SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 15, 2010
MULTI-FINELINE ELECTRONIX, INC.
(Exact name of registrant as specified in its charter)
3140 East Coronado Street
Anaheim, CA 92806
(Address of Principal Executive Offices) (Zip Code)
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
On April 15, 2010, MFLEX (Chengdu) Co., Ltd. (MFLEX Chengdu), a subsidiary of Multi-Fineline Electronix, Inc., Beijing Shiyuan Xida Construction and Technology Company (Contractor), organized and existing under the laws of the Peoples Republic of China and Contractors parent company, China Electronics Engineering Design Institute, organized and existing under the laws of the Peoples Republic of China (Guarantor) entered into an Engineering, Procurement and Construction/Turn Key Project Agreement for the construction of a manufacturing facility in Chengdu, China (the Agreement).
Pursuant to the Agreement, Contractor shall design, execute, complete and test the facility in conformity with MFLEX Chengdus specifications, including, without limitation, certain quality assurance, maintenance and defect remediation requirements, all as detailed in the Agreement. Completion of the construction is currently expected in January 2011 or earlier. MFLEX Chengdu is entitled to liquidated damages ranging from 0.03%/day to 0.05%/day of the contract price for a delay in completion beyond two weeks, subject to certain exceptions. Contractor may request an extension in the event of delays relating to various events, including, force majeure, exceptionally poor sub-surface conditions at the site, governmental stoppage and delayed payment, among other events. Additionally, MFLEX Chengdu may suspend or delay construction at its discretion. The term of the Agreement commenced on April 15, 2010 and continues for three-hundred and sixty-five (365) days following completion of construction, subject to earlier termination.
The Agreement provides for aggregate fees of RMB 105.3 million (approximately U.S. $15.5 million), which shall be paid in monthly progress payments beginning in May 2010 and continuing until completion of construction. Monthly payments range from RMB 4.5 million to RMB 13.8 million (approximately U.S. $0.7 million to U.S. $2.0 million) based on the work scheduled to be performed during the applicable period. If MFLEX Chengdu does not release all phases of the project in the time frames specified in the Agreement, the costs are subject to increase if prices of essential construction materials increase by more than 10% over the applicable prices in March of 2010. Contractor is obligated to deliver to MFLEX Chengdu monthly progress reports providing a detailed description of progress of construction and costs associated with such construction, among other items. A down payment of RMB 10.5 million (approximately U.S. $1.5 million) was required by MFLEX Chengdu upon execution of the Agreement. As security for performance under the Agreement, Contractor is required to deliver a performance bond in the amount of 10% of the contract price. In addition, Guarantor has guaranteed Contractors performance under the Agreement.
MFLEX Chengdu may terminate the Agreement on fourteen (14) days notice (1) in its discretion; (2) upon an uncured breach by Contractor; (3) if Contractor becomes bankrupt, insolvent or goes into liquidation; or (4) upon unauthorized assignment of the Agreement by Contractor. Contractor may terminate the Agreement on fourteen (14) days notice (1) upon an uncured breach, including failure to timely make scheduled payments; (2) if MFLEX Chengdu becomes bankrupt, insolvent or goes into liquidation; or (3) following a prolonged suspension of work under the Agreement.
The Agreement also provides that Contractor shall indemnify MFLEX Chengdu for all claims relating to the construction of the facility, subject to certain limitations. Any disputes between the parties shall be resolved through final and binding arbitration. The Agreement shall be governed and interpreted in accordance with the laws of The Peoples Republic of China.
The foregoing description of the Agreement is qualified in its entirety by reference to the Agreement filed as Exhibit 10.64 to this Current Report on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.