

6.      Improvements. Landlord will, at its sole expense and using contractors
        of its choice, make improvements ("Improvements") to the Premises as
        specified in Exhibit C attached hereto and incorporated herein by this
        reference. On or before June 1. 2000, Tenant shall deliver to Landlord,
        for Landlord's approval, its final construction drawings and
        specifications plans with detailed listing of finish materials, all of
        which have been approved by Tenant and all of which shall have been
        prepared by Landlord's Architect (Architopia). Tenant agrees to provide
        its written comments to Landlord within five (5) days from receipt of
        said draft construction documents and three (3) days following the
        receipt of any revision to the construction documents. Notwithstanding
        anything in this Lease to the contrary, if Tenant fails to provide
        Landlord with such final construction documents and specifications plans
        and finish materials approved by Tenant on or before June 1. 2000, or if
        Tenant changes any of the construction documents and specifications or
        finish materials subsequent to such date or if Tenant fails to provide
        Landlord within the time periods specified above, with its approval of
        the construction documents or if Tenant makes changes to the
        construction documents after such timeframes specified above, or if
        Tenant should delay Landlord's contractor from timely completing the
        construction of the Improvements, then the Commencement Date shall be
        the Anticipated Completion Date as hereinafter set forth, or the date of
        Landlord's notification to Tenant of Substantial Completion (as
        hereinafter defined) of the Improvements, or the date on which Tenant
        takes possession of the Premises, whichever shall first occur.

        Upon Landlord's approval (which shall not be unreasonably withheld or
        delayed) of such final construction documents and specifications
        including finish materials approved by Tenant, Landlord shall cause
        Landlord's contractor to diligently undertake to construct the
        Improvements in accordance with such final plans, specifications and
        finish materials as approved by Landlord and Tenant (collectively
        referred to as "Final Plans"). All such construction shall be performed
        with due diligence and in substantial accordance with the Final Plans.
        Landlord agrees to use all commercially reasonable efforts to
        substantially complete the Improvements by March 1, 2001 ("Anticipated
        Completion Date"), but without any warranty as to when such Improvements
        shall be substantially completed.

        Landlord's obligation to construct the Improvements is specifically
        subject to any changes or other requirements of or imposed by all
        applicable governmental body(ies), agency(ies) and/or utility(ies);
        Landlord shall notify Tenant of any such changes and/or requirements
        promptly after Landlord becomes aware of the same. Any improvements to
        the Premises not expressly shown or stated in the Final Plans shall be
        made by Landlord on behalf of Tenant at Tenant's sole cost and expense
        in accordance with Paragraph 11 of this Lease; provided, however, that
        notwithstanding anything in this Lease to the contrary, any delay in
        Landlord's construction of the Improvements caused in whole or in part
        by Tenant including, but not limited to, delays caused by additional
        improvements made or any changes requested by Tenant, shall not delay
        the Commencement Date of this Lease, and Substantial Completion, as
        hereinafter defined, for purposes of determining the Commencement Date
        of this Lease, shall be at such time as the Improvements would have been
        Substantially Complete absent such additional improvements made or
        changes requested by Tenant. The Landlord's Architect shall determine
        this date of Substantial Completion by giving written notice thereof to
        Landlord and Tenant, which notice shall be deemed a part of this Lease,
        Landlord and Tenant agree to accept such date as determined by
        Landlord's Architect.

        Landlord will allow Tenant to have access to the Premises beginning
        seven (7) days in advance of the estimated date for Substantial
        Completion in order for Tenant to perform Tenant's fit-up work, provided
        that neither Tenant nor its vendors shall interfere with or delay the
        performance of work by Landlord's contractors, vendors, inspectors and
        the like.

        It is understood that the Final Plans and the exact location of doors,
        walks, lighting, plumbing and all other facilities and improvements are
        subject to such minor changes (for example: Schlage lock set can be
        replaced with like kind alternate) as Landlord, or Landlord's architect
        or general contractor in charge of the construction of the Improvements,
        determine to be necessary desirable in the course of construction of or
        to the Premises, and no such changes shall affect this Lease or
        constitute a breach by Landlord hereunder. Landlord agrees to not
        materially deviate from the Final Plans without Tenant's consent, which
        consent shall not be unreasonably withheld or delayed.

        "Substantial Completion" shall mean the earlier of (i) the date upon
        which the City of Redwood City issues a temporary certificate of
        occupancy for the Premises, and Landlord's Architect certifies that all
        of the Improvements are substantially complete, or (ii) the date upon
        which all of the Improvements would have been substantially complete,
        but for delays caused by Tenant as provided in this Section 6 and
        Exhibit C of this Lease, but subject to usual punch list items of

                                       7
<PAGE>   8

        Improvements and except for Tenant's responsibility to obtain licenses
        and other approvals, for which Tenant agrees to be solely responsible
        (Landlord shall be responsible for customary certificate of occupancy
        from the City of Redwood City provided Tenant takes no action to prevent
        or hinder the issuance of such Certificate of Occupancy). If such
        Improvements do not conform exactly to the Final Plans, but the general
        appearance, structural integrity and Tenant's use and occupancy of the
        Premises, the Complex and such Improvements are not materially or
        unreasonably affected by such deviation(s), it is agreed that the
        Improvements shall be deemed to be "Substantially Completed" for
        purposes of this Lease, and Tenant's obligation to pay Rent hereunder
        shall not be affected by such deviation(s). Upon Substantial Completion,
        Tenant agrees to accept the Premises and such Improvements as so
        constructed by Landlord. However, notwithstanding the above, Tenant
        shall have thirty (30) days from the date of Substantial Completion to
        provide Landlord with a list of items requiring repair or replacement.
        Upon Landlord's receipt of such list, Landlord shall proceed to correct
        such "punch list" items with due diligence.

7.      Taxes and Assessments.

        A. Tenant shall pay before delinquency any and all taxes, assessments,
license fees and public charges levied, assessed or imposed upon or against
Tenant's fixtures, equipment, furnishings, furniture, appliances and personal
property installed or located on or within the Premises. Tenant shall cause said
fixtures, equipment, furnishings, furniture, appliances and personal property to
be assessed and billed separately from the real property of Landlord. If any of
Tenant's said personal property shall be assessed with Landlord's real property,
Tenant shall pay to Landlord the taxes attributable to Tenant within thirty (30)
days after receipt of a written statement from Landlord setting forth the taxes
applicable to Tenant's property.

        B. All Real Property Taxes shall be paid by Landlord and be reimbursed
by Tenant to Landlord as provided in Section 3 of this Lease. However, if a
supplemental assessment is levied in any calendar year subsequent to the
Landlord's estimate of the OPT for that calendar year (as provided in Section 3
of this Lease), and payment is due for said supplemented assessment during this
same calendar year, Landlord reserves the right to adjust its estimate of the
OPT for that calendar year so as to collect such reimbursement from Tenant to
timely pay (before delinquency) said supplemented assessment.

        The term "Real Property Taxes," as used herein, shall mean and include:
(i) all taxes, assessments, levies and other charges of any kind or nature
whatsoever, general and special, foreseen and unforeseen (including without
limitation, all installments of principal and interest required to pay any
general or special assessments for public improvements, and any increases
resulting from reassessments caused by any change in ownership of the Premises,
the Building or the Complex, or otherwise) now or hereafter imposed by any
governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy, or use of all or any
portion of the Complex, the Building or the Premises (as now constructed or as
may at any time hereafter be constructed, altered, or otherwise changed) or
Landlord's interest therein; any improvements of Landlord located within the
Complex, the Building or the Premises (regardless of ownership); the fixtures,
equipment and other property of Landlord, real or personal, that are an integral
part of and located in, on or about the Complex, the Building or the Premises;
and landscaping areas, walkways and parking areas; and (ii) all costs and fees
(including reasonable attorneys' fees) incurred by Landlord in reasonably
contesting any Real Property Tax and in negotiating with public authorities as
to any Real Property Tax. "Real Property Taxes" shall not include any franchise,
rental, income, inheritance or profit tax, capital levy or excise tax payable by
Landlord.

        Tenant shall have the right to contest by appropriate legal proceedings
the amount or validity of any taxes, including any assessments, taxes, fees,
levies and charges that may be imposed by governmental agencies for such
purposes as fire protection, street, sidewalk, road, utility construction and
maintenance, refuse removal and for other governmental services which may
formerly have been provided without charge to property owners or occupants,
provided Tenant shall pay all taxes when due so as not to cause any delinquency
or penalty to be incurred. In addition, Tenant acknowledges that the foregoing
does not waive Tenant's obligation to pay the taxes, fees, levies and charges as
a part of OPT in Sections 3 and 7 of this Lease.

        If at any time during the Term of this Lease the taxation or assessment
of the Complex, the Building or the Premises prevailing as of the Commencement
Date of this Lease shall be altered so that in lieu of or in addition to any
Real Property Tax described above there shall be levied, assessed or imposed
(whether by reason of a change in the method of taxation or assessment, creation
of a new tax or charge, or any other cause) an alternate or additional tax or
charge (i) on the value, use or occupancy of the Complex, the Building or the
Premises or Landlord's interest therein, or (ii) on or measured by the gross
receipts, income or rentals from the Complex, the Building or the Premises, on
Landlord's business of leasing the Complex, the Building or the Premises, or
Landlord's interest therein, or based on parking, employment, production or the
like in, on or about the Complex, the Building or the Premises, or computed in
any manner with respect to the operation of the Complex, the Building or the
Premises, then any such tax or charge, however designated, shall be included
within the meaning of the term "Real Property Taxes" for purposes of this Lease.
If any

                                       8
<PAGE>   9

Real Property Tax is based in part upon property or rents unrelated to the
Complex, the Building or the Premises, then only that part of such Real Property
Tax that is fairly allocable to the Complex, the Building or the Premises shall
be included within the meaning of the term "Real Property Taxes".

        If, at any time during the Term of this Lease, any assessments which
would be deemed to be Real Property Taxes are levied against the Premises, the
Building or the Complex, Landlord may elect either to pay the assessment in full
or to allow the assessment to go to bond and to pay it in installments. In
either case, however, Tenant shall only be obligated to pay to Landlord, with
regard to any such assessment, each time payment of Real Property Taxes is made,
a sum equal to that which would have been payable by Tenant as its pro rata
percentage of the installments of principal and interest which would have become
due during the Term of this Lease had Landlord allowed the assessment to go to
bond.

8.      Insurance.

        A.      Indemnity. Tenant agrees to indemnify and defend (with counsel
                reasonably acceptable to Landlord) Landlord against and hold
                Landlord and Landlord's, members, partners, officers, employees,
                and successors, assigns and agents harmless from any and all
                demands, claims, damages, costs and liabilities, causes of
                action, judgments or obligations, and all reasonable expenses
                incurred in investigating or resisting the same (including
                reasonable attorneys' fees), on account of, or arising out of,
                the Tenant's, its employees, invitees', licensees', sublessees',
                agents' and contractors' use or occupancy of the Premises except
                to the extent caused solely by Landlord's gross negligence or
                willful misconduct. This Lease is made on the express condition
                that Landlord shall not except to the extent caused solely by
                Landlord's gross negligence or willful misconduct be liable for,
                or suffer loss by reason of, injury to person or property, from
                whatever cause, in any way connected with the use or occupancy
                of the Premises specifically including, without limitation, any
                liability for injury to the person or property of Tenant, its
                agents, officers, employees, licensees and invitees.

        B.      Liability and Worker's Compensation Insurance. Tenant shall, at
                Tenant's expense, obtain and keep in force during the Term of
                this Lease a policy of worker's compensation insurance and a
                policy of comprehensive public liability insurance insuring
                Landlord and Tenant, with cross-liability endorsements, against
                any liability arising out of the Tenant's, its employees, agents
                and contractors use or occupancy of the Premises and all areas
                appurtenant thereto, including parking areas. Such public
                liability insurance shall be in an amount satisfactory to
                Landlord of not less than $10,000,000 combined single limit for
                bodily injury or death as a result of any one occurrence, and
                $10,000,000 for damage to property as a result of any one
                occurrence. The insurance shall be with companies admitted to do
                business in the State of California and companies of Best's
                Rating Guide of A+9 or better. Such policies shall be written as
                a primary policy, not contributing with and not in excess of
                coverage which Landlord may carry. During the Term of this
                Lease, liability limits shall be increased from time to time, as
                reasonably determined by Landlord. Tenant shall deliver to
                Landlord, prior to taking possession of the Premises, a
                certificate of insurance evidencing the existence of the policy
                required hereunder, and such certificate shall certify that the
                policy (i) names Landlord as an additional insured; (ii) shall
                not be canceled or altered without thirty (30) days prior
                written notice to Landlord; and (iii) the coverage is primary
                and any coverage carried or obtained by Landlord is in excess
                thereto. Tenant shall furnish renewal certificates at least
                thirty (30) days prior to the expiration date of any such
                policy.

                Landlord may at its election, maintain in effect its own policy
                of public liability and property damage insurance insuring
                against any liability (including bodily injury or property
                damage) arising on or about the Complex with policy limits
                determined by Landlord in its sole discretion. Such insurance
                costs and deductibles shall be included in Operating Expenses
                described in Paragraph 3 above.

        C.      Insurance of Personal Property, Fixtures and Equipment. Tenant
                shall at all times during the term hereof, and at its sole cost
                and expense, maintain in effect policies of insurance covering:
                (i) its personal property, inventory, alterations, fixtures and
                equipment located on the Premises, in an amount not less than
                one hundred percent (100%) of their actual replacement value,
                providing protection against any peril included within the
                classification "Fire and Extended Coverage," together with
                insurance against sprinkler damage, vandalism and malicious
                mischief; and (ii) all plate glass on the Premises. The proceeds
                of such insurance, so long as this Lease remains in effect,
                shall be used to repair or replace the personal property,
                inventory, alterations, fixtures, equipment and plate glass so
                insured.

        D.      Property Insurance. Landlord shall obtain and keep in force
                during the Term of this Lease a policy or policies of insurance
                coverage including special broad form coverage (and, at

                                       9
<PAGE>   10

                Landlord's sole and absolute discretion, earthquake and flood),
                for loss or damage to the Premises and to the Complex, in the
                amount of the full replacement value thereof. Such insurance
                costs and deductibles shall be included in Operating Expenses
                described in Paragraph 3 above.

        E.      Mutual Waiver of Subrogation. The parties hereto release each
                other and their respective authorized representatives partners,
                members, officers, agents, employees and servants, from any and
                all claims, demands, loss, expense or injury to any person, or
                to the Premises or Complex, or to the furnishings, fixtures or
                equipment located therein, caused by or resulting from perils,
                events or happenings which are the subject of insurance in force
                at the time of such loss. Each party shall cause each insurance
                policy obtained by it to provide that the insurer waives all
                right of recovery by way of subrogation against either party in
                connection with any damage covered by any policy. Neither party
                shall be liable to the other for any damage caused by fire or
                any of the risks insured against under any insurance policy in
                effect as required by this Lease.

        9.      Operation, Management, Services and Utilities. All operation and
                management of the Premises and the complex including, but not
                limited to, the furnishing of water, gas, light, heat, power,
                electricity, trash pick-up, property management services,
                landscaping, janitorial services, sewer charges, pest control,
                security charges, and all other services supplied to or consumed
                on the Premises or the Complex shall be controlled by Landlord
                and shall be included in Operating Expenses described in
                Paragraph 3 above, except to the extent such charges are
                directly billed to Tenant. Landlord agrees to manage the
                Property in a first class manner similar to other comparable
                projects in the Redwood City, San Mateo, Palo Alto marketplace.
                Landlord shall not be liable for and Tenant shall not be
                entitled to any abatement or reduction of Rent by reason of any
                interruption or failure of utility or other services to the
                Premises during the Lease term. Utilities and services shall be
                provided in accordance with the Standards for Utilities and
                Services set forth in Exhibit D attached hereto and incorporated
                herein. The parties agree to the terms and provisions set forth
                in the Standards and to any modifications or additions thereto.

10.     Repair and Maintenance.

        A.      Subject to provisions of Paragraphs 10B and 15 of this Lease,
                below, Landlord shall keep and maintain the roof, paving,
                structural elements, landscaping, irrigation systems and
                exterior walls of the Complex in good order and repair. Landlord
                shall also keep and maintain in good order and repair the
                windows, window frames, doors, hardware, interior walls, and the
                electrical, plumbing, elevators, lighting, energy management
                systems, security systems, fire sprinklers, heating and air
                conditioning systems. Landlord agrees to make such repairs as
                necessary as promptly as possible. Such expenses shall be
                included in Operating Expenses for purposes of Paragraph 3
                above. If, however, any repairs or maintenance are required
                because of an act or omission of Tenant, or its agents,
                employees or invitees, then Tenant shall pay to Landlord upon
                demand one hundred percent (100%) of the costs of such repair or
                maintenance. Notwithstanding anything in this Lease to the
                contrary, after the initial construction of the Improvements in
                the Premises by Landlord pursuant to the provisions of Paragraph
                6 of this Lease, Landlord shall have no obligation to alter,
                remodel, improve, decorate, or paint the Premises or any part
                thereof.

                Should Landlord fail to maintain the electrical, plumbing,
                elevators, lighting, energy management systems, security
                systems, fire sprinklers, and heating and air conditioning
                systems (the "Building Systems") in good order and repair, then
                Tenant may make or do the same at Tenant's expense provided,
                however, Tenant shall give Landlord three (3) days advance
                written notice and Tenant shall use such contractors to do such
                work so as to not void or in any way alter the existing
                warranties of the Building System(s) so being repaired.

        B.      Except as expressly provided in subparagraph 10.A above, Tenant
                shall, at its sole cost, keep and maintain the interior of the
                Premises in good and sanitary order, first class condition and
                repair.

                Should Tenant fail to maintain the Premises as required
                hereunder forthwith upon notice from Landlord, then Landlord, in
                addition to all other remedies available hereunder or by law,
                and without waiving any alternative remedies, may make or do the
                same, and in that event, Tenant shall reimburse Landlord for the
                cost of such maintenance or repairs as Additional Rent, at
                Landlord's election on demand or on the next date upon which
                Basic Rent becomes due.

                                       10
<PAGE>   11

                Tenant hereby expressly waives the provisions of Subsection 1 of
                Section 1932, and Sections 1941 and 1942 of the Civil Code of
                California and all rights to make repairs at the expense of
                Landlord, as provided in Section 1942 of said Civil Code.

        C.      Subject to the provisions of Paragraphs 15 and 16 of this Lease,
                neither Landlord nor Tenant shall be deemed in default of their
                respective obligations under this Paragraph 10 if performance
                thereof is delayed or becomes impossible because the fault or
                neglect of the other party, or because of acts of God, war
                (whether declared or undeclared), earthquake, fire, labor
                dispute, strike, acts of public agencies, embargoes, rainy,
                stormy or other adverse weather, riot, civil commotion,
                insurrection, blockade, inability to obtain materials, supplies
                or fuels, acts and delays of subcontractors or contractors, and
                such other contingencies beyond the control of the performing
                party. Upon such an event, the time for performance shall be
                reasonably extended, but in no event shall such extension be
                longer than sixty (60) days beyond the original date for
                performance.

        D.      Landlord shall on behalf of Tenant, take commercially reasonable
                steps to enforce all of its rights under any warranties received
                by Landlord in connection with the construction of the
                Improvements and Landlord shall reasonably cooperate with
                Tenant, at no cost to Landlord, in enforcing all such
                warranties.

11.     Alterations and Additions. Tenant shall not make, or suffer to be made,
        any alterations, improvements or additions in, on or about, or to the
        Premises or any part thereof, without the prior written consent of
        Landlord, which consent shall not be unreasonably withheld, and without
        a valid Building permit issued by the appropriate governmental
        authority. Such alterations, improvements and additions shall then be
        performed by Landlord's contractors.

        As a condition to giving such consent, Landlord may require that Tenant
        agree to remove any such alterations, improvements or additions at the
        termination of this Lease, and to restore the Premises to their prior
        condition. Any alteration, addition or improvements to the Premises,
        except movable furniture and trade fixtures not affixed to the Premises,
        shall become the property of Landlord upon installation, and shall
        (subject to the provisions of the immediately preceding sentence) remain
        upon and be surrendered with the Premises at the termination of this
        Lease. Landlord can elect, however, by so notifying Tenant in writing at
        the time the improvement is made or installed to require Tenant to
        remove any alterations, additions or improvements that Tenant has made
        to the Premises. If Landlord so elects, Tenant shall restore the
        Premises to the condition designated by Landlord in its election, before
        the last day of the Term or if earlier terminated before the last day of
        the term pursuant to an early termination.

        Alterations, additions and improvements which are not to be deemed trade
        fixtures include heating, lighting and electrical systems, air
        conditioning, partitioning, cabinetry, window coverings, carpeting, or
        any other installation which has become an integral part of the
        Premises.

        If Landlord consents to Tenant's making any alterations, improvements or
        additions in the Premises, Tenant shall be responsible for the timely
        posting of notices of non-responsibility on Landlord's behalf, which
        shall remain posted until completion of the alterations, additions or
        improvements, and Tenant shall provide Landlord with a copy of such
        notice of non-responsibility prior to commencement of any such
        construction. Tenant shall indemnify and defend (with counsel acceptable
        to Landlord) Landlord against and hold Landlord and Landlord's members,
        partners, officers, employees, successors and assigns and agents
        harmless from any and all claims, demands, losses, damages, costs and
        liabilities, causes of action, judgments or obligations resulting from
        any work performed at the Premises by or for the Tenant, including
        reasonable attorney's fees.

        If, during the term hereof, any alteration, addition or change of any
        sort through all or any portion of the Premises is required, due to
        Tenant's particular use of the Premises, by law, regulation, ordinance
        or order of any public agency, Tenant, at its sole cost and expense,
        shall promptly make the same.

12.     Acceptance of the Premises and Covenant to Surrender. By entry and
        taking possession of the Premises pursuant to this Lease, upon
        substantial completion of the Improvements, Tenant, subject to
        Landlord's obligation to correct so-called "punch list" items, as
        provided in Paragraph 6, above, accepts the premises as being in good
        and sanitary order, condition and repair, and accepts the Complex and
        the Improvements included in the Premises in their condition existing as
        of the date of such entry and without representation or warranty by
        Landlord as to the condition of the Complex or the Premises, or as to
        the use or occupancy which may be made thereof. Tenant further accepts
        any Improvements to be constructed by Landlord as being completed in
        accordance with the Final Plans for such Improvements, except for items
        specified in writing as punch list items pursuant to Paragraph 6.

                                       11
<PAGE>   12
        Tenant agrees, on the last day of the Term hereof, or on any sooner
        termination of this Lease, to surrender the Premises, together with all
        alterations, additions and improvements which may have been made in, to
        or on the Premises by Landlord or Tenant, to Landlord, broom clean, in
        good and sanitary order, condition and repair, except for such wear and
        tear as would be normal for the period of Tenant's occupancy. Tenant
        further agrees that at the end of the Term of this Lease or upon any
        sooner termination of this Lease, Tenant, at its sole expense, shall
        have any damaged walls and damaged columns patched and repainted as
        necessary, any damaged ceiling tile replaced, damaged light lenses and
        ballasts restored to good order and repair, any blinds repaired or
        replaced (as the case may be), any damaged doors and damaged cabinetry
        replaced or repaired (as the case may be), and any torn or stained
        carpet repaired or replaced (as the case may be) and any chipped or
        scratch floor tile/stone replaced.

        Tenant, on or before the end of the Term of this Lease or on any sooner
        termination of this Lease, shall remove all its personal property and
        trade fixtures from the Premises, and all property not so removed shall
        be deemed to be abandoned by Tenant and title to the same shall
        thereupon pass to Landlord without compensation to Tenant. Landlord may,
        upon termination of this Lease, remove, store and/or sell all moveable
        personal property and trade fixtures so abandoned by Tenant, at Tenant's
        sole cost, and repair any damage caused by such removal at Tenant's sole
        cost.

        If the Premises are not so surrendered at the end of the Term or sooner
        termination of this Lease, then Tenant shall be liable to Landlord for
        any loss or liability resulting from the delay by Tenant in so
        surrendering the Premises, including, without limitation, any claims
        made by any succeeding tenant founded on such delay.

        No act or conduct of Landlord, whether consisting of the acceptance of
        the keys to the Premises or otherwise, shall be deemed to be or to
        constitute an acceptance of the surrender of the Premises by Tenant
        prior to the expiration of the Term hereof, and such acceptance of any
        surrender by Tenant shall only be evidenced by a written acknowledgment
        of acceptance of surrender signed by Landlord. The voluntary or other
        surrender of the Premises by Tenant or a mutual cancellation of this
        Lease shall not work as a merger and, at the option of Landlord, shall
        either terminate all existing subleases or operate as an assignment to
        Landlord of all such subleases.

        After the expiration or earlier termination of this Lease, Tenant shall
        execute, acknowledge and deliver to Landlord, within ten (10) days after
        written demand from Landlord to Tenant, any quitclaim deed or other
        document required by any reputable title company, licensed to operate in
        the State of California, to remove the cloud or encumbrance created by
        this Lease from the Property.

13.     Events of Default. The occurrence of any of one or more of the following
        events shall constitute a default hereunder by Tenant (each, an "Event
        of Default"):

        A.      The abandonment of the Premises by Tenant. Abandonment is herein
                defined to include, but is not limited to, any absence by Tenant
                from the Premises for five (5) days or longer.

        B.      Three (3) days following written notice by Landlord to Tenant of
                Tenant's failure to make any payment of Rent, or other payment
                required to be made by Tenant hereunder, when due provided,
                however, that any such notice shall be in lieu of, and not in
                addition to, any notice required under California Code of Civil
                Procedure Section 1161.

        C.      The failure by Tenant to observe or perform any of the express
                or implied covenants or provisions of this Lease to be observed
                or performed by Tenant, other than monetary or as specified in
                subparagraphs 13.A or 13.B, above, where such failure continues
                for a period of twenty (20) days after written notice thereof
                from Landlord to Tenant; provided, however, that any such notice
                shall be in lieu of, and not in addition to, any notice required
                under California Code of Civil Procedure Section 1161; provided
                further, that if the nature of Tenant's default is such that
                more than twenty (20) days are reasonably required for its cure,
                then Tenant shall not be deemed to be in default if Tenant shall
                commence such cure within said twenty (20) day period and
                thereafter diligently prosecute such cure to completion (and
                such completion occurs within sixty (60) days thereafter).

        D.      Any assignment or subletting of this Lease without the consent
                of Landlord, including, without limitation, an involuntary
                assignment as defined in Paragraph 21, below.

        E.      Chronic delinquency by Tenant in the payment of Rent or any
                other periodic payments required to be paid by Tenant under this
                Lease. "Chronic delinquency" shall mean failure by Tenant to pay
                Rent, or any other payments required to be paid by Tenant under
                this Lease, within three (3) days after written notice thereof
                for any three (3) months

                                       12
<PAGE>   13

                (consecutive or nonconsecutive) during any twelve (12) month
                period. In the event of a chronic delinquency, at Landlord's
                option, Landlord shall have the right, in addition to all other
                remedies under this Lease and at law, to require that Rent be
                paid by Tenant quarterly, in advance. This provision shall not
                limit in any way nor be construed as a waiver of the rights and
                remedies of Landlord provided herein or by law in the event of
                even one instance of delinquency.

14.     Remedies for Default.

        A.      In the event of any breach of this Lease by Tenant, Landlord has
                the option of (i) removing all persons and property from the
                Premises and repossessing the Premises, in which case any of
                Tenant's property which Landlord removes from the Premises may
                be stored in a public warehouse or elsewhere at the cost of, and
                for the account of, Tenant, or (ii) allowing Tenant to remain in
                full possession and control of the Premises. If Landlord chooses
                to repossess the Premises, then this Lease will automatically
                terminate in accordance with the provisions of California Civil
                Code Section 1951.2. In the event of such termination of this
                Lease, Landlord may recover from Tenant: (a) the worth at the
                time of award of the unpaid Rent which had been earned at the
                time of termination, including interest at the prime rate as
                published in the "Wall Street Journal" or such other equivalent
                periodical that tracks such interest rates, plus these three
                hundred (300) basis points (hereinafter "Interest Rate"); (b)
                the worth at the time of award of the amount by which the unpaid
                Rent which would have been earned after termination until the
                time of award exceeds the amount of such rental loss that Tenant
                proves could have been reasonably avoided, including interest at
                the Interest Rate; (c) the worth at the time of award of the
                amount by which the unpaid Rent for the balance of the Term
                after the time of award exceeds the amount of such rental loss
                that Tenant proves could be reasonably avoided; and (d) any
                other amount necessary to compensate Landlord for all the
                detriment proximately caused by Tenant's failure to perform its
                obligations under this Lease or which, in the ordinary course of
                things, would be likely to result therefrom. "The worth at the
                time of the award", as used in (a) and (b) of this paragraph, is
                to be computed by allowing interest at the Interest Rate. "The
                worth at the time of the award", as referred to in (c) of this
                paragraph, is to be computed by discounting the amount at the
                discount rate of the Federal Reserve Bank of San Francisco at
                the time of the award, plus one percent (1%).

        B.      If Landlord chooses not to repossess the Premises, but allows
                Tenant to remain in full possession and control of the Premises,
                in accordance with provisions of California Civil Code Section
                1951.4, then Landlord may treat this Lease as being in full
                force and effect, and may collect from Tenant all Rents as they
                become due through the termination date of this Lease, as
                specified in this Lease. For the purpose of this Paragraph 14,
                the following shall not constitute a termination of Tenant's
                right to possession:

                (1)     Acts of maintenance or preservation, or efforts to relet
                        the Premises;

                (2)     The appointment of a receiver on the initiative of
                        Landlord to protect its interest under this Lease.

        C.      Tenant shall be liable immediately to Landlord for all
                reasonable costs Landlord incurs in reletting the Premises,
                including, without limitation, brokers' commissions, expenses of
                remodeling the Premises required by the reletting, and like
                costs. Reletting can be for a period shorter or longer than the
                remaining Term of this Lease. Tenant shall pay to Landlord the
                Rent due under this Lease, on the dates the Rent is due, less
                the Rent Landlord receives from the new Lease, unless Landlord
                notifies Tenant that Landlord elects to terminate this Lease.
                Tenant shall pay to Landlord, in addition to the remaining Rent
                due, all costs which Landlord incurred in reletting, including
                without limitation maintenance, that remain after applying the
                Rent received from the reletting, as provided in this Paragraph
                14. After the occurrence of an Event of Default and for as long
                as Landlord does not terminate Tenant's right to possession of
                the Premises, if Tenant obtains Landlord's consent, Tenant shall
                have the right to assign its interest in this Lease, or sublet
                all or a portion of the Premises, but Tenant shall not be
                released from liability and obligations under this Lease.
                Landlord's consent to a proposed assignment or subletting shall
                be as required in Paragraph 21.

        D.      If Landlord elects to relet the Premises as provided in this
                Paragraph 14, then any Rent that Landlord receives from
                reletting shall be applied to the payment of:

                (1)     First, any indebtedness from Tenant to Landlord other
                        than Rent due from Tenant;

                                       13
<PAGE>   14

                (2)     Second, all costs, including for maintenance, incurred
                        by Landlord in reletting; and

                (3)     Third, Rent due and unpaid under this Lease.

        E.      After deducting the payments referred to in this Paragraph 14,
                any sum remaining from any Rent which Landlord receives from
                reletting shall be held by Landlord and applied in payment of
                future Rent as Rent becomes due under this Lease. In no event
                shall Tenant be entitled to any excess Rent received by
                Landlord.

        F.      Landlord, at any time after an Event of Default, can cure the
                default at Tenant's cost. If Landlord at any time, by reason of
                an Event of Default, pays any sum or does any act that requires
                the payment of any sum, then the sum paid by Landlord shall be
                due immediately from Tenant to Landlord at the time the sum is
                paid and, if paid at a later date, shall bear interest at the
                Interest Rate from the date the sum is paid by Landlord until
                Landlord is reimbursed by Tenant. The sum, together with
                interest on it, shall be Additional Rent.

        G.      Any Rent not paid when due shall bear interest at the Interest
                Rate from the date due until paid and shall be subject to the
                late charge set forth in subparagraph 3.A above.

15.     Destruction.

        A. In the event the Premises or the Complex are damaged by any casualty
        which is covered under insurance carried by Tenant or Landlord, then
        Landlord or Tenant, whichever receives such insurance proceeds, shall
        restore such damage to the extent that the insurance proceeds are
        available provided such restoration can be completed within one hundred
        eighty (180) days after the commencement of the work. In such event,
        this Lease shall continue in full force and effect except that Tenant
        shall be entitled to proportionate reduction of Rent while such
        restoration takes place, such proportionate reduction to be based upon
        the extent to which the restoration efforts interfere with the Tenant's
        business in the Premises. If such repair and restoration is not
        completed by the end of said one hundred eighty (180) day period, then
        Tenant shall have the right to terminate this Lease by written notice to
        Landlord given within fifteen (15) days after the end of such one
        hundred eighty (180) day period. If Tenant fails to give notice of
        termination within the time provided, then this Lease shall continue in
        full force and effect. Landlord shall, at all times during the Term of
        this Lease, procure and continue in force insurance coverage to cover an
        amount equal to at least one hundred percent (100%) replacement value of
        the building. Notwithstanding the foregoing, if any such damage or
        destruction occurs during the last twelve (12) months of the Term of
        this Lease, and Tenant has not exercised its option to renew as provided
        in Section 39 hereof, Landlord shall not be obligated to repair such
        damage.

        B. If the Premises, the Building, Complex or common areas are damaged by
        risks not covered by such insurance or the insurance proceeds available
        to Landlord are less than ninety percent (90%) of the cost of
        restoration, or if the restoration cannot be completed within six (6)
        months after the commencement of work in the opinion of the architect or
        engineer appointed by Landlord, then Landlord shall have the option to
        (i) repair or restore such damage, this Lease continuing in full force
        and effect, or (ii) give notice to Tenant at any time within ninety (90)
        days after the date of such damage terminating this Lease as of the date
        to be specified in such notice, which date shall not be less than thirty
        (30) and no more than sixty (60) days after giving of such notice.
        Notwithstanding the foregoing, if any such uninsured damage or
        destruction occurs during the last twelve (12) months of the Term of
        this Lease, and Tenant has not previously exercised its option to renew
        as provided in Section 39 hereof, Landlord shall not be obligated to
        repair such damage.

        C. Notwithstanding the foregoing, if the Premises are destroyed
        ("Destroyed" shall mean more than fifty percent (50%) of the Premises),
        in whole or in part, from any cause, Landlord shall, at its option,
        either:

                (1)     Rebuild or restore the Premises to their condition prior
                        to the damage or destruction; or

                (2)     Terminate this Lease.

        If Landlord does not give Tenant notice in writing within sixty (60)
        days from the destruction of the Premises of its election either to keep
        this Lease in full force and rebuild and restore the Premises, or to
        terminate this Lease, and provided that insurance proceeds actually
        available to Landlord for the purpose of restoring the Complex or the
        Premises are sufficient to rebuild or restore the Premises, then
        Landlord shall be deemed to have elected to rebuild or restore the

                                       14
<PAGE>   15
         Premises, in which event Landlord agrees, at its expense, promptly to
         rebuild or restore the Premises to the condition existing as of the
         date of Substantial Completion.

         If Landlord does not materially complete the re-building or restoration
         cannot be completed within six (6) months after the commencement of
         work in the opinion of the architect or engineer appointed by Landlord
         (such period of time to be extended for delays as provided in Paragraph
         36), then Tenant shall have the right to terminate this Lease by giving
         written notice to Landlord within fifteen (15) days of the expiration
         of such period. If Tenant fails to give notice of termination within
         the time provided, then this Lease shall continue in full force and
         effect.

         Landlord's obligation to rebuild or restore the Premises shall not
         include restoration of Tenant's trade fixtures, equipment or
         merchandise, or any improvements, alterations or additions made by
         Tenant to the Premises. Unless this Lease is terminated pursuant to the
         foregoing provisions, this Lease shall remain in full force and effect.
         Tenant hereby expressly waives the provisions of Section 1932,
         Subdivision 2, and Section 1933, Subdivision 4, of the California Civil
         Code.

16.      Condemnation. If any part of the Premises shall be taken for any public
         or quasi-public use, under any statute or by right of eminent domain,
         or private purchase in lieu thereof, and a part thereof remains which
         is susceptible of occupancy hereunder, then this Lease shall, as to the
         part so taken, terminate as of the date title vests in the condemnor or
         purchaser, and the Rent payable hereunder shall be adjusted so that
         Tenant shall be required to pay for the remainder of the term only such
         portion of the Rent as the value of the part remaining after such
         taking bears to the value of the entire Premises prior to such taking.
         Landlord shall have the right to terminate this Lease in the event that
         such taking causes a reduction in Rent payable hereunder by twenty-five
         percent (25%) or more. If all of the Premises or such part thereof is
         taken so that there does not remain a portion susceptible for occupancy
         hereunder, as reasonably necessary for Tenant's conduct of its business
         as contemplated in this Lease, then this Lease shall thereupon
         terminate. If a part or all of the Premises is taken, then all
         compensation awarded upon such taking shall go to Landlord and Tenant
         shall have no claim thereto, and Tenant hereby irrevocably assigns and
         transfers to Landlord any right to compensation or damages to which
         Tenant may become entitled during the Term hereof by reason of the
         purchase or condemnation of all or a part of the Premises. Tenant shall
         have the right to separately petition and to claim and recover from the
         condemning authority, but not from Landlord, such compensation as may
         be separately awarded or recoverable by Tenant in Tenant's own right on
         account of any and all damage to Tenant's business, including without
         limitation the loss of goodwill by reason of any appropriation, and for
         or on account of any cost or loss to which Tenant might be put in
         removing and relocating Tenant's merchandise, furniture, moveable trade
         fixtures and equipment. In no event, however, shall the loss of
         goodwill include any diminution in the value of the leasehold or the
         bonus value of this Lease and in no event shall Tenant be entitled to
         any award which diminishes the award to Landlord on account of the
         condemnation. Each party waives the provisions of Code of Civil
         Procedure, Section 1265.130, allowing either party to petition the
         Superior Court to terminate this Lease in the event of a partial taking
         of the Premises.

17.      Free from Liens. Tenant shall (i) pay for all labor and services
         performed or materials used by or furnished to Tenant or any contractor
         employed by Tenant with respect to the Premises, and (ii) indemnify,
         protect and defend (with counsel reasonably acceptable to Landlord)
         Landlord against and hold Landlord and Landlord's members, partners,
         officers, employees, lenders, successors, assigns and agents harmless
         from any and all claims, demands, losses, damages, costs and
         liabilities, causes of action, judgments or obligations resulting
         therefrom, including reasonable attorney's fees with respect to the
         Premises.

18.      Compliance with Laws. Tenant shall, at its own cost, comply with and
         observe all requirements of all municipal, county, state and federal
         authority now in force, or which may hereafter be in force, pertaining
         to the use and occupancy of the Premises and/or Complex.

19.      Subordination. Tenant agrees that this Lease shall, at the option of
         Landlord, be subject and subordinate to any mortgage, deed of trust or
         other instrument of security which has been or shall be placed on the
         Premises and the Complex, and this subordination is hereby made
         effective without any further act of Tenant or Landlord. Tenant shall,
         at any time hereinafter, on demand, execute any instruments, releases
         or other documents that may be required by a mortgagee, mortgagor,
         trustor or beneficiary under any deed of trust, for the purpose of
         subjecting or subordinating this Lease to the lien of any such
         mortgage, deed of trust or other instrument of security. If Tenant
         fails to execute and deliver any such documents or instruments, such
         failure shall, at Landlord's option, constitute a default by Tenant
         under this Lease.

         If the Premises is currently subject to a superior lease or mortgage,
         Landlord shall obtain a subordination, non-disturbance and attornment
         agreement from the holder thereof in recordable form, in the form
         customarily used by such holder, whereby the holder of such superior
         lease or mortgage agrees that, so long as Tenant is not in default
         under this Lease, Tenant shall lawfully

                                       15

<PAGE>   16

         and quietly hold, occupy and enjoy the Premises during the Term of this
         Lease, without hindrance or interference from anyone claiming by or
         through said superior lessor or mortgagee.

         If this Lease is or becomes subordinate to any encumbrance now of
         record or any encumbrance recorded after this date affecting the
         Premises, then Tenant agrees to attorn to any purchaser at any
         foreclosure sale, or to any grantee or transferee designated in any
         deed given in lieu of foreclosure. In such event, Tenant shall execute,
         at Landlord's or the lender's request, such recognition and attornment
         agreement as the lender, at its option, may require. Landlord and
         Tenant acknowledge that it is the intention that a subordination,
         non-disturbance and attornment agreement (in reasonably industry
         standard form) be executed by Landlord, Tenant and the lender to the
         Complex. Landlord agrees to be diligent and negotiate in good faith
         with any lender to obtain quiet enjoyment/non-disturbance agreement
         regarding the Premises provided that Tenant is in conformance with the
         terms and conditions of the Lease, and provided that obtaining such an
         agreement shall not be a condition to subordination of this Lease
         (Landlord shall not be required to pay any consideration to the lender
         for the same).

20.      Abandonment. Tenant shall not vacate nor abandon the Premises at any
         time during the Term of this Lease; and if Tenant shall abandon, vacate
         or surrender said Premises, or be dispossessed by process of law, or
         otherwise, then any personal property belonging to Tenant and left on
         the Premises shall be deemed to be abandoned, at the option of
         Landlord, except such property as may be mortgaged to Landlord.

21.      Assignment and Subletting.

         A.       Landlord's Consent Required. Tenant shall not, either
                  voluntarily or by operation of law, sell, encumber, pledge or
                  otherwise transfer all or any part of Tenant's leasehold
                  estate hereunder or permit the Premises to be occupied by
                  anyone other than Tenant or Tenant's employees, or sublet the
                  Premises or any portion thereof, without Landlord's prior
                  written consent in each instance, which consent may not
                  unreasonably be withheld by Landlord. In exercising its
                  reasonable discretion, Landlord may consider all commercially
                  relevant factors involved in the leasing, subleasing or
                  assignment of the space, including, but not limited to, the
                  following: (i) the creditworthiness and financial stability
                  of the prospective assignee or sublessee; (ii) the references
                  from prior landlords of such prospective sublessee or
                  assignee; (iii) the past history of such sublessee or assignee
                  with respect to involvement in litigation and bankruptcy
                  proceedings; (iv) whether the proposed use of the Premises by
                  the prospective sublessee or assignee falls within the use
                  permitted under Paragraph 5; (v) the impact of said sublessee
                  or assignee and the proposed use of the Premises on pedestrian
                  and vehicular traffic and parking facilities; (vi) the
                  anticipated use, storage, generation, treatment and disposal
                  of Hazardous Materials by such prospective sublessee or
                  assignee; or (vii) the fact that the subletting will cause a
                  vacancy in any property owned by Landlord's affiliates. Tenant
                  shall provide Landlord with prior notice of any proposed
                  assignment or sublease as provided in subparagraph 21.B,
                  below. Consent by Landlord to one or more assignments of this
                  Lease or to one or more subletting of the Premises shall not
                  operate to exhaust Landlord's rights under this Paragraph 21.
                  If Tenant is a corporation, unincorporated association, or
                  partnership, the transfer, assignment, or hypothecation of any
                  stock or ownership interest in such corporation,
                  unincorporated association or partnership in excess of
                  forty-nine percent (49%) shall be deemed an assignment within
                  the meaning and provision of this Paragraph 21; but excluding
                  ordinary secondary market transactions in the stock of Tenant
                  which may aggregate 49% thereof, if they take place on a
                  market or exchange such as NASDAQ or NYSE, but including
                  transfers in connection with a "tender offer" merger,
                  stock-for stock exchange or "going private". If in excess of
                  forty-nine percent (49%) of the ownership of Tenant's stock is
                  transferred, or all or substantially all of its assets are
                  transferred or Tenant merges with another corporation, then
                  such transferee of the stock or new party directly or
                  indirectly controlling greater than 49% of the stock of Tenant
                  shall promptly execute a guarantee ("Guarantee") of the Lease
                  as attached hereto in Exhibit "F" and in the case of a
                  transfer of assets or a merger, such transferee or merged
                  corporation shall assume this Lease without modification.

                  As a condition of Landlord's consent to an assumption of the
                  Lease by the transferee after such a stock transfer, asset
                  sale or merger, which condition Tenant agrees is reasonable,
                  the proposed transferee of stock, purchaser of assets, or
                  surviving entity in a merger shall have a minimum net worth
                  (as determined by GAAP) equal to Five Hundred Million and
                  No/100ths U.S. Dollars ($500,000,000.00) at the time of the
                  completion of the transaction. The voluntary or other
                  surrender of this Lease by Tenant or a mutual cancellation
                  hereof shall not work a merger, and shall, at the option of
                  Landlord, terminate all or any existing subleases or
                  subtenancies. All Rent received by Tenant from its subtenants
                  in excess of the Rent payable by Tenant to Landlord under this
                  Lease shall be paid to Landlord, and any sums to be paid by an
                  assignee to Tenant in consideration of the assignment of this

                                       16

<PAGE>   17

                  Lease shall be paid to Landlord. In addition, all
                  considerations in excess of the fair market value for the item
                  being leased or conveyed shall be paid to Landlord. However,
                  from the sublease rent in excess of the Basic and Additional
                  Rent hereunder, Tenant may recover its direct documented
                  third-party expenses of subleasing of reasonable legal fees,
                  reasonable brokerage commissions, and reasonable tenant
                  improvement costs. Any sublease or assignment permitted
                  herein, shall, at Landlord's election, automatically terminate
                  Tenant's option(s), if any, to extend the Term of this Lease
                  and, in such event, any such options shall not be available to
                  any sublessee, assignee or other transferee. Furthermore,
                  Landlord reserves the right to terminate this Lease upon
                  thirty (30) days written notice after Landlord receives
                  Tenant's written request to approve a proposed sublease and/or
                  assignment. Such election shall be made within said thirty
                  (30) days after Landlord receives Tenant's request for
                  approval of a sublease or assignment. Landlord's election to
                  terminate shall be in Landlord's sole and absolute discretion.

         B.       Notice to Landlord. If Tenant desires at any time to assign
                  this Lease or to sublet the Premises (including any
                  transaction treated as an assignment under the terms of this
                  Lease) or any portion thereof, it shall first notify Landlord
                  of its desire to do so and shall submit in writing to Landlord
                  (i) the name of the proposed sublessee or assignee; (ii) the
                  nature of the proposed sublessee's or assignee's business to
                  be carried on in the Premises; (iii) the material business
                  terms of the proposed sublease or assignment; and (iv) such
                  reasonable financial information concerning the proposed
                  sublessee or assignee as Landlord may need to make a prudent
                  and considered decision. Tenant shall also provide to Landlord
                  a copy of the sublease or assignment after such document has
                  been fully executed by both Tenant and the proposed subtenant
                  or assignee, as the case may be, for Landlord's review and
                  approval.

         C.       Tenant Not Released. No subletting or assignment, even with
                  the written consent of Landlord, shall relieve Tenant of its
                  obligation to pay the Rent and perform all of the other
                  obligations to be performed by Tenant hereunder. Tenant shall
                  indemnify and defend (with counsel reasonably acceptable to
                  Landlord) Landlord against and hold Landlord and Landlord's
                  members, partners, officers, employees, successors and assigns
                  and agents harmless from any and all claims, demands, losses,
                  damages, costs and liabilities, causes of action, judgments or
                  obligations resulting therefrom, including reasonable
                  attorney's fees, arising out of any claims by brokers or
                  others for commissions or finder's fees with respect to any
                  subletting or assignment by Tenant. The acceptance of Rent by
                  Landlord from any other person shall not be deemed to be a
                  waiver by Landlord of any provision of this Lease or to be a
                  consent to any assignment or subletting. Tenant immediately
                  and irrevocably assigns to Landlord, as security for Tenant's
                  obligations under this Lease, all Rent from any subletting,
                  and Landlord, as assignee and attorney in fact for Tenant, or
                  any receiver for Tenant appointed on Landlord's application,
                  may collect such Rent and apply it toward Tenant's obligations
                  under this Lease, except that, until the occurrence of any
                  Event of Default by Tenant, Tenant shall have the right to
                  collect such Rent.

         D.       Involuntary Assignment. No interest of Tenant in this Lease
                  shall be assignable by operation of law. Without limiting the
                  foregoing, each of the following acts shall be considered an
                  involuntary assignment:

                  (i)      If Tenant is or becomes bankrupt or insolvent, makes
                           an assignment for the benefit of creditors, or
                           institutes a proceeding under the Bankruptcy Act in
                           which Tenant is the bankrupt; or, if Tenant is a
                           partnership or consists of more than one person or
                           entity, if any general partner of the partnership or
                           other person or entity is or becomes bankrupt or
                           insolvent, or makes an assignment for the benefit of
                           creditors;

                  (ii)     The appointment of a trustee or receiver to take
                           possession of substantially all of Tenant's assets
                           located at the Premises or of Tenant's interests in
                           this Lease, where possession is not restored to
                           Tenant within thirty (30) days; or

                  (iii)    The attachment, execution or other judicial seizure
                           of substantially all of Tenant's assets located at
                           the Premises or of Tenant's interest in this Lease,
                           where seizure is not discharged within thirty (30)
                           days.

                  An involuntary assignment shall constitute an Event of Default
                  under this Lease, and in such event Landlord shall have the
                  right to elect to terminate this Lease, in which case this
                  Lease shall not be treated as an asset of Tenant.

         E.       Tenant to Reimburse Landlord for Expenses. Tenant agrees to
                  reimburse Landlord, as Additional Rent, upon demand, for
                  Landlord's reasonable costs and attorney's fees,

                                       17
<PAGE>   18

                  incurred in conjunction with the processing, investigation and
                  documentation of any requested assignment, subletting,
                  transfer, change of ownership or hypothecation of this Lease
                  or Tenant's interest in and to the Premises, regardless of
                  whether any request actually results in a permitted
                  assignment, sublease or other transfer.

22.      Parking. Any parking charges, surcharges or any other cost hereafter
         levied or assessed by local, state or federal governmental agencies in
         connection with the use of the parking facilities serving the Premises,
         including, without limitation, any parking surcharge imposed by or
         under the authority of the Federal Environmental Protection Agency,
         shall be included in Operating Expenses as defined in Paragraph 3,
         above. Should Landlord require that Tenant issue parking permits to its
         individual employees or develop any form of traffic parking management
         plan, Tenant agrees to fully and promptly cooperate with Landlord.
         Tenant further acknowledges that the parking garage is designed for a
         specific number of cars i.e.: 229 and Tenant agrees that it shall not
         park more than that number of cars in the parking garage at any one
         given time.

23.      Landlord Loan or Sale. Tenant agrees, promptly following request by
         Landlord, to execute and deliver to Landlord any documents, including
         estoppel certificates presented to Tenant by Landlord, (i) certifying
         that this Lease is unmodified and in full force and effect (or, if
         modified, stating the nature of such modification and certifying that
         this Lease, as so modified, is in full force and effect) and the date
         to which the Rent and other charges are paid in advance, if any; (ii)
         acknowledging that there are not, to Tenant's knowledge, any uncured
         defaults on the part of Landlord hereunder (or, if there are any such
         uncured defaults, stating the nature of any such default[s]); and (iii)
         evidencing the status of the Lease as may be required either by a
         lender making a loan to Landlord, to be secured by deed of trust or
         mortgage covering the Premises, or a purchaser of the Complex or the
         Premises from Landlord. Tenant's failure to deliver an estoppel
         certificate within ten (10) business days following such request shall
         constitute a default under this Lease and shall be conclusive upon
         Tenant that this Lease is in full force and effect and has not been
         modified except as may be represented by Landlord, and that there are
         no uncured defaults in Landlord's performance. In addition, if
         requested by Landlord, Tenant shall deliver to any prospective lender
         or purchaser of the Property and/or the Complex, audited financial
         statements of Tenant covering the two (2) fiscal years immediately
         preceding the request, certified by an independent certified public
         accountant (or, if such statements are not normally prepared, audited
         and certified by an independent public accountant, then certified by
         the chief financial officer or a principal of Tenant).

24.      Surrender of Lease. The voluntary or other surrender of this Lease by
         Tenant, or a mutual cancellation thereof, shall not work a merger nor
         relieve Tenant of any of Tenant's obligations under this Lease, and
         shall, at the option of Landlord, either terminate all or any existing
         subleases or subtenancies, or operate as an assignment to Landlord of
         any or all such subleases or subtenancies.

25.      Attorneys' Fees. If, for any reason, any action or other proceeding is
         initiated between Landlord and Tenant, the prevailing party shall be
         entitled to legal costs, expert witnesses expenses, reasonable
         attorneys' fees and costs as fixed by the court.

26.      Notices. All notices to be given to either party shall be given in
         writing, personally or by depositing the same in the United States
         mail, postage prepaid, or by commercial overnight courier, and
         addressed to Tenant at the said Premises, whether or not Tenant has
         departed from, abandoned or vacated the Premises, as well as to the
         address set forth below, or to such other address as Tenant may specify
         by notice given in accordance with the provisions of this Paragraph 26.
         Any notice to be given to Landlord shall be addressed to Landlord at
         the address set forth below, or at such other address as it may have
         theretofore specified by notice delivered in accordance herewith:

       Landlord:     DLC REDWOOD CITY
                     c/o Dewey Land Company, Inc.
                     999 Baker Way, Suite 300
                     San Mateo, CA 94404
                     (650) 571-1010 Fax (650) 571-1019

                     Before Commencement:                  After Commencement:

       Tenant:       NIKU, Inc.                            At the Premises
                     305 Main Street
                     Redwood City, CA 94063
                     (650)298-4600 Fax (650)298-4601
                     Attn: General Counsel and Chief Financial
                           Officer

                                       18
<PAGE>   19
27.      Waiver. The waiver by Landlord or Tenant of any breach of any term,
         covenant or condition herein contained shall not be deemed to be a
         waiver of such term, covenant or condition. The subsequent acceptance
         of Rent hereunder by Landlord shall not be deemed to be a waiver of any
         preceding breach by Tenant of any term, covenant or condition of this
         Lease, other than the failure of Tenant to pay the particular Rent so
         accepted, regardless of Landlord's knowledge of such preceding breach
         at the time of acceptance of such Rent.

28.      Holding Over. Any holding over by Tenant after the expiration of the
         Term of this Lease or any extension hereof, with the consent of
         Landlord, shall be construed to be a tenancy from month-to-month, at a
         Basic Rent of two hundred percent (200%) of the monthly Basic Rent in
         effect during the last month of the Lease term, or any extension
         thereof, and shall otherwise be on the terms and conditions herein
         specified, so far as applicable.

29.      Covenants, Conditions and Restrictions. The parties by this reference
         incorporate herein as if set out in full, all Covenants, Conditions and
         Restrictions ("CC&R's") pertaining to the Complex which may exist in
         the future. As a condition to this Lease, Tenant agrees to abide by all
         of said CC&R's. Moreover, such reasonable rules and regulations as may
         be hereafter adopted by Landlord for the safety, care and cleanliness
         of the Complex and/or Premises and the preservation of good order
         thereon, are hereby expressly made a part hereof, and Tenant agrees to
         obey all such rules and regulations.

30.      Limitation on Landlord's Liability. If Landlord is in default of this
         Lease, and as a consequence Tenant recovers a money judgment against
         Landlord, any such judgment shall be satisfied only out of the proceeds
         of sale received on execution of the judgment and levy against the
         right, title and interest of Landlord in the Premises, or in the
         Complex, and out of Rent or other income from such real property
         receivable by Landlord, or out of the consideration received by
         Landlord from the sale or other disposition of all or any part of
         Landlord's right, title and interest in the Premises in the Complex.
         Neither Landlord nor any of the members or partners comprising the
         company or partnership or officers of the company designated as
         Landlord (or its general partner) shall be personally liable for any
         deficiency.

31.      Sale or Transfer of Premises. If Landlord sells or transfers all or any
         portion of the Premises, or the Complex, then Landlord, on consummation
         of the sale or transfer, shall be released from any liability
         thereafter accruing under this Lease. If any security deposit or
         prepaid Rent has been paid by Tenant, Landlord agrees to transfer the
         security deposit or prepaid Rent to Landlord's successor, other than
         any portion of the security deposit applied or retained to compensate
         Landlord for any loss or damage which Landlord may have suffered as a
         result of an Event of Default, and thereupon Landlord shall be
         discharged from any further liability in reference thereto.

32.      Landlord's Right to Perform. All terms, covenants and conditions of
         this Lease to be performed or observed by Tenant shall be performed or
         observed by Tenant, at Tenant's sole cost and expense, and without any
         reduction of Rent. If Tenant fails to pay any sum of money required to
         be paid by it hereunder or fails to perform or observe any other term
         hereunder on its part to be performed or observed, then Landlord may,
         at its option, without waiving or releasing Tenant from any obligation
         of Tenant hereunder, make any such payment, or perform or observe any
         such other term or act on Tenant's part to be performed or observed.
         All sums so paid by Landlord and all reasonably necessary costs of such
         performance or observation by Landlord together with interest thereon
         from the date incurred at the Interest Rate, shall be paid by Tenant to
         Landlord as Additional Rent, on demand, in which event and as to the
         same Landlord shall have the same rights and remedies against Tenant as
         in the case of nonpayment of Rent hereunder.

33.      Landlord's Right of Entry. With reasonable telephone notice (except in
         the case of emergency), Landlord (and/or its representatives) shall
         have the right, at all reasonable times, to enter the Premises in order
         to post notices; to improve, or alter the Complex; to inspect or repair
         the Premises or the Complex; and to erect scaffolding and other
         necessary structures in or near the Premises (provided the same do not
         unreasonably impair access to the Premises), or the Complex; and to
         post "For Sale" signs with respect to the Complex. During the last nine
         (9) months of the then current Term of this Lease, Landlord (and/or its
         representatives) shall have the right, at all reasonable times, to
         enter the Premises to place "For Lease" signs on the Premises. Landlord
         and any purchaser, lessee or encumbrancer may enter the Premises, at
         all reasonable times, with respect to any existing or prospective sale,
         lease or encumbrance. Landlord shall also have the right to enter the
         Premises at any time, without prior notice, in those emergency
         situations which could involve potential injury to persons or loss of
         property. All of the above shall be without abatement of Rent and any
         such entry shall not be construed as a forcible or unlawful entry, or a
         detainer, or an actual or constructive eviction of Tenant from the
         Premises.

34.      Signs. No sign, placard, picture, advertisement, name or notice shall
         be inscribed, displayed, printed or affixed on or to any part of the
         outside of the Premises, or any exterior windows of the Premises, or
         any interior windows visible from common areas of the Complex, without
         the prior

                                       19
<PAGE>   20

         written consent of Landlord (which consent may be granted in Landlord's
         absolute discretion) and Landlord shall have the right to remove the
         same without notice to and at the expense of Tenant. NIKU, Inc. may
         install its name on the exterior of the Building, in one location,
         facing Highway 101 Size, color and exact location of said sign shall be
         mutually agreed upon by Landlord and Tenant, and be subject to City of
         Redwood City approval. Tenant shall be permitted to install its name on
         the main building directory and its suite. Tenant may allocate the
         Basic Allowance toward this cost for signage. At Landlord's option,
         upon expiration or other sooner termination of this Lease, Tenant
         shall, at Tenant's sole cost, remove all Tenant signage, repair all
         damage caused thereby and restore the appearance of the Premises and
         the Building to its condition prior to the placement of said signs. All
         approved signs (or lettering on outside doors) shall be done at the
         expense of Tenant by a person selected by Landlord.

35.      Exercise Facility. By its execution of this Lease, Tenant acknowledges
         that it is aware that the Complex may contain an exercise facility in
         Landlord's sole election. Tenant and its employees over the age of
         eighteen (18) years may reasonably use the exercise facility and its
         equipment in accordance with the rules therefor established by
         Landlord; provided, however, that no person shall use the exercise
         facility or its equipment unless he/she has signed a waiver and release
         in the form attached hereto as Exhibit E and made a part hereof, and
         the original of such executed waiver and release has been delivered to
         Landlord. In consideration for the right to use the exercise facility,
         Tenant agrees to faithfully enforce the provision of this Paragraph 35,
         and to indemnify, defend and hold Landlord harmless from any claims or
         damages, including reasonable attorneys' fees, incurred as a result of
         the use of the exercise facility and its equipment including but not
         limited to any personal injury, pursuant to this Paragraph 35. Use of
         the exercise facility in violation of the provisions of this Paragraph
         35 or any other unauthorized use of the exercise facility shall
         constitute a material breach of this Lease. The cost of operation of
         the exercise facility (including rent at the same per square foot
         rental rate as being paid by Tenant on area of the exercise facility)
         shall be included in the Operating Expenses described in Paragraph 3
         above.

36.      Force Majeure. Subject to the provisions of Paragraphs 15 and 16 of
         this Lease, neither Landlord nor Tenant shall be deemed in default of
         their respective obligations under this Lease if performance thereof is
         delayed or becomes impossible because the fault or neglect of the other
         party, or because of acts of God, war (whether declared or undeclared),
         earthquake, fire, acts of public agencies, embargoes, rainy, stormy or
         other adverse weather, riot, civil commotion, insurrection, blockade,
         inability to obtain materials, supplies or fuels, acts and delays of
         subcontractors or contractors, and such other contingencies beyond the
         control of the performing party. Upon such an event, the time for
         performance shall be reasonably extended, but in no event shall such
         extension be longer than sixty (60) days beyond the original date for
         performance, in which case the party to whom the obligation is owed may
         terminate this Lease without penalty by giving notice to the other
         party. This Paragraph 36 shall not be applicable to the payment of Rent
         or other monetary sums under this Lease.

37.      Quiet Enjoyment. Landlord covenants that if, and so long as, Tenant
         keeps and performs each and every covenant, agreement, term, provision
         and condition herein contained on the part and on behalf of Tenant to
         be kept and performed, Tenant shall quietly enjoy the Premises from and
         against the claims of all persons.

38.      Miscellaneous.

         A.       Time is of the essence of this Lease, and each and all of its
                  provisions.

         B.       The term "Complex" shall mean the Complex in which the
                  Premises are situated.

         C.       The term "assign" shall include the term "transfer".

         D.       The invalidity or unenforceability of any provision of this
                  Lease shall not affect the validity or enforceability of the
                  remainder of this Lease.

         E.       The headings and titles to the paragraphs of this Lease are
                  not a part of this Lease and shall have no effect upon the
                  construction or interpretation of any part thereof.

         F.       Landlord has made no representation(s) whatsoever to Tenant
                  (express or implied) except as may be expressly stated in
                  writing in this Lease.

         G.       This instrument contains all of the agreements and conditions
                  between the parties hereto with respect to the Premises, and
                  may not be modified orally or in any other manner than by
                  agreement in writing, signed by all of the parties hereto or
                  their respective successors in interest.

                                       20

<PAGE>   21

         H.       It is understood and agreed that the remedies herein given to
                  Landlord shall be cumulative, and the exercise of any one
                  remedy by Landlord shall not be to the exclusion of any other
                  remedy.

         I.       The covenants and conditions herein contained shall, subject
                  to the provisions of Paragraph 21, apply to and bind the
                  heirs, successors, executors, administrators and assigns of
                  all the parties hereto.

         J.       This Lease has been negotiated jointly by the parties hereto,
                  and the language hereof shall not be construed for or against
                  either party.

         K.       All exhibits to which reference is made in this Lease are
                  deemed incorporated into this Lease, whether or not actually
                  attached.

         L.       All provisions of this Lease, whether covenants or conditions,
                  applicable to Tenant shall be deemed to be both covenants and
                  conditions.

         M.       This Lease shall in all respects be governed by, and construed
                  and enforced in accordance with the laws of the State of
                  California.

         N.       As used in this Lease, the term "Effective Date" shall mean
                  the latest date set forth below.

         O.       Tenant and Landlord hereby warrant to the other that each
                  individual executing this Lease has been duly authorized to
                  execute and deliver the Lease by all necessary entity action
                  and that this Lease is the valid and binding obligation of
                  Tenant and Landlord. Tenant and Landlord warrant to the other
                  that it is qualified to do business in and to be in good
                  standing in the State of California.

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the
date first above written.

        LANDLORD                                     TENANT

        DLC REDWOOD CITY                             NIKU Inc
        a California limited partnership             a Delaware corporation

        By 350 Associates LLC                        By: /s/ MARK NELSON
        a California limited liability company          ------------------------
        its General Partner                          Its: CFO
                                                         -----------------------

                                                     Date: 3/29/00
                                                          ----------------------
        By: /s/ RICHARD R. DEWEY, JR.
           ---------------------------
        Richard R. Dewey, Jr.
        Manager
        Date  3/29/0200
            --------------------------

                                       21

<PAGE>   22

                                    ADDENDUM

TO THAT CERTAIN LEASE DATED March 28, 2000, BY AND BETWEEN DLC REDWOOD CITY, A
CALIFORNIA LIMITED PARTNERSHIP ("LANDLORD") AND NIKU, INC, A DELAWARE
CORPORATION ("TENANT").

39.      Option to Extend. Tenant shall have the option to renew the Term of
         this Lease for one (1) additional ten (10) year term (the "Extended
         Term"). The Basic Rent for the Extended Term shall be Fair Market Rent
         including annual increases provided in Section 3B of this Lease as
         reflected in the determination of Fair Market Rent as provided herein.
         Fair Market Rent shall be defined to be rent for first class well
         maintained mid-rise office projects located proximate to the Palo Alto,
         Menlo Park, Redwood City, Redwood Shores, San Mateo, Foster City
         marketplace and that have on-building freeway visible signage,
         including the most recent comparable leases Landlord has consummated
         with other tenants at the Complex. Should Landlord and Tenant be unable
         to agree upon the Fair Market Rent within twenty-one (21) days of
         Landlord's timely receipt of Tenant's written notice as required
         herein, then Tenant may elect to either (i) revoke its written notice
         and have the lease expire at the end of the Term as provided in this
         Lease or (ii) notify Landlord within five (5) days that it elects to
         set the Fair Market Rent by appraisal. Tenant's failure to so timely
         notify Landlord as provided above shall be deemed to be Tenant's
         election to have the Lease expire at the end of the Term.

         Following such election to set the Fair Market Rent by appraisal, each
         party, within fifteen (15) days at its cost and by giving notice to the
         other party, shall appoint a licensed real estate appraiser (MAI) with
         at least five (5) years' full-time commercial appraisal experience in
         the area in which the Premises are located to determine the Fair Market
         Rental as specified above. If a party does not appoint an appraiser
         within fifteen (15) days, the single appraiser appointed shall be the
         sole appraiser and shall set the Fair Market Rent for the extended
         Term. If the two appraisers are appointed by the parties as stated in
         this paragraph, they shall meet promptly and attempt to set the Fair
         Market Rent for the extended term. If they are unable to agree within
         twenty (20) days after the second appraiser has been appointed, they
         shall select a third appraiser meeting the qualifications stated in
         this paragraph within ten (10) days after the last day the two
         appraisers are given to set the Fair Market Rent. The cost of said
         third appraiser shall be borne equally by Landlord and Tenant.

         Within ten (10) days after the selection of the third appraiser, a
         majority of the appraisers shall set the Fair Market Rent for the
         Extended Term. If a majority of the appraisers are unable to set the
         Fair Market Rent within the stipulated period of time, then the two
         (2) closest appraisals shall be added together and their total divided
         by two (2); and shall be the initial Basic Rent for the Premises for
         the first twelve (12) months of the Extended Term subject to CPI
         adjustments as set forth in the Lease. In no event shall Fair Market
         Rent be less than the Basic Rent paid in the last month of the primary
         Term of the Lease as increased by the CPI. Said Basic Rent as set by
         the appraisers shall be binding upon the parties hereto and the Lease
         shall remain in effect through the Extended Term. Tenant shall have no
         other right to extend the Lease beyond the Extended Term herein
         granted.

         Tenant shall thereafter notify Landlord of its desire to exercise such
         option within a minimum of nine (9) months and a maximum of twelve (12)
         months prior to the expiration date of the primary lease Term. This
         option shall be void, at Landlord's option, if Tenant has been
         chronically delinquent as defined in Section 13# of this Lease, or is
         in default at the time of exercise or at any time subsequent to Tenant
         giving timely notice up to commencement of the Extended Term. This
         option is personal to Tenant and may not be assigned or transferred
         without Landlord's expressed

                                       22

<PAGE>   23

ADDENDUM
NIKU, INC.
PAGE 2

written consent which may be withheld in Landlord's sole and absolute
discretion. TIME IS OF THE ESSENCE.

Except for adjustments to the Basic Rent, the Extended Term shall be on the same
terms and conditions as the primary Term of the Lease. OPT shall continue to be
chargeable to Tenant during the Extended Term.

<TABLE>
<CAPTION>

     <S>                                                    <C>
     AGREED AND ACCEPTED:                                   AGREED AND ACCEPTED:

     LANDLORD                                               TENANT

     DLC REDWOOD CITY                                       NIKU, INC.
     a California limited partnership                       a Delaware corporation

     By 350 Associates LLC
     a limited liability company
     its General Partner

     By: /s/ RICHARD R. DEWEY, JR. Date: 3/29/2000          By: /s/ MARK NELSON Date: 3/29/00
        ------------------------------------------             -------------------------------
             Richard R. Dewey, Jr.                                  Mark Nelson

     Its: Manager                                           Its:    CFO
         -----------------------------                          ------------------------
</TABLE>

                                       23

<PAGE>   24

                                    EXHIBIT A

Description of Premises, including description of Real Property on which the
Premises are located:

PARCEL ONE:

Parcel 3, as shown on Parcel Map 78-7, being a resubdivision f Parcel "A" shown
on the Parcel Map 69-recorded in Book 7 of Parcel Maps, Page 28, City of Redwood
City, San Mateo County, California, and recorded on October 4, 1978 in Book 44
of Parcel Maps, Page 5.

PARCEL TWO:

Parcel 4, as shown on Parcel Map No. 78-7, being a resubdivision of Parcel "A"
shown on Parcel Map 69-1 recorded in Book 7 of Parcel Maps, Page 28, City of
Redwood City, San Mateo County, California, and recorded on October 4, 1978 in
Book 44 of Parcel Maps, Page 5, Series No. 23141-AN.

 APN:   052-383-320
        052-383-330

                                       24

<PAGE>   25

                       DESCRIPTION OF 350 CONVENTION WAY

<PAGE>   26

                       DESCRIPTION OF 350 CONVENTION WAY

<PAGE>   27

                       DESCRIPTION OF 350 CONVENTION WAY

<PAGE>   28

                                    EXHIBIT B

                                     (DATE)

NIKU, INC.
350 Convention Way
Redwood City, CA 94063

Re: Commencement Date under Lease dated March 28, 2000 Between DLC Redwood City
a California limited partnership, ("Landlord") NIKU, Inc., a Delaware
corporation (hereinafter called "Tenant").

Dear                         :
    -------------------------

         Pursuant to Paragraph 2 of the above-mentioned Lease, you are hereby
         informed of the following:

         Commencement Date of the Term of the Lease:

         Expiration Date of the Term of the Lease:

                               Very truly yours,

                               DLC Redwood City
                               a California limited partnership

                               By 350 Associates LLC
                               a California limited liability Company
                               its General Partner.

                               Richard R. Dewey, Jr.
                               Manager

                               RRD/ms

                                       25

<PAGE>   29

                                    EXHIBIT C

Improvements

Landlord shall provide a Tenant Improvement allowance of Thirty and No/100ths
Dollars ($30.00) per usable square foot (usable square footage shall be the
rentable building areas less the first floor lobby and elevator core, restrooms,
utility/janitor rooms, shafts/stairwells as determined by Landlord's Architect)
("Base Allowance") for construction of tenant improvements in accordance with
the Final Plans prepared under Paragraph 6 of the Lease. Said Improvements shall
include the Building standards including, but limited to, full height solid core
doors in finish selected by Landlord; upgraded light fixtures; "2nd look" t-bar
ceiling grid/tile; semi-recessed fire sprinklers at t-bar ceiling and fully
recessed sprinklers at sheetrock ceiling; side lights next to interior doors,
smooth (Level 5) walls and ceilings; white electrical outlets/switches; Kitchen
appliances (refrigerator, dishwasher, garbage disposal etc.) and sinks on all
floors; and the like. It is understood that Landlord's general contractor will
complete all Improvements done at the Premises. Landlord shall provide Tenant
with its written estimate of the cost of the Improvements (construction costs,
city fees, design fees, architectural/structural fees, etc.) plus a contingency
of five percent (5%). Should the estimated cost of the Improvements exceed the
Base Allowance, then, within ten (10) days from receipt of Landlord's written
estimate, Tenant shall deposit such estimated amount in excess of the Base
Allowance with Landlord. Tenant's failure to so timely forward said excess
amount shall be deemed a default under the Lease as well as a delay in
Substantial Completion caused by Tenant. During construction, any additional
costs in excess of the Base Allowance and funds deposited with Landlord, shall
be paid by Tenant to Landlord within ten (10) days of Tenant's receipt of
Landlord's invoice. Tenant's failure to timely pay as required herein shall be a
default under the Lease as well as a delay as caused by Tenant. At the end of
the construction of the Improvements, Landlord shall provide Tenant with a
summary of the actual costs of the Improvements. Should the actual cost of the
Improvements be less than the amount so paid by Tenant in excess of the Base
Allowance, Landlord shall refund the difference to Tenant within ten (10) days.
Should the actual cost of the Improvements be in excess of the Base Allowance
plus the cost so paid by Tenant, Tenant shall pay this difference (i.e. actual
cost of the Improvements less Base Allowance, less amount paid by Tenant) to
Landlord within ten (10) days of receipt of written invoice.

The Base Allowance provided to Tenant is in addition to work provided in the
base Complex shell at Landlord's cost, included in the base Complex shell
provided at Landlord's sole cost are:

On-site improvements; Parking Garage; Building structure; elevators (finished),
main building (finished) restroom core on each floor (finished); elevator lobby
is fully finished on first floor; main HVAC unit set on roof with main vertical
duct shaft (horizontal distribution, zoning, energy management systems and all
controls are part of the Tenant Improvements); main electrical service to main,
electrical room (Distribution on the respective floor is part of the Tenant
Improvements); and fire sprinkler main vertical riser (horizontal branches,
distribution and drops are part of the Tenant Improvements); all power and
telephone service will be described in detail on or before June 1, 2000 by
Tenant.

Landlord agrees to do the following (or cause the following to be done by the
general contractor): (i) Place order for steel by June 30, 2000; (ii) Place
order to GFRC/Curtain Wall by June 30, 2000; (iii) Commence Indicator piles by
May 31, 2000. (iv) Commence installation of piles by July 31, 2000. Should
Landlord not so timely commence or order, as the case may be, on or before
thirty (30) days, following the above respected date, Tenant may notify Landlord
in writing of this delay. Landlord then shall have thirty (30) days to commence
the work or place the order, as the case may be. Should Landlord fail to do so,
Tenant, by giving Landlord fifteen (15) days written notice, may terminate the
Lease.

                                       26

<PAGE>   30

                                   EXHIBIT "D"

                      STANDARDS FOR UTILITIES AND SERVICES

The following Standards for Utilities and Services shall apply to the Complex.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto at any time as Landlord, in its sole discretion, deems
advisable.

A.       On the Commencement Date through the date the Lease terminates, during
         usual business hours (and at other times for a reasonable additional
         charge to be fixed by Landlord), Landlord shall ventilate the Premises
         and furnish air-conditioning or heating on such days and hours, when in
         the judgment of Landlord it may be required for the comfortable
         occupancy of the Premises. The air-conditioning system achieves maximum
         cooling when the window coverings are closed, Landlord shall not be
         responsible for room temperatures if Tenant does not keep all window
         coverings in the Premises closed whenever the system is in operation.
         Tenant agrees to cooperate fully at all times with Landlord, and to
         abide by all regulations and requirements which Landlord may prescribe
         for the proper functioning and protection of said air-conditioning
         system. Tenant agrees not to connect any apparatus, device, conduit or
         pipe to the Complex air-conditioning supply lines. Tenant further
         agrees that neither Tenant nor its servants, employees, agents,
         visitors, licensees or contractors shall at any time enter mechanical
         installations or facilities of the Complex or adjust, tamper with,
         touch or otherwise in any manner affect said installations or
         facilities.

B.       The Landlord shall furnish to the Premises during the usual business
         hours, electric current as required by the Complex's standard office
         lighting and fractional horsepower office lighting and fractional
         horsepower office business machines in the amount of approximately four
         (4) watts per square foot. The Tenant agrees, should its electrical
         installation or electrical consumption be in excess of the aforesaid
         quantity or extend beyond usual business hours, to reimburse Landlord
         monthly on the date Basic Rent is due for the measured consumption at
         the terms, classifications and rates charged similar consumers by said
         public utility serving the neighborhood in which the Complex is
         located. If a separate meter is not installed at Tenant's cost, such
         excess cost will be established by an estimate agreed upon by Landlord
         and Tenant, and if the parties fail to agree, as established by an
         independent licensed engineer, selected by Landlord and approved by
         Tenant. Tenant agrees not to use any apparatus or device in, or upon,
         or about the Premises which may in any way increase the amount of such
         services usually furnished or supplied to said Premises, and Tenant
         further agrees not to connect any apparatus or device with wires,
         conduits or pipes, or other means by which such services are supplied,
         for the purpose of using additional or unusual amounts of such services
         without the prior written consent of Landlord. Should Tenant use the
         same to excess, Tenant shall pay to Landlord, upon demand, the amount
         established by Landlord for such excess usage. At all times Tenant's
         use of electric current shall never exceed the capacity of the feeders
         to the Complex or the risers or wiring installation and Tenant shall
         not install or use or permit the installation or use of any computer or
         electronic data processing equipment in the Premises without the prior
         written consent of Landlord.

C.       Water will be available in public areas for drinking and lavatory
         purposes only, but if, in Landlord's sole determination, Tenant
         requires, uses or consumes water for any purpose in addition to
         ordinary drinking and lavatory purposes, Landlord may install a water
         meter at Tenant's expense and thereby measure Tenant's water
         consumption for all purposes. Tenant shall pay Landlord, upon demand,
         for the cost of the meter and the cost of the installation thereof and
         throughout the duration of Tenant's occupancy Tenant shall keep said
         meter and installation equipment in good working order and repair at
         Tenant's own cost and expense. If Tenant is in default of its
         obligations to keep the meter and equipment in good repair, then
         Landlord, in addition to all other remedies for breach in this Lease
         and at law, may cause such meter and equipment to be replaced or
         repaired and collect the cost thereof from Tenant. Tenant agrees to pay
         for water consumed, as shown on said meter, as and when bills are
         rendered, and on default in making such payment, Landlord may, in
         addition to all other remedies for breach in this Lease and at law, pay
         such charges and collect the same from Tenant.

D.       The Landlord shall provide janitorial services on the Premises,
         provided the same are used exclusively as offices and are kept
         reasonably in order by Tenant. Tenant shall pay to Landlord, upon
         demand, the cost of removal of Tenant's refuse and rubbish, to the
         extent that the same exceeds the refuse and rubbish usually attendant
         upon the use of the Premises as offices, as well as any costs of excess
         rubbish removal due to move-in, new equipment etc.

                                       27

<PAGE>   31

Exhibit "D"
Page 2

E.       "Holidays" for purposes of this Lease, shall be defined as holidays
         observed by the United States Post Office. "Usual business hours" for
         purposes of this Lease, are from 8:00 a.m. until 6:00 p.m.; Monday
         through Friday, except holidays.

F.       Tenant may operate its business at hours other than usual business
         hours provided that Tenant acknowledges that it shall pay the cost of
         operation of HVAC and electricity for power and lighting on a monthly
         basis as invoiced by Landlord and payable by Tenant to Landlord within
         fifteen (15) days of invoice for Landlord to Tenant.

Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air-conditioning and electric systems, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed. Landlord's obligations to
provide utilities and services hereunder shall also be subject to and limited by
the Force Majeure provisions of the Lease. Any failure to supply utilities or
services, whether caused by a Force Majeure described in the Lease or by reason
of accident, emergency, repair, alteration or improvement, shall not be
construed as an eviction of Tenant, whether actual or constructive, and shall
not cause an abatement of Rent, either in whole or in part.

Landlord shall have no obligation whatsoever to supply utilities and services to
the Premises if Tenant is in default of any term, covenant, or condition of this
Lease.

Any costs or expenses incurred by Landlord with respect to Tenant's default
hereunder as well as all payments to be made by Tenant to Landlord pursuant to
the above provisions, as stated herein or as may be later modified, shall be
deemed to be Additional Rent under the Lease and Landlord shall have all its
rights and remedies under the Lease and at law with respect to the same
including but not limited to the right to late fees and interest upon default.

The cost for operating the HVAC at times other than usual business hours is
forty and No/100ths Dollars ($40.00) per hour. This cost shall be adjusted to
reflect increases in the Index as provided in Paragraph 3B of the Lease. The
cost for operating the lighting systems at times other than usable business
hours is twelve and No/100ths Dollars ($12.00) per hour. This cost shall be
adjusted to reflect increases in the Index as provided in Paragraph 3B of the
Lease. The foregoing charges and limitations on use shall not be applicable to
Tenant so long as Tenant is leasing 100% of the Building and is therefore
responsible for 100% of the utility and repair/replacement costs and expenses.

                                       28
<PAGE>   32

                                   EXHIBIT "E"

                               WAIVER AND RELEASE

         In consideration for being authorized to use the Exercise Facility, I,
the undersigned, for myself, my heirs, executors, administrators and assigns
waive and release all rights and claims for damages for death, personal injury
or loss of property which I may have as a result of my utilization of the
Exercise Facility arid its equipment located at_________________.

         I, the undersigned, for myself, my heirs, executors, administrators and
assigns release and forever discharge the Complex owners, lessees of the
Complex, and management of the Complex and their respective agents, members,
directors, partners, officers, employees and representative from any and all
liability, losses, claims, and damages arising out of or connected in any way
with my use of the Exercise Facility. I understand that exercise entails risk of
personal injury and my participation is voluntary and done entirely at my own
risk. I attest that I have no medical condition which would increase the usual
risks of physical exercise.

         I have read and fully understand everything written above.

Dated:
      ---------------------

Signature:
          -----------------

Printed Name:
             --------------

                                       29
<PAGE>   33

                                   EXHIBIT "F"
                                 LEASE GUARANTEE

WHEREAS, NIKU, INC., A DELAWARE CORPORATION, (the "Tenant"), has entered into a
lease agreement dated March 28, 2000 as Tenant, with DLC Redwood City, a
California limited partnership ("Landlord'), concerning real property commonly
known as 350 Convention Way, Redwood City, California (the "Lease"); and

         WHEREAS, the undersigned Guarantor is willing to execute and deliver
this Lease Guarantee for the express and intended purpose of inducing Landlord
to enter into the Lease.

         NOW, THEREFORE, the Guarantor, in order to induce Landlord to enter
into the Lease with Tenant, does hereby absolutely and unconditionally guarantee
to Landlord the full and prompt payment of all amounts which Tenant, or any
sublessee or assignee of the Lease (collectively, "Obligors"), may at any time
owe under the Lease, any extensions, renewals or modifications thereof, and
further guarantees to Landlord and shall be liable to Landlord for the full,
prompt and faithful performance of the Obligors of each and all of the
covenants, terms, and conditions of the Lease, or any extensions, modifications
or renewals thereof, to be hereafter performed and kept by the lessee of the
Lease, or any Obligor.

         The Guarantor's obligations hereunder are independent of the
obligations of the Obligors, and a separate action or actions may be brought and
prosecuted against the Guarantor whether or not action is brought against the
Obligors or whether or not the Obligors be joined in any such action or actions.
Landlord's rights hereunder shall not be exhausted by its exercise of any of its
rights or remedies or by any such action or by any number of successive actions
until and unless all indebtedness and obligations, the payment and performance
of which are hereby guaranteed, have been paid and fully performed.

         The Guarantor authorizes Landlord, without notice or demand and without
affecting the liability of Guarantor hereunder, from time to time to (a) consent
to any extensions, accelerations or other changes in the time for any payment
provided for in the Lease, or consent to any other alteration of any covenant,
term or condition of the Lease in any respect so long as Tenant consents
thereto, and to consent to any assignment, subletting or reassignment of the
Lease; (b) take and hold security for any payment provided for in the Lease or
for the performance of any covenant, term or condition of the Lease, or
exchange, waive or release any such security; (c) apply such security and direct
the order or manner of sale thereof as Landlord in its discretion may determine.
Landlord may, without notice, assign this Guarantee to any party who assumes the
obligations of lessor under the Lease. Notwithstanding any termination, renewal,
extension or holding over of the Lease, this Guarantee shall continue until all
of the covenants, terms and conditions on the part of the Obligors to be
performed have been fully and completely performed by the Obligors, and the
Guarantor shall not be released of any obligation or liability hereunder so long
as there is any claim against the Obligors arising out of the Lease that has not
been settled or discharged in full.

Guarantor hereby waives and relinquishes all rights and remedies accorded by
applicable law to guarantors and agrees not to assert or take advantage of any
such rights or remedies including but not limited to: (a) any right to require
Landlord to proceed against any Obligor or any other person or to proceed
against or exhaust any security held by Landlord at any time or to pursue any
other remedy in Landlord's power before proceeding against Guarantor; (b) the
defense of the statute of limitations in any action hereunder or in any action
for the collection of any obligation or indebtedness or the performance of any
obligation hereby guaranteed; (c) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other person or
persons or the failure of Landlord to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other person or
persons; (d) demand, protest and notice of any kind, including but not limited
to notice of the existence, creation or incurring of any new or additional
obligation or of any action or non-action on the part of Landlord, any Obligor
or on the part of any other person whomsoever under this or any other instrument
in connection with any obligation hereby guaranteed; (e) any defense based upon
an election of remedies by Landlord, which destroys or otherwise impairs the
subrogation rights of Guarantor or the right of Guarantor to proceed against
Tenant and/or the Obligors for reimbursement or both; (f) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more 'burdensome than that of
the principal; (g) any duty on the part of Landlord to disclose to Guarantor any
facts Landlord may now or hereafter know about

                                       30

<PAGE>   34

Tenant, regardless of whether Landlord has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume or
has reason to believe that such facts are unknown to Guarantor or has a
reasonable opportunity to communicate such facts to Guarantor, it being
understood and agreed that the Guarantor is fully responsible for being and
keeping informed of the financial condition of Tenant and of all circumstances
bearing on the risk of non-performance of any obligation of the lessee under the
Lease; (h) any defense arising because of Landlord's election, in any proceeding
instituted under the federal Bankruptcy Code, of the application of Section 1111
(b)(2) of the federal Bankruptcy Code; (i) any defense based on any borrowing
or grant of a security interest under Section 364 of the federal Bankruptcy
Code, and (j) any defense based on the assumption or rejection of the Lease by
any Obligor or any bankruptcy trustee under Section 365(a) of the federal
Bankruptcy Code. Without limiting the generality of the foregoing or any other
provision hereof, Guarantor hereby expressly waives any and all benefits which
might otherwise be available to Guarantor under California Civil Code Sections
2809 through 2856, 2899 and 3433.

         The Guarantor shall have no right of subrogation and waiver, any right
to proceed against any Obligor for reimbursement, as well as any right to
enforce any remedy which Landlord now has or may hereafter have against any
Obligor, and waives any benefit of, and any right to participate in any security
now or hereafter held by Landlord.

         The Guarantor waives all demands upon and notices to Guarantor or to
any Obligor, including demands for performance, notices of non-performance,
notices of non-payment and notice of acceptance of this Guarantee.

         Guarantor agrees to pay reasonable attorneys' fees and all other costs
and expenses which may be incurred by Landlord in the enforcement of this
Guarantee.

         No right or power of Landlord shall be deemed to have been waived by
any act or conduct on the part of Landlord, or by any neglect to exercise such
right or power, or by any delay in so doing; and every right and power of
Landlord shall continue in full force and effect until such right or power is
specifically waived by an instrument in writing executed by Landlord.

         This Guarantee shall bind the Guarantor, its successors and assigns,
and shall inure to the benefit of Landlord and its successors and assigns.

         This Guarantee and each and every term and provision thereof shall be
construed in accordance with the laws of the State of California.

         In the event any dispute arises regarding the enforcement or
construction of the terms or provisions of this Guarantee, the prevailing party
in such dispute shall be entitled to recover, in addition to any damages
suffered, reasonable attorneys' fees incurred as a result thereof.

         If any provision or portion thereof of this Guarantee is declared
unenforceable by a court of competent jurisdiction, the remaining provisions
shall continue in full force and effect.

         IN WITNESS WHEREOF, Guarantor has executed this instrument on this
day___ of _________.

                                   "GUARANTOR"

                                   -------------------------------

                                       31

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