<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 31, 1997
Commission File Number 0-23248
SigmaTron International, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant, as Specified in its Charter)
Delaware 36-3918470
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2201 Landmeier Road, Elk Grove Village, Illinois 60007
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (847) 956-8000
No Change
- --------------------------------------------------------------------------------
(Former Name, Address, or Fiscal Year, if Changed Since Last Reports)
Indicate, by check mark, whether the Registrant
(1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934, during the preceding 12
months, and
Yes XX No
--- ---
(2) has been subject to such filing requirements for the past 90 days.
Yes XX No
--- ---
On March 10, 1997, there were 2,875,227 shares of the Registrant's Common Stock
outstanding.
<PAGE> 2
SigmaTron International, Inc.
Index
PART I. FINANCIAL INFORMATION: Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets--January 31, 1997
and April 30, 1996 3
Consolidated Statements of Income--Three and
Nine Months Ended January 31, 1997 and 1996 4
Consolidated Statements of Cash Flow--Nine Months
Ended January 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits 10
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SIGMATRON INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JANUARY 31, April 30,
1997 1996
(UNAUDITED) (Audited)
------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,500 $ 2,500
Accounts receivable, less allowance for doubtful
accounts of $164,126 at January 31,
1997 and $492,126 at April 30, 1996 10,105,157 11,080,485
Inventories 19,825,513 14,854,050
Equipment lease receivables from affiliate 816,293 655,913
Notes receivable from affiliate - 300,000
Prepaid expenses 224,109 167,686
Other assets 1,997,971 744,164
Deferred income taxes 446,871 446,871
---------- ----------
Total current assets 33,418,414 28,251,669
Machinery and equipment, net 9,236,836 7,230,393
Intangible assets, net of amortization of
$172,197 and $154,341 at January 31, 1997 and
April 30, 1996, respectively 20,058 37,914
Equipment lease receivables from affiliate, less
current portion 1,645,505 1,920,876
Investment and advances with affiliate 549,469 202,524
Other assets 446,984 671,418
---------- ----------
Total assets $45,317,266 $38,314,794
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - Bank 166,668 166,668
Notes payable - Related parties 74,543 151,860
Trade accounts payable 8,634,393 6,062,695
Trade accounts payable - Related parties 428,605 794,310
Accrued expenses 1,070,611 1,443,034
Income taxes payable 708,039 66,236
Capital lease obligations 1,088,497 913,566
---------- ----------
Total current liabilities 12,171,356 9,598,369
Notes payable - Bank, less current portion 14,078,507 12,533,171
Notes payable - Related parties, less current portion 0 42,596
Capital lease obligations, less current portion 2,388,541 2,720,484
Deferred income taxes 651,635 651,635
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value; 6,000,000 shares
authorized, 2,875,227 and 2,737,500 shares issued and 28,752 27,375
outstanding at January 31, 1997 and April 30, 1996,
respectively 8,930,212 8,384,089
Capital in excess of par value 7,068,263 4,357,075
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Retained earnings 16,027,227 12,768,539
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Total stockholders' equity
Total liabilities and stockholders' equity $45,317,266 $38,314,794
========== ==========
</TABLE>
See accompanying notes.
3
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SigmaTron International, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS Three Months NINE MONTHS Nine Months
ENDED Ended ENDED Ended
JANUARY 31, 1997 January 31, 1996 JANUARY 31, 1997 January 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales
Cost of products sold $21,910,286 $20,118,444 $70,086,628 $48,225,397
19,051,065 17,191,061 59,861,218 41,028,899
----------- ----------- ----------- -----------
2,859,221 2,927,383 10,225,410 7,196,498
Selling and administrative expenses 1,185,831 1,360,591 4,546,409 3,192,486
----------- ----------- ----------- -----------
Operating income 1,673,390 1,566,792 5,679,001 4,004,012
Equity in net loss (income) of affiliate 26,841 (10,113) 52,805 202,378
Interest expense - banks and capital lease obligations 483,980 487,358 1,399,110 1,169,979
Interest expense - related party 2,006 6,717 8,699 26,710
Interest income - related party (101,167) (99,467) (300,259) (302,470)
----------- ----------- ----------- -----------
411,660 384,495 1,160,355 1,096,597
Income before income taxes 1,261,730 1,182,297 4,518,646 2,907,415
Income taxes 504,692 472,919 1,807,458 1,162,966
----------- ----------- ----------- -----------
Net income $ 757,038 $ 709,378 $ 2,711,188 $ 1,744,449
=========== =========== =========== ===========
Net income per common and common equivalent share $ 0.25 $ 0.26 $ 0.93 $ 0.64
=========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding 2,982,201 2,738,072 2,920,158 2,737,818
=========== =========== =========== ===========
Net income per common share -
assuming full dilution $ 0.25 $ 0.90
=========== ===========
Weighted average number of common shares
outstanding - assuming ful dilution 3,026,570 3,026,570
=========== ===========
</TABLE>
See accompanying notes.
4
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SIGMATRON INTERNATIONAL, INC.
Consoldiated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 31,
OPERATING ACTIVITIES 1997 1996
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<S> <C> <C>
Net Income $2,711,188 $1,744,449
Adjustments to reconcile net income
to net provided by (cash used) in
operating activities:
Depreciation 739,836 551,024
Equity in net loss of affiliate 52,805 202,378
Amortization 17,856 19,607
Provision for doubtful accounts - (21,112)
Compensation expense related to stock options 75,000 -
Changes in operating assets and liabilities:
Accounts receivable 975,328 (4,217,913)
Notes receivable from affiliates - (200,000)
Inventories (4,971,463) (5,142,574)
Prepaid expenses (56,423) (23,424)
Refundable income taxes - 134,773
Other assets (1,029,373) (845,981)
Trade accounts payable 2,571,698 2,972,355
Trade accounts payable - related parties (365,705) (163,793)
Accrued expenses (372,423) (50,075)
Income taxes payable 641,803 331,693
--------- ---------
Net provided by (cash used) in operating activities 990,127 (4,708,593)
INVESTING ACTIVITIES:
Purchases of machinery and equipment (2,397,566) (1,230,264)
Proceeds from sale of investment in affiliate 250 -
Proceeds from sale of machinery
and equipment - 37,513
Advances to affiliate (100,000) (50,000)
Net proceeds from affiliate subleases 370,620 206,966
--------- ---------
Net cash used in investing activities (2,126,696) (1,035,785)
FINANCING ACTIVITIES:
Repayment of term loan and other notes payable (119,913) (313,012)
Net payments under capital lease obligations (761,354) (644,508)
Issuance of common stock 472,500 -
Net proceeds under line of credit 1,545,336 6,701,898
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Net cash provided by financing activities 1,136,569 5,744,378
Change in cash 0 0
Cash at beginning of period 2,500 2,500
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Cash at end of period $ 2,500 $ 2,500
========= ==========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Acquisition of machinery and equipment
financed under capital leases $ 348,713 $ 432,256
========= ========
</TABLE>
5
See accompanying notes.
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SigmaTron International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
January 31, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended January 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending April 30, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report for the year ended April 30, 1996.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
January 31, April 30,
1997 1996
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<S> <C> <C>
Finished products $ 1,341,516 $ 556,157
Work-in-process 1,960,720 1,407,996
Raw materials 16,523,277 12,889,897
----------- -----------
$19,825,513 $14,854,050
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</TABLE>
NOTE C -- LINE OF CREDIT
On December 5, 1996 the Company amended its credit agreement to allow the
maximum borrowing limit under the revolving line-of-credit agreement to be
limited to the lesser of: (i) $21,500,000, or (ii) an amount equal to the sum
of up to 85% of the receivables borrowing base, as defined, and the lesser of
$8,000,000 or the amount of the inventory borrowing base as defined.
6
<PAGE> 7
NOTE D -- INVESTMENT IN AFFILIATE
During this quarter, the Company made advances to SMT Unlimited L.P. (SMTU) of
$100,000 in exchange for subordinated debentures. These debentures bear
interest at 12% and are to be repaid on December 31, 2001. The Company also
converted $300,000 of promissory notes with SMTU into subordinated debentures.
These debentures bear interest at 12% and are to be repaid on December 31,
2001.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE: To the extent any statements in this Form 10-Q may be deemed to be
forward-looking, such statements should be evaluated in the context of the
risks and uncertainties inherent in the Company's business, including the
Company's continuing dependence on certain major customers, the anticipated
seasonality of its business, the timing of or rescheduling of customer orders
and other risks and uncertainties set forth in the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 1996.
Sales to the Company's largest customer are seasonal and may cause the
Company's quarterly revenues and earnings to fluctuate significantly.
RESULTS OF OPERATIONS:
Net sales increased from $20,118,444 for the three month period ended January
31, 1996 to $21,910,286 for the three month period ended January 31, 1997. For
the first nine months of fiscal 1997 net sales increased to $70,086,628 from
$48,225,397 for the comparable period of the prior year. The increase in net
sales was due primarily to sales to Nighthawk Systems, Inc. (NSI), which
contributed $23,726,822 in net sales for the nine months ended January 31, 1997
and $11,763,300 for the comparable period in the prior year. The Company began
manufacturing for NSI in August 1995, and NSI's market is an emerging market
which could lead to volatility in the forecast. The Company anticipates NSI
will account for a significant percentage of the Company's net sales in fiscal
1997. Sales to NSI are seasonal due to the nature of the product and generally
are greater in the Company's second and third quarter.
Gross profit decreased during the three month period ended January 31, 1997 to
$2,859,221 from $2,927,383 for the same period of the prior fiscal year. For
the nine months ended January 31, 1997 gross profit increased to $10,225,410 as
compared to $7,196,498 for the same period in 1996. The increase in absolute
dollars is due to a higher sales volume. Gross profit decreased as a percent
of net sales for the nine months ended January 31, 1997 to 14.6% from 14.9% for
the same period in the prior year, which is primarily due to product mix.
Selling and administrative expenses decreased for the three month period ended
1/31/96 from $1,360,591 to $1,185,831 for the three months ended January 31,
1997. Selling and administrative expenses as a percentage of net sales for the
nine months ended January 31, 1997 were 6.5% or $4,546,409 compared to 6.6% or
$3,192,486 in the same period in the prior year. The increase in absolute
dollars for the nine months ended January 31, 1997 was primarily due to an
increase in commission expense related to the higher sales volume.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- - cont'd
Interest expense for bank debt and capital lease obligations for the
three month period ended January 31, 1997 was $483,980 compared to $487,358 for
the same period in the prior year. For the nine months ended January 31, 1997
interest expense increased to $1,399,110 from $1,169,979 in the same period for
the prior fiscal year. This increase is primarily attributable to a higher
outstanding balance on the line of credit and interest expense associated with
increased capital lease obligations.
As a result of the foregoing, income before taxes increased from
$1,182,297 in the three month period ended January 31, 1996 to $1,261,730 for
the same period in fiscal year 1997. Net income increased from $709,378 for
the three month period ended January 31, 1996 to $757,038 for the three month
period ended January 31, 1997. Earnings per share were $ .26 and $ .25 for the
three months ended January 31, 1996 and 1997, respectively. For the nine months
ended January 31, 1997 primary earnings per share were $ .93 compared to $ .64
for the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary source of liquidity has been cash provided by net income
and borrowings from its secured lender. The Company had working capital of
$21,247,057 at January 31, 1997 and $20,622,238 at January 31, 1996. This
represents a current ratio of 2.75 and 3.34 for these periods, respectively.
For the nine month period ended January 31, 1997, the primary use of cash from
operations was an increase in inventories. The net cash used for investing
activities for the same period was $2,126,696, which was primarily attributable
to machinery and equipment purchases.
To the extent that the Company provides the funds necessary to operate its
Mexican operations, the amount of funds available for use in the Company's
domestic operations may be depleted. The funds, which ordinarily derive from
the Company's cash from operations and borrowings under its revolving credit
facility, equal approximately $1,649,500 for the three month period ended
January 31, 1997 and $4,387,500 for the nine month period ended January 31,
1997.
Net cash provided by financing activities totaled $1,136,570 for the nine
months ended January 31, 1997 compared to $5,744,378 in the prior year. Net
proceeds under the line of credit decreased from $6,701,898 for the nine months
ended January 31, 1996 to $1,545,336 for the nine months ended January 31,
1997.
9
<PAGE> 10
SIGMATRON INTERNATIONAL, INC.
PART II - OTHER INFORMATION
January 31, 1997
ITEM 6 (A) EXHIBITS
10.38 Lease Agreement between the Company and International Financial
Services 96-129 dated September 20, 1996.
10.39 Lease Agreement between the Company and International Financial
Services 96-127 dated August 20, 1996.
10.40 Tenth Amendment to Amended and Restated Loan and Security
Agreement between SigmaTron International, Inc. and HSBC Midland
Business Loans Inc. dated December 5, 1996.
10.41 Amended and Restated Agreement between SigmaTron International,
Inc. and Nighthawk Systems, Incorporated dated November 15, 1996.
10.42 Lease Agreement between SigmaTron International, Inc. and
Industrias Irvin DeMexico S.A. DE C.V. dated January 15, 1997.
11.0 Statement RE: Computation of Earnings Per Share.
Item 6(a) Exhibits 27 - Financial Data Schedule (EDGAR version only)
(b) No report on Form 8-K was filed for the quarter ended January 31,
1997.
10
<PAGE> 11
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGMATRON INTERNATIONAL, INC.
/s/ Gary R. Fairhead 3/11/97
- ----------------------------------------------- ---------
Gary R. Fairhead Date
President and CEO (Principal Executive Officer)
/s/ Linda K. Blake 3/11/97
- ---------------------------------------------- ---------
Linda K. Blake Date
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
11
<PAGE> 1
EXHIBIT 10.38
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-129
ADDRESS: 2201 LANDMEIER ROAD CONTACT: MS. LINDA BLAKE, PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
SMT UNLIMITED L.P.
TYPE OF COMPANY: CORPORATION 47650 WESTINGHOUSE DR., FREMONT, CA 94539
</TABLE>
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EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $3,050.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $6,100.00 payable at the
TOTAL # OF LEASE PAYMENTS: 60 signing of this lease to be applied
EFFECTIVE DATE: SEE PARAGRAPH 25 to the last two rental payments.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF LEASE
1. LEASE. LESSOR hereby leases to LESSEE and LESSEE hereby hires and takes
from LESSOR, the personal property set forth on the EQUIPMENT Schedule above
and any Schedule attached hereto with all accessories incorporated therein
and/or affixed thereto, hereinafter referred to as EQUIPMENT.
2. RENTALS. During and for the original term hereof LESSEE hereby agrees to
pay LESSOR as and for rental of the EQUIPMENT the amounts specified above as
monthly or other calendar period rental multiplied by the number of months or
periods specified above. The first rental payment shall be made on the
effective date as set forth above. In the event the effective date is omitted
when the LEASE is executed by the LESSEE, the LESSOR is authorized to and shall
insert the effective date of this LEASE which shall be the date of delivery of
EQUIPMENT. Subsequent monthly or other period rental payments shall be due on
the same day of subsequent months or other calendar periods as the effective
date of this LEASE. All payments shall be made at the office of the LESSOR at
1113 S. Milwaukee Avenue, Libertyville, IL 60048, or as otherwise directed by
the LESSOR or assignee in writing.
3. TERM. The original term of this LEASE shall commence on the date that the
EQUIPMENT is delivered to LESSEE and shall terminate upon the expiration of
the number of months, or other calendar periods, set forth above from said
date. Said rent shall be payable monthly in advance.
4. EQUIPMENT AND LIABILITY. LESSOR, at the request of LESSEE, has ordered or
shall order the EQUIPMENT described above from a supplier selected by LESSEE.
LESSOR shall not be liable for specific performance of this LEASE or for
damages, if , for any reason, supplier fails to accept such order or delays or
fails to fill the order. LESSEE agrees to accept such EQUIPMENT and to
complete the acceptance notice provided by LESSOR.
5. PLACE OF USE; INSPECTION. LESSEE shall keep the EQUIPMENT at its place of
business as specified above. LESSEE covenants and agrees not to allow the use
of EQUIPMENT by other than the employees of the LESSEE and covenants and agrees
not to rent or sublet the EQUIPMENT or any part thereof to others for their own
use. Whenever requested by LESSOR, LESSEE shall promptly advise LESSOR as to
the exact location of the EQUIPMENT. LESSOR, from time to time, may enter the
premises where the EQUIPMENT is located and inspect same upon 1 business day's
notice and subject to LESSEE's security rules.
6. ADVANCE RENTALS. At the LESSOR'S option any advance rentals made hereunder
may be applied by LESSOR to cure any default of LESSEE. LESSEE will from time
to time promptly provide any additional credit or financial information that
the LESSOR deems necessary to this transaction.
7. DISCLAIMER OF WARRANTY. LESSOR not being the manufacturer or the supplier
of the EQUIPMENT, nor a dealer in similar equipment, has not made and does not
make any representation warranty or covenant, express or implied, with respect
to the design, condition, durability, suitability, fitness for use or
merchantability of the EQUIPMENT in any respect. As between LESSOR and LESSEE,
the EQUIPMENT shall be accepted and leased by LESSEE "AS IS" and "WITH ALL
FAULTS". LESSEE agrees to settle all such claims directly with the supplier
and will not assert any such claims or defenses against LESSOR or LESSOR'S
assignee. LESSOR assigns to, authorizes and appoints LESSEE to enforce, in its
own name and at its own expense, any claim, warranty, agreement or
representation which may be made against the supplier, but LESSOR assumes no
obligation as to the extent or enforceability thereof. LESSOR agrees to
cooperate with LESSEE in the enforcement of any manufacturer warranty to the
extent LESSOR'S cooperation is necessary under the terms of any such warranty.
No defect or unfitness of the EQUIPMENT, loss or damage thereto or any other
circumstances shall relieve LESSEE of its obligations under this LEASE which
are absolute and unconditional. In no event shall LESSOR or LESSEE be liable
for any consequential damages. Supplier is not an agent of LESSOR and no
employee of supplier is authorized to waive, supplement or otherwise alter, any
provision of this LEASE.
8. ERRORS IN ESTIMATED COST. The amount of each rent payment and the advance
rental initially set forth above are based upon the estimated total cost of the
EQUIPMENT (excluding taxes, transportation and any other charges) which is an
estimate, and each shall be adjusted proportionally if the actual cost of the
EQUIPMENT differs from said estimate. LESSEE hereby authorizes LESSOR to
correct the figures set forth above when the actual cost is known. If the
actual cost of the EQUIPMENT differs from the estimated cost by more than ten
percent (10%) thereof, however, either party at its option may terminate this
LEASE by giving written notice to the other party within fifteen (15) days
after receiving notice of the actual cost or the corrected rent.
9. USE AND RETURN OF EQUIPMENT. The LESSEE shall exercise due and proper care
in the use, repair and servicing of the EQUIPMENT and at all times and at its
expense shall keep and maintain the leased property in good working condition,
order, and repair. LESSEE may alter and upgrade the EQUIPMENT provided that
such alteration or upgrade does not reduce the value or impair the capability
of the EQUIPMENT. LESSEE shall have the right to remove any such alteration or
upgrade before returning the EQUIPMENT to LESSOR so long as the removal does
not damage the EQUIPMENT. LESSEE shall bear all costs associated with the
acquisition, installation and removal of any such alteration or upgrade. Upon
the expiration or termination of this LEASE, LESSEE at its sole expense shall
forthwith properly pack and return the EQUIPMENT to LESSOR, or to such place
designated by LESSOR within 30 miles of EQUIPMENT location, in the same
condition as when received by LESSEE, reasonable wear and tear alone excepted.
All replacement parts, incorporated in or affixed to the EQUIPMENT after the
commencement of this LEASE shall become the property of LESSOR.
10. TITLE; LIENS; TAXES. The Equipment is, and shall at all times be and
remain (i) the sole and exclusive property of LESSOR; and the LESSEE shall have
no right, title or interest therein or thereto except as expressly set forth
in this LEASE; (ii) personal property notwithstanding that the EQUIPMENT or any
part thereof may now be or hereafter become, in any manner affixed or attached
to or imbedded in, or permanently resting upon, real property or any building
thereon. LESSEE agrees to affix nameplates or decals to the EQUIPMENT
indicating LESSOR'S ownership thereof if requested and supplied by LESSOR.
THIS LEASE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED ABOVE AND ON THE
FOLLOWING PAGES AND RIDERS WHICH ARE MADE PART THEREOF AND WHICH LESSEE
ACKNOWLEDGES THAT IT HAS READ. IN WITNESS WHEREOF THE LESSEE HAS HEREBY
EXECUTED THIS NON CANCELLABLE LEASE THIS _____DAY OF _________________ 19___
<TABLE>
<S> <C>
ACCEPTED _____________ 19_____ LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
---------------------------------------------------------------
INTERNATIONAL FINANCIAL SERVICES CORP., Lessor SIGNED BY:
---------------------------------------------------------------
BY TITLE: President and Chief Executive Officer
- ---------------------------------------------------- ---------------------------------------------------------------
TITLE (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
- ----------------------------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK IS REQUIRED ON DATE:
---------------------------------------------------------------
LEASE PAGES 1,2,3,4,5 - MUST BE ORIGINAL SIGNATURES LEASE ORIGINAL - 1
</TABLE>
<PAGE> 2
LESSEE shall keep the EQUIPMENT free and clear of levies, liens and
encumbrances and shall pay all license and registration fees, assessments,
filing or recording fees, documentary stamp tax, sale/use taxes, personal
property taxes, gross receipt taxes, excise taxes including value added taxes
and all other taxes (local, state and federal) which may now or hereafter be
imposed upon the ownership, leasing, rental, sale, purchase, possession or use
of the EQUIPMENT whether assessed to LESSOR or LESSEE excluding, however, all
taxes on or measured by LESSOR'S net income.
If such taxes are levied against the LESSOR, the LESSOR shall have the
right, subject to the following paragraph, but not the obligation, to pay any
such taxes, whether levied against the LESSOR or the LESSEE. In such event the
LESSEE shall reimburse the LESSOR therefor within five (5) days after receipt
of invoice and for the failure to make such reimbursement when due the LESSOR
shall have all remedies provided herein with respect to the nonpayment of the
rental hereunder. LESSEE shall give LESSOR immediate notice of any attachment
or other judicial process, liens or encumbrances affecting the EQUIPMENT and
shall indemnify and save LESSOR harmless from any loss or damage caused
thereby.
Notwithstanding the foregoing, LESSEE shall have the right, at its expense
and by appropriate legal proceedings, to contest the validity, applicability or
amount of any fees, assessments or taxes imposed upon the EQUIPMENT provided
that LESSEE shall not cause a tax lien to be levied against the EQUIPMENT or
LESSOR. LESSOR agrees to cooperate with LESSEE in any such contest and will
permit LESSEE to contest the same in the name of LESSOR (if required by law) or
in the name of LESSEE, all at LESSEE'S cost and expense. The non-payment of
any fee, tax or assessment by LESSEE in connection with such contest shall not
be deemed a default hereunder until final determination of such contest and
expiration of any due date established therein.
11. FILING. LESSEE hereby authorizes LESSOR to file financing statements with
respect to the EQUIPMENT or any collateral provided by LESSEE to LESSOR prior
to or following LESSOR's acceptance of this LEASE, in any State of the United
States in which the EQUIPMENT is located. LESSEE shall execute such
supplemental instruments and financing statements if LESSOR deems such to be
necessary or advisable and shall otherwise cooperate to defend the title of the
LESSOR by filing or otherwise. LESSEE, upon demand, shall promptly pay to
LESSOR all filing costs and fees incurred or paid by LESSOR.
12. INSURANCE. Commencing on the date risk passes to LESSOR from the supplier
and continuing until LESSEE has redelivered possession of the EQUIPMENT to
LESSOR, LESSEE, at its expense, shall keep the EQUIPMENT insured against all
risks of loss or damage from every cause whatsoever for the greater of the
total rent for the full term of this LEASE or the full undepreciated
replacement value (new) of the EQUIPMENT, and shall carry public liability
insurance, both personal injury and property damage, covering the EQUIPMENT and
its use. All insurance shall be of a type, form, in amounts, with companies
and contain terms and conditions reasonably satisfactory to LESSOR.
Certificates of insurance or other evidence satisfactory to LESSOR, including
the original or certified copies of the actual policies showing the existence
of insurance in accordance herewith, and the terms, conditions and payments
therefor shall be delivered to LESSOR upon LESSOR's request. Said insurance
shall provide for loss, if any, payable to LESSOR and LESSEE as their interests
may appear and shall name LESSOR as an additional insured for purposes of
liability insurance. The proceeds of insurance payable as a result of loss of
or damage to EQUIPMENT shall be applied, at the option of LESSEE: (a) toward
the replacement, restoration or repair of EQUIPMENT which may be lost, stolen,
destroyed or damaged; or (b) toward payment of the obligations of LESSEE
hereunder. In the event the LESSEE elects to apply insurance proceeds to the
repair or to the replacement of the damaged EQUIPMENT, this LEASE shall
continue in full force and effect. In the event LESSEE elects to apply
insurance proceeds to the payment of LESSEE'S obligations for rent hereunder,
the LESSEE's obligations for the rent hereunder shall be reduced by the amount
of such insurance proceeds, but the LESSEE shall be liable for any additional
rents due. Such reduction of rents shall be allocated solely to the item or
items lost, stolen, damaged or destroyed.
13. LOSS; DAMAGE. LESSEE assumes and shall bear the risk of loss and damage to
the EQUIPMENT from every cause whatsoever, whether or not insured. In the
event of any loss or damage to the EQUIPMENT, LESSEE, at the option of LESSEE,
shall (a) place the same in good repair, condition and working order; or (b)
replace the same with new EQUIPMENT; or (c) immediately pay to LESSOR the
following amount: the greater of (x) the total unpaid rentals for the entire
term hereof (discounted to present value at the rate of six (6) percent per
annum plus any amount due LESSOR pursuant to Section 18 hereof or (y) the fair
market value of the EQUIPMENT immediately prior to the loss or damage. Upon
such payment, together with payment of all other sums owing on said LEASE to
and including such payment date, LESSOR will transfer title to the affected
EQUIPMENT to LESSEE "as is", "where is", and without warranty, express or
implied but including the warranty of good and marketable title.
14. INDEMNITY. Lessee does hereby assume liability for and does agree to
indemnify, protect, save and keep harmless LESSOR, and any assignee of LESSOR
from and against any and all liabilities, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements, including court costs and
reasonable legal expenses, of whatever kind and nature, imposed on, incurred by
or asserted against LESSOR, and any assignee of LESSOR (whether or not also
indemnified against by any other person) in any way relating to or arising out
of this LEASE or the manufacture, purchase, ownership, delivery, lease,
possession, use, operation, condition, return or other disposition of the
EQUIPMENT by LESSEE, including without limitation any claim alleging latent or
other defects, whether or not discoverable by LESSOR or LESSEE; any claim for
patent, trademark or copyright infringement; any claim arising out of strict
liability in tort; and any taxes for which LESSEE is responsible pursuant to
this LEASE, but excluding any such claims arising from acts or omissions of
LESSOR or its assignees.
15. DEFAULT. Any of the following events or conditions shall constitute an
event of default hereunder; (a) LESSEE'S failure to pay when due any rent or
other amount due hereunder within 30 days after receipt by LESSEE of notice of
default: (b) LESSEE'S default in performing any other term, covenant or
condition hereof if such default is not cured within 30 days after receipt by
LESSEE of notice of default; (c) seizure of any EQUIPMENT under legal process;
(d) the filing by or against LESSEE of a petition for reorganization or
liquidation under the Bankruptcy Code or any amendment thereto or under any
other insolvency law providing for the relief of debtors; (e) the voluntary or
involuntary making of an assignment of a substantial portion of its assets by
LESSEE for the benefit of creditors, appointment of a receiver or trustee for
LESSEE or for any of LESSEE'S asset institution by or against LESSEE of any
formal or informal proceeding for dissolution, liquidation, settlement of
claims against or winding up of the affairs of LESSEE, or the making by LESSEE
of a transfer of all or a material portion of LESSEE's assets or inventory not
in the ordinary course of business and not for equivalent consideration.
16. REMEDIES. Upon LESSEE'S default, LESSOR shall have the right to exercise
any one or more of the following remedies; (a) without affecting LESSOR'S title
or right to possession of the EQUIPMENT, declare due, sue for and recover all
rents and other amounts then accrued or thereafter accruing for the entire
lease term, discounted to present value at 8% per annum or the sum calculated
per paragraph 27 below, whichever is greater, (b) require LESSEE to promptly
redeliver the EQUIPMENT in the manner specified in Section 9 hereof; or (c)
repossess the EQUIPMENT without notice, legal process, prior judicial hearing
or liability for trespass (which rights LESSEE hereby voluntarily,
intelligently and knowingly waives). Such return or repossession of EQUIPMENT
shall not terminate this LEASE unless LESSOR so notifies LESSEE in writing.
LESSOR, at its option may sell or re-lease the EQUIPMENT upon such terms as it
reasonably determines and apply the proceeds to LESSEE's obligations hereunder,
after deducting from such proceeds all costs and expenses of repossession and
disposition, reasonable attorney's fees, plus any amounts due LESSOR pursuant
to Section 18 hereof. LESSEE shall promptly pay any resulting deficiency,
together with interest at the lesser of sixteen (16%) percent and LESSOR's
reasonable attorneys' fees if legal action is required to collect such
deficiency. If LESSOR is unable to repossess the EQUIPMENT for any reason, the
EQUIPMENT shall be deemed a total loss and LESSEE shall pay to LESSOR the
amount due pursuant to Section 13 (c). All such remedies are cumulative and
may be enforced separately or concurrently and are in addition to any other
rights or remedies available to LESSOR at law or in equity. The foregoing
provisions of this Section 16 are subject to any mandatory requirement of
applicable law then in effect.
17. ASSIGNMENT. Without the prior written consent of LESSOR, LESSEE shall not
assign, transfer, pledge or hypothecate this LEASE and EQUIPMENT or any
interest in this LEASE or in and to the EQUIPMENT or permit its rights under
this LEASE to be subject to any lien, charge or encumbrance of any nature.
Notwithstanding the foregoing, LESSEE may assign the LEASE, the EQUIPMENT and
its interest in this LEASE and the EQUIPMENT to an affiliate or in connection
with a sale of all or substantially all of its assets to, or consolidation with
or merger of LESSEE into, any entity so long as such entity assumes the
obligations of LESSEE hereunder and immediately following such event is, in the
reasonable opinion of LESSOR, no less creditworthy than was LESSEE immediately
prior to such event. LESSOR shall have the right to assign this LEASE or any
part thereof. If LESSOR assigns the rents reserved herein or all or any of
the LESSOR's other rights hereunder, or amounts equal thereto, the right of the
assignee to receive the rentals as well as any other right of the assignee
shall not be subject to any defense, setoff, counterclaim or recoupment which
may arise out of any breach or obligation of LESSOR or by reason of any other
indebtedness or liability at any time owing by LESSOR to LESSEE. All rentals
due hereunder shall be payable to assignee by LESSEE in accordance with the
terms hereof. On receipt of notification of such assignment, LESSEE, subject
to its rights hereunder, shall become the pledgeholder of the EQUIPMENT for and
on behalf of the assignee and will relinquish possession thereof only to the
assignee or pursuant to its written order subject to LESSEE's rights hereunder.
LESSEE, on receiving notice of any such assignment, shall make payments as may
therein be directed. Following such assignments, the term "LESSOR" shall be
deemed to include or refer to LESSOR'S assignee, provided that no such assignee
shall be deemed to assume any obligation or duty imposed upon LESSOR hereunder
and LESSEE shall look only to LESSOR for performance thereof. There shall be
only one executed counterpart of this LEASE marked "Original" and all other
counterparts shall be marked "Duplicate". To the extent that LEASE constitutes
chattel paper (as defined in the Uniform Commercial Code) no security interest
in this lease may be created through the transfer or possession of any
counterpart other than the original.
18. DEPRECIATION AND INVESTMENT TAX CREDIT INDEMNITY. (THIS SECTION DOES NOT
APPLY IF LESSOR HAS AGREED IN WRITING TO PASS THE INVESTMENT TAX CREDIT (ITC)
TO LESSEE.) If, as to any EQUIPMENT, under any circumstances and for any
reason whatsoever, except through the fault of the LESSOR, LESSOR shall lose or
shall not have the right to claim, or there shall be disallowed or recaptured
(collectively a "loss") (1) any portion of the maximum ITC, allowable under the
Internal Revenue Code of 1954, as amended, for new property with a useful life
equivalent to the lease term for such EQUIPMENT; or (2) any prortion of the
claimed depreciation deductions for such EQUIPMENT, based on the cost thereof,
LESSEE agrees to pay LESSOR upon demand an amount which, in the reasonable
opinion of LESSOR, will cause LESSOR's after tax net yield in respect of such
equipment to equal the net yield that LESSOR would have received if LESSOR had
not suffered such loss.
TERMS AND CONDITIONS OF LEASE #96-129 CONTINUED LESSEE'S INITIALS __________
LEASE ORIGINAL - 1
<PAGE> 3
19. ENTIRE AGREEMENT; NON-WAIVER; NOTICES; SEVERABILITY. This LEASE and each
rider hereto initialed by LESSEE contains the entire and only understanding
between LESSOR and LESSEE relating to the subject matter hereof. Any
representation, promises or conditions not contained herein shall not be
binding unless in writing and signed by duly authorized representatives of each
party. No covenant or condition of this LEASE can be waived except by the
written consent of LESSOR. Any notices required to be given hereunder shall be
given in writing at the address of each party herein set forth, or to such
other address as either party may substitute by written notice to the other
with a copy of any such notice sent to LESSEE sent to Henry J. Underwood, Jr.,
Esq., Defrees & Fiske, 200 South Michigan, Suite 1100, Chicago, Illinois 60604.
Whenever reference is made herein to the "LEASE," it shall be deemed to
include any Schedules attached hereto identifying all items of EQUIPMENT and
the applicable term and rent, and each rider hereto initialed by LESSEE, all of
which constitute one indivisible lease of equipment to which all the terms and
provisions hereof apply. If any provision of this LEASE is held invalid, such
invalidity shall not affect any other provisions hereof.
20. GENDER; NUMBER; JOINT AND SEVERAL LIABILITY; AUTHORIZATION. Whenever the
context of this LEASE requires, the masculine gender includes the feminine or
neuter and the singular number includes the plural; whenever the word "LESSOR"
is used herein, it shall include all assignees of LESSOR; whenever the word
"herein" is used referring to this LEASE, it shall include the applicable
Schedules hereto and each rider hereto initialed by LESSEE. If there is more
than one LESSEE named in this LEASE, the liability of each shall be joint and
several. LESSEE hereby authorizes LESSOR to insert equipment serial numbers
and other identification in the equipment description when known.
21. SURVIVAL. LESSEE'S indemnities shall survive the expiration or other
termination of this LEASE.
22. CHOICE OF LAW, SERVICE OF PROCESS. This LEASE shall be binding and
effective on LESSOR only when signed by an officer of LESSOR at its home office
in Libertyville, Illinois, and except for local filing requirements, shall be
governed by Illinois law and shall be deemed to have been made in Libertyville,
Illinois. LESSEE does hereby submit to the jurisdiction of any courts
(federal, state or local) having situs within the State of Illinois with
respect to any dispute, claim or suit arising out of or relating to this LEASE
or LESSEE'S obligations hereunder.
23. QUIET ENJOYMENT. LESSOR represents and warrants to LESSEE that LESSOR has
good title to the EQUIPMENT with the full and unencumbered right to lease the
same to LESSEE. LESSOR covenants with LESSEE that so long as LESSEE is not in
default under this Lease, neither LESSOR nor any third party shall interfere
with LESSEE'S right to quiet possession and enjoyment of the EQUIPMENT. LESSOR
shall protect and defend LESSEE'S right to the quiet possession and enjoyment
of the EQUIPMENT against all claims and liens of LESSOR'S creditors. Upon
expiration of the term of this LEASE and exercise by LESSEE of its purchase
option, LESSOR shall transfer title to the EQUIPMENT to LESSEE pursuant to a
bill of sale providing for LESSOR'S warranty of good and marketable title to
the EQUIMENT but excluding any warranties relating to the physical condition of
the EQUIPMENT, including but not limited to the warranties of merchantability
or fitness for a particular purpose.
24. PURCHASE OPTION. LESSEE shall have the option, exercisable upon notice to
Lessor, to purchase all of the EQUIPMENT for one dollar ($1.00) effective upon
the expiration of the original term of this LEASE.
25. EFFECTIVE DATE OF LEASE. The effective date of this LEASE for purposes of
commencing LESSEE'S obligation to pay monthly rent shall occur upon LESSEE'S
acceptance of the EQUIPMENT.
26. EARLY TERMINATION OPTION. After acceptance of the EQUIPMENT in
accordance with this LEASE, LESSEE shall have the right to terminate its
obligations under this LEASE at any time upon 30 days prior notice to LESSOR
and payment of the balance as set forth on the amortization schedule attached
hereto as Exhibit A opposite the date two months after the pre-payment is
effective plus the Prepayment Penalty set forth on Exhibit A. The amortization
schedule shall be adjusted as necessary if the monthly rental is adjusted under
paragraph 27 hereof.
27. RENTAL ADJUSTMENT. When LESSEE accepts the EQUIPMENT, the monthly rental
amount of $3,050.00 will be adjusted in proportion to any increase or decrease
in five year treasury rates from August 27, 1996 until the effective date.
Said monthly payment, adjusted as necessary, shall be payable in advance for 60
months commencing on the first day of the month immediately following the
effective date.
Whenever any monthly rental payment is not paid when due and continues
unpaid 15 days after notice of non-payment is received by LESSEE, LESSEE agrees
to pay LESSOR on demand (as a fee to offset LESSOR'S collection and
administrative expenses) the greater of twenty-five dollars ($25.00) or three
and one-half percent (3 1/2%) of the overdue amount to the extent permitted by
applicable law.
TERMS AND CONDITIONS OF LEASE #96-129 LESSEE'S INITIALS __________
LEASE ORIGINAL - 1
<PAGE> 4
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
(847) 549-0100 FAX (847) 549-0119
- --------------------------------------------------------------------------------
AMENDMENT "A" TO LEASE #96-129
------------------------------
LESSOR: International Financial Services Corporation
1113 S. Milwaukee Avenue, Suite 303
Libertyville, IL 60048
LESSEE: SIGMATRON INTERNATIONAL, INC.
ADDRESS: 2201 Landmeier Road
Elk Grove Village, IL 60007
AMEND LEASE AS FOLLOWS:
TERM: 60 $3,105.00 per period for the first 60 periods
Periods are: Monthly ADVANCE RENTALS,$6,210.00 payable at the signing
Total # of Lease of this lease to be applied to the last two rental
Payments: 60 payments.
Effective Date:
All other terms, conditions, guaranties, additional collateral of the lease
between:
SIGMATRON INTERNATIONAL, INC.
and INTERNATIONAL FINANCIAL SERVICES CORPORATION remain in full force and
effect.
AGREED:
INTERNATIONAL FINANCIAL SIGMATRON INTERNATIONAL, INC.
SERVICES CORPORATION
BY: BY:
- ----------------------- ---------------------------------------------
TITLE: TITLE: President and Chief Executive Officer
- ----------------------- -------------------------------------
DATE: DATE:
- ----------------------- ---------------
<PAGE> 5
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-129
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL SMT UNLIMITED L.P.
TYPE OF COMPANY: CORPORATION 47650 WESTINGHOUSE DR., FREMONT, CA 94539
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $3,050.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $6,100.00 payable at
TOTAL # OF LEASE PAYMENTS: 60 the signing of this lease to be applied
EFFECTIVE DATE: SEE PARAGRAPH 25 to the last two rental payments.
- --------------------------------------------------------------------------------
ACCEPTANCE NOTICE
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
All items referred to above were received by us and were and are in good
order and condition and acceptable to us. The decals, labels, etc., if
required and supplied have been affixed to the above items. We approve payment
by you to the supplier. Lessee hereby certifies that the lessor has fully and
satisfactorily performed all covenants and conditions to be performed by it
under said lease agreement as of the date hereof.
Very Truly Yours,
<TABLE>
<S> <C>
LEASE DATED ___ DAY OF ______________ , 199________
VENDOR: This acceptance must be signed
by lessee and returned to us before your LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
invoice can be paid. ---------------------------------------
SIGNED BY: _________________________________________
TITLE: President and Chief Executive Officer
---------------------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK IS REQUIRED ON (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
LEASE PAGES 1,2,3, 4,5 - MUST BE ORIGINAL SIGNATURES
DATE:
---------------------------------------------
</TABLE>
ACCEPTANCE NOTICE - 3
<PAGE> 6
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-129
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
SMT UNLIMITED L.P.
TYPE OF COMPANY: CORPORATION 47650 WESTINGHOUSE DR., FREMONT, CA 94539
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $3,050.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $6,100.00 payable at the
TOTAL # OF LEASE PAYMENTS: 60 signing of this lease to be applied
EFFECTIVE DATE: SEE PARAGRAPH 25 to the last two rental payments.
- --------------------------------------------------------------------------------
EQUIPMENT DISCLAIMER AND AGREEMENT
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
This will advise that LESSEE is aware of its obligations with reference to the
above lease and that LESSEE agrees in its name to enforce all warranties,
agreements, or representations, if any, which may be made by the supplier to
LESSEE. LESSEE agrees that INTERNATIONAL FINANCIAL SERVICES CORPORATION makes
no expressed or implied warranties as to any matter whatsoever, including,
without limitation the condition of the equipment, its merchantability or its
fitness for any particular purpose except as set forth in the LEASE. No defect
or unfitness of equipment shall release LESSEE of the obligation to pay rental
payments or of any other obligations under this lease agreement.
Very Truly Yours,
LEASE DATED __ DAY OF _____________ , 199_____
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
---------------------------------------
SIGNED BY:
---------------------------------------
TITLE: President and Chief Executive Officer
---------------------------------------
LESSEE'S ORIGINAL (INDICATE CORPORATE OFFICE, GENERAL
SIGNATURE IN INK IS PARTNER, OWNER, ETC)
REQUIRED ON LEASE
PAGES 1,2,3,4,5 -
MUST BE ORIGINAL
SIGNATURES
DATE:
---------------------------------------------------
EQUIPMENT DISCLAIMER AND AGREEMENT - 4
<PAGE> 7
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-129
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
SMT UNLIMITED L.P.
TYPE OF COMPANY: CORPORATION 47650 WESTINGHOUSE DR., FREMONT, CA 94539
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $3,050.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $6,100.00 payable at the
TOTAL # OF LEASE PAYMENTS: 60 signing of this lease to be applied
EFFECTIVE DATE: SEE PARAGRAPH 25 to the last two rental payments.
- --------------------------------------------------------------------------------
LESSEE'S ACKNOWLEDGEMENT
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
As Lessee under the lease referred to above with International Financial
Services Corporation, the undersigned hereby acknowledges the Lessor's right to
assign its interest under the Lease and that Assignee does not assume any of
the obligations of the Lessor thereunder, consents to any such assignment and,
in consideration of the assignee having advanced funds to the Lessor to finance
the equipment described in the Lease, and in consideration of Assignee's
covenant with Lessee that so long as Lessee is not in default under the Lease,
Lessee will quietly possess the Equipment, free of interference from third
parties, agrees as follows: (a) that its obligation to pay directly to the
Assignee the amounts (whether designated as rentals or otherwise) which become
due from the Lessee as set forth in the Lease so assigned shall be absolutely
unconditional and shall be payable in strict accordance with the Lease, and it
promises so to pay the same notwithstanding any defense, set-off or
counterclaim whatsoever, whether by reason of breach of the Lease, the exercise
of any right or option thereunder, or otherwise, which it may or might now or
hereafter have as against the Lessor (the Lessee reserving its right to have
recourse directly against the Lessor on account of any such defense, set-off or
counterclaim); and (b) that, subject to and without impairment of the Lessee's
leasehold rights in and to the Equipment described in said Lease, Lessee holds
said Equipment and the possession thereof for the Assignee to the extent of the
Assignee's rights therein. There shall be only one executed counterpart of
this lease marked "Original" and all other counterparts shall be marked
"Duplicate." To the extent that Lease constitutes chattel paper (as defined in
the Uniform Commercial Code) no security interest in this lease may be created
through the transfer or possession of any counterpart other than the original.
Very Truly Yours,
LEASE DATED __ DAY OF ___________ , 199______
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
----------------------------------
SIGNED BY:
----------------------------------
TITLE: President and Chief Executive Officer
------------------------------------------------
LESSEE'S ORIGINAL (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
SIGNATURE IN INK
IS REQUIRED ON
LEASE PAGES 1,2,3,
4,5 - MUST BE
ORIGINAL SIGNATURES
DATE:
------------------------------------------------
LESSEE'S ACKNOWLEDGEMENT - 5
<PAGE> 8
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SCHEDULE "A" TO LEASE #96-129
-----------------------------
AND/OR SECURITY AGREEMENT-MORTGAGE ON GOODS & CHATTELS
AND UNIFORM COMMERCIAL CODE #1 & #3 FILING FORM
DATED _________________
LESSEE: Sigmatron International, Inc.
LESSOR: INTERNATIONAL FINANCIAL SERVICES CORPORATION
EQUIPMENT AS DESCRIBED BELOW:
1989 Fuji IP 1, Electrovert Omniflow 7 Reflow system; Including all
accessories and attachments thereto.
INCLUDING ALL ACCESSORIES AND ATTACHMENTS THERETO AND ALL PROCEEDS THEREOF.
INTERNATIONAL FINANCIAL
SERVICES CORPORATION SIGMATRON INTERNATIONAL, INC.
By: By:
----------------- -------------------------------------
Title: Title: President and Chief Executive Officer
----------------- -------------------------------------
SCHEDULE - 2
<PAGE> 1
Exhibit 10.39
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-127
ADDRESS: 2201 LANDMEIER ROAD CONTACT: MS. LINDA BLAKE, PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
TYPE OF COMPANY: CORPORATION
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $10,006.00 per period for the first 60 periods. ADVANCE RENTALS,
PERIODS ARE: MONTHLY $20,012.00 payable at the signing of this lease to be applied to
TOTAL # OF LEASE PAYMENTS: 60 the last two rental payments.
EFFECTIVE DATE: SEE PARAGRAPH 25
- -------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS OF LEASE
1. LEASE. LESSOR hereby leases to LESSEE and LESSEE hereby hires and takes
from LESSOR, the personal property set forth on the EQUIPMENT Schedule above
and any Schedule attached hereto with all accessories incorporated therein
and/or affixed thereto, hereinafter referred to as EQUIPMENT.
2. RENTALS. During and for the original term hereof LESSEE hereby agrees to
pay LESSOR as and for rental of the EQUIPMENT the amounts specified above as
monthly or other calendar period rental multiplied by the number of months or
periods specified above. The first rental payment shall be made on the
effective date as set forth above. In the event the effective date is omitted
when the LEASE is executed by the LESSEE, the LESSOR is authorized to and shall
insert the effective date of this LEASE which shall be the date of delivery of
EQUIPMENT. Subsequent monthly or other period rental payments shall be due on
the same day of subsequent months or other calendar periods as the effective
date of this LEASE. All payments shall be made at the office of the LESSOR at
1113 S. Milwaukee Avenue, Libertyville, IL 60048, or as otherwise directed by
the LESSOR or assignee in writing.
3. TERM. The original term of this LEASE shall commence on the date that the
EQUIPMENT is delivered to LESSEE and shall terminate upon the expiration of
the number of months, or other calendar periods, set forth above from said
date. Said rent shall be payable monthly in advance.
4. EQUIPMENT AND LIABILITY. LESSOR, at the request of LESSEE, has ordered or
shall order the EQUIPMENT described above from a supplier selected by LESSEE.
LESSOR shall not be liable for specific performance of this LEASE or for
damages, if , for any reason, supplier fails to accept such order or delays or
fails to fill the order. LESSEE agrees to accept such EQUIPMENT and to
complete the acceptance notice provided by LESSOR.
5. PLACE OF USE; INSPECTION. LESSEE shall keep the EQUIPMENT at its place of
business as specified above. LESSEE covenants and agrees not to allow the use
of EQUIPMENT by other than the employees of the LESSEE and covenants and agrees
not to rent or sublet the EQUIPMENT or any part thereof to others for their own
use. Whenever requested by LESSOR, LESSEE shall promptly advise LESSOR as to
the exact location of the EQUIPMENT. LESSOR, from time to time, may enter the
premises where the EQUIPMENT is located and inspect same upon 1 business day's
notice and subject to LESSEE's security rules.
6. ADVANCE RENTALS. At the LESSOR'S option any advance rentals made hereunder
may be applied by LESSOR to cure any default of LESSEE. LESSEE will from time
to time promptly provide any additional credit or financial information that
the LESSOR deems necessary to this transaction.
7. DISCLAIMER OF WARRANTY. LESSOR not being the manufacturer or the supplier
of the EQUIPMENT, nor a dealer in similar equipment, has not made and does not
make any representation warranty or covenant, express or implied, with respect
to the design, condition, durability, suitability, fitness for use or
merchantability of the EQUIPMENT in any respect. As between LESSOR and LESSEE,
the EQUIPMENT shall be accepted and leased by LESSEE "AS IS" and "WITH ALL
FAULTS". LESSEE agrees to settle all such claims directly with the supplier
and will not assert any such claims or defenses against LESSOR or LESSOR'S
assignee. LESSOR assigns to, authorizes and appoints LESSEE to enforce, in its
own name and at its own expense, any claim, warranty, agreement or
representation which may be made against the supplier, but LESSOR assumes no
obligation as to the extent or enforceability thereof. LESSOR agrees to
cooperate with LESSEE in the enforcement of any manufacturer warranty to the
extent LESSOR'S cooperation is necessary under the terms of any such warranty.
No defect or unfitness of the EQUIPMENT, loss or damage thereto or any other
circumstances shall relieve LESSEE of its obligations under this LEASE which
are absolute and unconditional. In no event shall LESSOR or LESSEE be liable
for any consequential damages. Supplier is not an agent of LESSOR and no
employee of supplier is authorized to waive, supplement or otherwise alter, any
provision of this LEASE.
8. ERRORS IN ESTIMATED COST. The amount of each rent payment and the advance
rental initially set forth above are based upon the estimated total cost of the
EQUIPMENT (excluding taxes, transportation and any other charges) which is an
estimate, and each shall be adjusted proportionally if the actual cost of the
EQUIPMENT differs from said estimate. LESSEE hereby authorizes LESSOR to
correct the figures set forth above when the actual cost is known. If the
actual cost of the EQUIPMENT differs from the estimated cost by more than ten
percent (10%)thereof, however, either party at its option may terminate this
LEASE by giving written notice to the other party within fifteen (15) days
after receiving notice of the actual cost or the corrected rent.
9. USE AND RETURN OF EQUIPMENT. The LESSEE shall exercise due and proper care
in the use, repair and servicing of the EQUIPMENT and at all times and at its
expense shall keep and maintain the leased property in good working condition,
order, and repair. LESSEE may alter and upgrade the EQUIPMENT provided that
such alteration or upgrade does not reduce the value or impair the capability
of the EQUIPMENT. LESSEE shall have the right to remove any such alteration or
upgrade before returning the EQUIPMENT to LESSOR so long as the removal does
not damage the EQUIPMENT. LESSEE shall bear all costs associated with the
acquisition, installation and removal of any such alteration or upgrade. Upon
the expiration or termination of this LEASE, LESSEE at its sole expense shall
forthwith properly pack and return the EQUIPMENT to LESSOR, or to such place
designated by LESSOR within 30 miles of EQUIPMENT location, in the same
condition as when received by LESSEE, reasonable wear and tear alone excepted.
All replacement parts, incorporated in or affixed to the EQUIPMENT after the
commencement of this LEASE shall become the property of LESSOR.
10. TITLE; LIENS; TAXES. The Equipment is, and shall at all times be and
remain (i) the sole and exclusive property of LESSOR; and the LESSEE shall have
no right, title or interest therein or thereto except as expressly set forth
in this LEASE; (ii) personal property notwithstanding that the EQUIPMENT or any
part thereof may now be or hereafter become, in any manner affixed or attached
to or imbedded in, or permanently resting upon, real property or any building
thereon. LESSEE agrees to affix nameplates or decals to the EQUIPMENT
indicating LESSOR'S ownership thereof if requested and supplied by LESSOR.
THIS LEASE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED ABOVE AND ON THE
FOLLOWING PAGES AND RIDERS WHICH ARE MADE PART THEREOF AND WHICH LESSEE
ACKNOWLEDGES THAT IT HAS READ. IN WITNESS WHEREOF THE LESSEE HAS HEREBY
EXECUTED THIS NON CANCELLABLE LEASE THIS _____DAY OF _________________ 19___
<TABLE>
<S> <C>
ACCEPTED _____________ 19_____ LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
INTERNATIONAL FINANCIAL SERVICES CORP., Lessor ---------------------------------------------------
BY SIGNED BY:
-------------------------------------------- ---------------------------------------------------
TITLE TITLE: President and Chief Executive Officer
----------------------------------------- -----------------------------------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK IS REQUIRED ON (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
LEASE PAGES 1,2,3 ,4,5 - MUST BE ORIGINAL SIGNATURES DATE:
-----------------------------------------------------------
LEASE ORIGINAL - 1
</TABLE>
<PAGE> 2
LESSEE shall keep the EQUIPMENT free and clear of levies, liens and
encumbrances and shall pay all license and registration fees, assessments,
filing or recording fees, documentary stamp tax, sale/use taxes, personal
property taxes, gross receipt taxes, excise taxes including value added taxes
and all other taxes (local, state and federal) which may now or hereafter be
imposed upon the ownership, leasing, rental, sale, purchase, possession or use
of the EQUIPMENT whether assessed to LESSOR or LESSEE excluding, however, all
taxes on or measured by LESSOR'S net income.
If such taxes are levied against the LESSOR, the LESSOR shall have the
right, subject to the following paragraph, but not the obligation, to pay any
such taxes, whether levied against the LESSOR or the LESSEE. In such event the
LESSEE shall reimburse the LESSOR therefor within five (5) days after receipt
of invoice and for the failure to make such reimbursement when due the LESSOR
shall have all remedies provided herein with respect to the nonpayment of the
rental hereunder. LESSEE shall give LESSOR immediate notice of any attachment
or other judicial process, liens or encumbrances affecting the EQUIPMENT and
shall indemnify and save LESSOR harmless from any loss or damage caused
thereby.
Notwithstanding the foregoing, LESSEE shall have the right, at its expense
and by appropriate legal proceedings, to contest the validity, applicability or
amount of any fees, assessments or taxes imposed upon the EQUIPMENT provided
that LESSEE shall not cause a tax lien to be levied against the EQUIPMENT or
LESSOR. LESSOR agrees to cooperate with LESSEE in any such contest and will
permit LESSEE to contest the same in the name of LESSOR (if required by law) or
in the name of LESSEE, all at LESSEE'S cost and expense. The non-payment of
any fee, tax or assessment by LESSEE in connection with such contest shall not
be deemed a default hereunder until final determination of such contest and
expiration of any due date established therein.
11. FILING. LESSEE hereby authorizes LESSOR to file financing statements with
respect to the EQUIPMENT or any collateral provided by LESSEE to LESSOR prior
to or following LESSOR's acceptance of this LEASE, in any State of the United
States in which the EQUIPMENT is located. LESSEE shall execute such
supplemental instruments and financing statements if LESSOR deems such to be
necessary or advisable and shall otherwise cooperate to defend the title of the
LESSOR by filing or otherwise. LESSEE, upon demand, shall promptly pay to
LESSOR all filing costs and fees incurred or paid by LESSOR.
12. INSURANCE. Commencing on the date risk passes to LESSOR from the supplier
and continuing until LESSEE has redelivered possession of the EQUIPMENT to
LESSOR, LESSEE, at its expense, shall keep the EQUIPMENT insured against all
risks of loss or damage from every cause whatsoever for the greater of the
total rent for the full term of this LEASE or the full undepreciated
replacement value (new) of the EQUIPMENT, and shall carry public liability
insurance, both personal injury and property damage, covering the EQUIPMENT and
its use. All insurance shall be of a type, form, in amounts, with companies
and contain terms and conditions reasonably satisfactory to LESSOR.
Certificates of insurance or other evidence satisfactory to LESSOR, including
the original or certified copies of the actual policies showing the existence
of insurance in accordance herewith, and the terms, conditions and payments
therefor shall be delivered to LESSOR upon LESSOR's request. Said insurance
shall provide for loss, if any, payable to LESSOR and LESSEE as their interests
may appear and shall name LESSOR as an additional insured for purposes of
liability insurance. The proceeds of insurance payable as a result of loss of
or damage to EQUIPMENT shall be applied, at the option of LESSEE: (a) toward
the replacement, restoration or repair of EQUIPMENT which may be lost, stolen,
destroyed or damaged; or (b) toward payment of the obligations of LESSEE
hereunder. In the event the LESSEE elects to apply insurance proceeds to the
repair or to the replacement of the damaged EQUIPMENT, this LEASE shall
continue in full force and effect. In the event LESSEE elects to apply
insurance proceeds to the payment of LESSEE'S obligations for rent hereunder,
the LESSEE's obligations for the rent hereunder shall be reduced by the amount
of such insurance proceeds, but the LESSEE shall be liable for any additional
rents due. Such reduction of rents shall be allocated solely to the item or
items lost, stolen, damaged or destroyed.
13. LOSS; DAMAGE. LESSEE assumes and shall bear the risk of loss and damage to
the EQUIPMENT from every cause whatsoever, whether or not insured. In the
event of any loss or damage to the EQUIPMENT, LESSEE, at the option of LESSEE,
shall (a) place the same in good repair, condition and working order; or (b)
replace the same with new EQUIPMENT; or (c) immediately pay to LESSOR the
following amount: the greater of (x) the total unpaid rentals for the entire
term hereof (discounted to present value at the rate of six (6) percent per
annum plus any amount due LESSOR pursuant to Section 18 hereof or (y) the fair
market value of the EQUIPMENT immediately prior to the loss or damage. Upon
such payment, together with payment of all other sums owing on said LEASE to
and including such payment date, LESSOR will transfer title to the affected
EQUIPMENT to LESSEE "as is", "where is", and without warranty, express or
implied but including the warranty of good and marketable title.
14. INDEMNITY. Lessee does hereby assume liability for and does agree to
indemnify, protect, save and keep harmless LESSOR, and any assignee of LESSOR
from and against any and all liabilities, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements, including court costs and
reasonable legal expenses, of whatever kind and nature, imposed on, incurred by
or asserted against LESSOR, and any assignee of LESSOR (whether or not also
indemnified against by any other person) in any way relating to or arising out
of this LEASE or the manufacture, purchase, ownership, delivery, lease,
possession, use, operation, condition, return or other disposition of the
EQUIPMENT by LESSEE, including without limitation any claim alleging latent or
other defects, whether or not discoverable by LESSOR or LESSEE; any claim for
patent, trademark or copyright infringement; any claim arising out of strict
liability in tort; and any taxes for which LESSEE is responsible pursuant to
this LEASE, but excluding any such claims arising from acts or omissions of
LESSOR or its assignees.
15. DEFAULT. Any of the following events or conditions shall constitute an
event of default hereunder; (a) LESSEE'S failure to pay when due any rent or
other amount due hereunder within 30 days after receipt by LESSEE of notice of
default: (b) LESSEE'S default in performing any other term, covenant or
condition hereof if such default is not cured within 30 days after receipt by
LESSEE of notice of default; (c) seizure of any EQUIPMENT under legal process;
(d) the filing by or against LESSEE of a petition for reorganization or
liquidation under the Bankruptcy Code or any amendment thereto or under any
other insolvency law providing for the relief of debtors; (e) the voluntary or
involuntary making of an assignment of a substantial portion of its assets by
LESSEE for the benefit of creditors, appointment of a receiver or trustee for
LESSEE or for any of LESSEE'S asset institution by or against LESSEE of any
formal or informal proceeding for dissolution, liquidation, settlement of
claims against or winding up of the affairs of LESSEE, or the making by LESSEE
of a transfer of all or a material portion of LESSEE's assets or inventory not
in the ordinary course of business and not for equivalent consideration.
16. REMEDIES. Upon LESSEE'S default, LESSOR shall have the right to exercise
any one or more of the following remedies; (a) without affecting LESSOR'S title
or right to possession of the EQUIPMENT, declare due, sue for and recover all
rents and other amounts then accrued or thereafter accruing for the entire
lease term, discounted to present value at 8% per annum or the sum calculated
per paragraph 27 below, whichever is greater, (b) require LESSEE to promptly
redeliver the EQUIPMENT in the manner specified in Section 9 hereof; or (c)
repossess the EQUIPMENT without notice, legal process, prior judicial hearing
or liability for trespass (which rights LESSEE hereby voluntarily,
intelligently and knowingly waives). Such return or repossession of EQUIPMENT
shall not terminate this LEASE unless LESSOR so notifies LESSEE in writing.
LESSOR, at its option may sell or re-lease the EQUIPMENT upon such terms as it
reasonably determines and apply the proceeds to LESSEE's obligations hereunder,
after deducting from such proceeds all costs and expenses of repossession and
disposition, reasonable attorney's fees, plus any amounts due LESSOR pursuant
to Section 18 hereof. LESSEE shall promptly pay any resulting deficiency,
together with interest at the lesser of sixteen (16%) percent and LESSOR's
reasonable attorneys' fees if legal action is required to collect such
deficiency. If LESSOR is unable to repossess the EQUIPMENT for any reason, the
EQUIPMENT shall be deemed a total loss and LESSEE shall pay to LESSOR the
amount due pursuant to Section 13 (c). All such remedies are cumulative and
may be enforced separately or concurrently and are in addition to any other
rights or remedies available to LESSOR at law or in equity. The foregoing
provisions of this Section 16 are subject to any mandatory requirement of
applicable law then in effect.
17. ASSIGNMENT. Without the prior written consent of LESSOR, LESSEE shall not
assign, transfer, pledge or hypothecate this LEASE and EQUIPMENT or any
interest in this LEASE or in and to the EQUIPMENT or permit its rights under
this LEASE to be subject to any lien, charge or encumbrance of any nature.
Notwithstanding the foregoing, LESSEE may assign the LEASE, the EQUIPMENT and
its interest in this LEASE and the EQUIPMENT to an affiliate or in connection
with a sale of all or substantially all of its assets to, or consolidation with
or merger of LESSEE into, any entity so long as such entity assumes the
obligations of LESSEE hereunder and immediately following such event is, in the
reasonable opinion of LESSOR, no less creditworthy than was LESSEE immediately
prior to such event. LESSOR shall have the right to assign this LEASE or any
part thereof. If LESSOR assigns the rents reserved herein or all or any of
the LESSOR's other rights hereunder, or amounts equal thereto, the right of the
assignee to receive the rentals as well as any other right of the assignee
shall not be subject to any defense, setoff, counterclaim or recoupment which
may arise out of any breach or obligation of LESSOR or by reason of any other
indebtedness or liability at any time owing by LESSOR to LESSEE. All rentals
due hereunder shall be payable to assignee by LESSEE in accordance with the
terms hereof. On receipt of notification of such assignment, LESSEE, subject
to its rights hereunder, shall become the pledgeholder of the EQUIPMENT for and
on behalf of the assignee and will relinquish possession thereof only to the
assignee or pursuant to its written order subject to LESSEE's rights hereunder.
LESSEE, on receiving notice of any such assignment, shall make payments as may
therein be directed. Following such assignments, the term "LESSOR" shall be
deemed to include or refer to LESSOR'S assignee, provided that no such assignee
shall be deemed to assume any obligation or duty imposed upon LESSOR hereunder
and LESSEE shall look only to LESSOR for performance thereof. There shall be
only one executed counterpart of this LEASE marked "Original" and all other
counterparts shall be marked "Duplicate". To the extent that LEASE constitutes
chattel paper (as defined in the Uniform Commercial Code) no security interest
in this lease may be created through the transfer or possession of any
counterpart other than the original.
18. DEPRECIATION AND INVESTMENT TAX CREDIT INDEMNITY. (THIS SECTION DOES NOT
APPLY IF LESSOR HAS AGREED IN WRITING TO PASS THE INVESTMENT TAX CREDIT (ITC)
TO LESSEE.) If, as to any EQUIPMENT, under any circumstances and for any
reason whatsoever, except through the fault of the LESSOR, LESSOR shall lose or
shall not have the right to claim, or there shall be disallowed or recaptured
(collectively a "loss") (1) any portion of the maximum ITC, allowable under the
Internal Revenue Code of 1954, as amended, for new property with a useful life
equivalent to the lease term for such EQUIPMENT; or (2) any prortion of the
claimed depreciation deductions for such EQUIPMENT, based on the cost thereof,
LESSEE agrees to pay LESSOR upon demand an amount which, in the reasonable
opinion of LESSOR, will cause LESSOR's after tax net yield in respect of such
equipment to equal the net yield that LESSOR would have received if LESSOR had
not suffered such loss.
TERMS AND CONDITIONS OF LEASE #96-127 CONTINUED LESSEE'S INITIALS __________
LEASE ORIGINAL - 1
<PAGE> 3
19. ENTIRE AGREEMENT; NON-WAIVER; NOTICES; SEVERABILITY. This LEASE and each
rider hereto initialed by LESSEE contains the entire and only understanding
between LESSOR and LESSEE relating to the subject matter hereof. Any
representation, promises or conditions not contained herein shall not be
binding unless in writing and signed by duly authorized representatives of each
party. No covenant or condition of this LEASE can be waived except by the
written consent of LESSOR. Any notices required to be given hereunder shall be
given in writing at the address of each party herein set forth, or to such
other address as either party may substitute by written notice to the other
with a copy of any such notice sent to LESSEE sent to Henry J. Underwood, Jr.,
Esq., Defrees & Fiske, 200 South Michigan, Suite 1100, Chicago, Illinois 60604.
Whenever reference is made herein to the "LEASE," it shall be deemed to
include any Schedules attached hereto identifying all items of EQUIPMENT and
the applicable term and rent, and each rider hereto initialed by LESSEE, all of
which constitute one indivisible lease of equipment to which all the terms and
provisions hereof apply. If any provision of this LEASE is held invalid, such
invalidity shall not affect any other provisions hereof.
20. GENDER; NUMBER; JOINT AND SEVERAL LIABILITY; AUTHORIZATION. Whenever the
context of this LEASE requires, the masculine gender includes the feminine or
neuter and the singular number includes the plural; whenever the word "LESSOR"
is used herein, it shall include all assignees of LESSOR; whenever the word
"herein" is used referring to this LEASE, it shall include the applicable
Schedules hereto and each rider hereto initialed by LESSEE. If there is more
than one LESSEE named in this LEASE, the liability of each shall be joint and
several. LESSEE hereby authorizes LESSOR to insert equipment serial numbers
and other identification in the equipment description when known.
21. SURVIVAL. LESSEE'S indemnities shall survive the expiration or other
termination of this LEASE.
22. CHOICE OF LAW, SERVICE OF PROCESS. This LEASE shall be binding and
effective on LESSOR only when signed by an officer of LESSOR at its home office
in Libertyville, Illinois, and except for local filing requirements, shall be
governed by Illinois law and shall be deemed to have been made in Libertyville,
Illinois. LESSEE does hereby submit to the jurisdiction of any courts
(federal, state or local) having situs within the State of Illinois with
respect to any dispute, claim or suit arising out of or relating to this LEASE
or LESSEE'S obligations hereunder.
23. QUIET ENJOYMENT. LESSOR represents and warrants to LESSEE that LESSOR has
good title to the EQUIPMENT with the full and unencumbered right to lease the
same to LESSEE. LESSOR covenants with LESSEE that so long as LESSEE is not in
default under this Lease, neither LESSOR nor any third party shall interfere
with LESSEE'S right to quiet possession and enjoyment of the EQUIPMENT. LESSOR
shall protect and defend LESSEE'S right to the quiet possession and enjoyment
of the EQUIPMENT against all claims and liens of LESSOR'S creditors. Upon
expiration of the term of this LEASE and exercise by LESSEE of its purchase
option, LESSOR shall transfer title to the EQUIPMENT to LESSEE pursuant to a
bill of sale providing for LESSOR'S warranty of good and marketable title to
the EQUIMENT but excluding any warranties relating to the physical condition of
the EQUIPMENT, including but not limited to the warranties of merchantability
or fitness for a particular purpose.
24. PURCHASE OPTION. LESSEE shall have the option, exercisable upon notice to
Lessor, to purchase all of the EQUIPMENT for one dollar ($1.00) effective upon
the expiration of the original term of this LEASE.
25. EFFECTIVE DATE OF LEASE. The effective date of this LEASE for purposes of
commencing LESSEE'S obligation to pay monthly rent shall occur upon LESSEE'S
acceptance of the EQUIPMENT.
26. EARLY TERMINATION OPTION. After acceptance of the EQUIPMENT in
accordance with this LEASE, LESSEE shall have the right to terminate its
obligations under this LEASE at any time upon 30 days prior notice to LESSOR
and payment of the balance as set forth on the amortization schedule attached
hereto as Exhibit A opposite the date two months after the pre-payment is
effective plus the Prepayment Penalty set forth on Exhibit A. The amortization
schedule shall be adjusted as necessary if the monthly rental is adjusted under
paragraph 27 hereof.
27. RENTAL ADJUSTMENT. When LESSEE accepts the EQUIPMENT, the monthly rental
amount of $10,006.00 will be adjusted in proportion to any increase or decrease
in five year treasury rates from August 27, 1996 until the effective date.
Said monthly payment, adjusted as necessary, shall be payable in advance for 60
months commencing on the first day of the month immediately following the
effective date.
Whenever any monthly rental payment is not paid when due and continues
unpaid 15 days after notice of non-payment is received by LESSEE, LESSEE agrees
to pay LESSOR on demand (as a fee to offset LESSOR'S collection and
administrative expenses) the greater of twenty-five dollars ($25.00) or three
and one-half percent (3 1/2%) of the overdue amount to the extent permitted by
applicable law.
TERMS AND CONDITIONS OF LEASE #96-127 LESSEE'S INITIALS __________
LEASE ORIGINAL - 1
<PAGE> 4
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
(847) 549-0100 FAX (847) 549-0119
AMENDMENT "B" TO LEASE #96-127
LESSOR: International Financial Services Corporation
1113 S. Milwaukee Avenue, Suite 303
Libertyville, IL 60048
LESSEE: SIGMATRON INTERNATIONAL, INC.
ADDRESS: 2201 Landmeier Road
Elk Grove Village, IL 60007
AMEND LEASE AS FOLLOWS:
<TABLE>
<S> <C>
TERM: 60 $10,072.00 per period for the first 60 periods. ADVANCE
Periods are: Monthly RENTALS,$20,144.00 payable at the signing of this lease
Total # of Lease to be applied to the last two rental payments.
Payments: 60
Effective Date:
</TABLE>
All other terms, conditions, guaranties, additional collateral of the
lease between:
SIGMATRON INTERNATIONAL, INC.
and INTERNATIONAL FINANCIAL SERVICES CORPORATION remain in full force
and effect.
AGREED:
INTERNATIONAL FINANCIAL SIGMATRON INTERNATIONAL, INC.
SERVICES CORPORATION
BY: BY:
- ----------------------- -------------------------------------
TITLE: TITLE: President and Chief Executive Officer
- ----------------------- ----------------------------------------
DATE: DATE:
- ----------------------- ---------------------------------------
<PAGE> 5
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-127
ADDRESS: 2201 LANDMEIER ROAD CONTACT: MS. LINDA BLAKE PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
TYPE OF COMPANY: CORPORATION
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
<TABLE>
<S> <C>
TERM: 60 $10,006.00 per period for the first 60 periods. ADVANCE RENTALS,
PERIODS ARE: MONTHLY $20,012.00 payable at the signing of this lease to be applied to the last
TOTAL # OF LEASE PAYMENTS: 60 two rental payments.
EFFECTIVE DATE: SEE PARAGRAPH 25
</TABLE>
- --------------------------------------------------------------------------------
ACCEPTANCE NOTICE
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
All items referred to above were received by us and were and are in good
order and condition and acceptable to us. The decals, labels, etc., if
required and supplied have been affixed to the above items. We approve payment
by you to the supplier. Lessee hereby certifies that the lessor has fully and
satisfactorily performed all covenants and conditions to be performed by it
under said lease agreement as of the date hereof.
Very Truly Yours,
<TABLE>
<S> <C> <C>
LEASE DATED ___ DAY OF __________ , 199 _______
VENDOR: This acceptance must be signed
by lessee and returned to us before your LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
invoice can be paid. ------------------------------------
SIGNED BY:
-------------------------------------------------
TITLE: President and Chief Executive Officer
--------------------------------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK IS REQUIRED ON (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
LEASE PAGES 1,2,3 ,4,5 - MUST BE ORIGINAL SIGNATURES
DATE:
--------------------------------------------------------
</TABLE>
ACCEPTANCE NOTICE - 3
<PAGE> 6
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-127
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
TYPE OF COMPANY: CORPORATION
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
<TABLE>
<S> <C>
TERM: 60 $10,006.00 per period for the first 60 periods. ADVANCE RENTALS,
PERIODS ARE: MONTHLY $20,012.00 payable at the signing of this lease to be applied to
TOTAL # OF LEASE PAYMENTS: 60 the last two rental payments.
EFFECTIVE DATE: SEE PARAGRAPH 25
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT DISCLAIMER AND AGREEMENT
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
This will advise that LESSEE is aware of its obligations with reference to the
above lease and that LESSEE agrees in its name to enforce all warranties,
agreements, or representations, if any, which may be made by the supplier to
LESSEE. LESSEE agrees that INTERNATIONAL FINANCIAL SERVICES CORPORATION makes
no expressed or implied warranties as to any matter whatsoever, including,
without limitation the condition of the equipment, its merchantability or its
fitness for any particular purpose except as set forth in the LEASE. No defect
or unfitness of equipment shall release LESSEE of the obligation to pay rental
payments or of any other obligations under this lease agreement.
Very Truly Yours,
<TABLE>
<S> <C>
LEASE DATED ___ DAY OF ________ , 199 ____
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
-----------------------------------
SIGNED BY:
-----------------------------------
TITLE: President and Chief Executive Officer
--------------------------------------------------------
LESSEE'S ORIGINAL SIGNATURE (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
IN INK IS REQUIRED ON DATE:
LEASE PAGES 1,2,3 ,4,5 - --------------------------------------------------------
MUST BE ORIGINAL SIGNATURES
</TABLE>
EQUIPMENT DISCLAIMER AND AGREEMENT - 4
<PAGE> 7
INTERNATIONAL FINANCIAL 1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SERVICES CORPORATION (847) 549-0100 FAX (847) 549-0119
<TABLE>
<S> <C>
LESSEE: SIGMATRON INTERNATIONAL, INC. LEASE NO. ALWAYS REFER TO: #96-127
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL 60007 EQUIPMENT LOCATION IF OTHER THAN ADDRESS OF LESSEE:
TYPE OF COMPANY: CORPORATION
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
<TABLE>
<S> <C>
TERM: 60 $10,006.00 per period for the first 60 periods. ADVANCE RENTALS,
PERIODS ARE: MONTHLY $20,012.00 payable at the signing of this lease to be applied to
TOTAL # OF LEASE PAYMENTS: 60 the last two rental payments.
EFFECTIVE DATE: SEE PARAGRAPH 25
</TABLE>
- --------------------------------------------------------------------------------
LESSEE'S ACKNOWLEDGEMENT
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 Milwaukee Avenue
Libertyville, IL 60048
GENTLEMEN:
As Lessee under the lease referred to above with International Financial
Services Corporation, the undersigned hereby acknowledges the Lessor's right to
assign its interest under the Lease and that Assignee does not assume any of
the obligations of the Lessor thereunder, consents to any such assignment and,
in consideration of the assignee having advanced funds to the Lessor to finance
the equipment described in the Lease, and in consideration of Assignee's
covenant with Lessee that so long as Lessee is not in default under the Lease,
Lessee will quietly possess the Equipment, free of interference from third
parties, agrees as follows: (a) that its obligation to pay directly to the
Assignee the amounts (whether designated as rentals or otherwise) which become
due from the Lessee as set forth in the Lease so assigned shall be absolutely
unconditional and shall be payable in strict accordance with the Lease, and it
promises so to pay the same notwithstanding any defense, set-off or
counterclaim whatsoever, whether by reason of breach of the Lease, the exercise
of any right or option thereunder, or otherwise, which it may or might now or
hereafter have as against the Lessor (the Lessee reserving its right to have
recourse directly against the Lessor on account of any such defense, set-off or
counterclaim); and (b) that, subject to and without impairment of the Lessee's
leasehold rights in and to the Equipment described in said Lease, Lessee holds
said Equipment and the possession thereof for the Assignee to the extent of the
Assignee's rights therein. There shall be only one executed counterpart of
this lease marked "Original" and all other counterparts shall be marked
"Duplicate." To the extent that Lease constitutes chattel paper (as defined in
the Uniform Commercial Code) no security interest in this lease may be created
through the transfer or possession of any counterpart other than the original.
Very Truly Yours,
<TABLE>
<S> <C>
LEASE DATED ___ DAY OF ________________________ , 199____
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
----------------------------------------------
SIGNED BY:
----------------------------------------------
TITLE: President and Chief Executive Officer
------------------------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK IS (INDICATE CORPORATE OFFICE, GENERAL PARTNER, OWNER, ETC)
REQUIRED ON LEASE PAGES 1,2,3 ,4,5 -
MUST BE ORIGINAL SIGNATURES DATE:
----------------------------------------------------
</TABLE>
LESSEE'S ACKNOWLEDGMENT - 5
<PAGE> 8
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
SCHEDULE "A" TO LEASE #96-127
AND/OR SECURITY AGREEMENT-MORTGAGE ON GOODS & CHATTELS
AND UNIFORM COMMERCIAL CODE #1 & #3 FILING FORM
DATED _________________
LESSEE: Sigmatron International, Inc.
LESSOR: INTERNATIONAL FINANCIAL SERVICES CORPORATION
EQUIPMENT AS DESCRIBED BELOW:
Two (2) New Amistar Surface Mount Machines and One (1)
Vitronics Unitherm SMR-800 Forced Convection Solder Reflow System
including all accessories and attachments thereto.
INCLUDING ALL ACCESSORIES AND ATTACHMENTS THERETO AND ALL PROCEEDS THEREOF.
INTERNATIONAL FINANCIAL
SERVICES CORPORATION SIGMATRON INTERNATIONAL, INC.
By: By:
--------------------- -------------------------------------
Title: Title: President and Chief Executive Officer
--------------------- -------------------------------------
<PAGE> 9
LETTER OF AUTHORIZATION
I, Linda Blake, hereby certify that I am a duly elected officer of
SIGMATRON INTERNATIONAL, INC.
I further hereby certify that Gary Fairhead is authorized and directed
to negotiate, execute and deliver on behalf of this agreement for the following
list of equipment with INTERNATIONAL FINANCIAL SERVICES CORPORATION.
Equipment to be leased: See attached Schedule A; Including all
accessories and attachments thereto.
LESSEE: SIGMATRON INTERNATIONAL, INC.
SIGNED : ________________________
TITLE: ___________________________
<PAGE> 1
Exhibit 10.40
SIGMATRON INTERNATIONAL, INC.
TENTH AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
HSBC Business Loans, Inc.
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Loan and
Security Agreement dated as of February 8, 1994, as amended (the "Loan
Agreement"), between the undersigned, SigmaTron International, Inc., a Delaware
corporation, and HSBC Business Loans, Inc. All capitalized terms used herein
without definition shall have the same meanings herein as such terms have in
the Loan Agreement.
Debtor has requested that Secured Party increase the amount of Advances
available at any one time under the line of credit provided for in the Loan
Agreement from $20,000,000 to $21,500,000, amend the annual lease rentals and
capital expenditures covenant, and make certain other amendments to the Loan
Agreement, and Secured Party is willing to do so under the terms and conditions
set forth in this Amendment.
1. AMENDMENTS.
Upon your acceptance hereof in the space provided for that purpose below,
the Loan Agreement shall be and hereby is amended as follows:
(a) Item 1 of the Schedule to the Loan Agreement shall be amended in
its entirety and as amended it shall be restated to read as follows:
"1. Borrowing Capacity (Section 1.1(c))
<PAGE> 2
Borrowing Capacity at any time shall be the net amount
determined by taking the lesser of the following
amounts:
(A) $21,500,000
or
(B) the amount equal to the sum of:
(i) up to 85% of the Receivable Borrowing
Base, provided that the aggregate amount of
Receivables owing to Debtor from Nighthawk Systems,
Incorporated and its affiliates included within the
determination of the Receivables Borrowing Base at
any one time shall not exceed $10,000,000;
and
(ii) the lesser of $8,000,000 or the amount of
the Inventory Borrowing Base;
and subtracting from the lesser of (A) and (B) above,
the sum (without duplication) of letters of guaranty
and Letters of Credit."
(b) Item 26 of the Schedule to the Loan Agreement shall be amended
in its entirety, and as amended it shall be restated to read as follows:
"26. Combined Maximum Annual Lease Rentals and Capital
Expenditures (Section 10.10)
-2-
<PAGE> 3
$4,000,000 annually in the aggregate for Debtor and
its Consolidated Subsidiaries."
2. CONDITIONS.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) Debtor and Secured Party shall have executed and delivered this
Amendment;
(b) Secured Party shall have received from Debtor certified copies
of resolutions of the Board of Directors of Debtor authorizing the
execution and delivery of this Amendment and, to the extent not
previously delivered to Secured Party, containing the actual specimen
signatures of such signer, in each case in a form satisfactory to Secured
Party and its counsel; and
(c) Debtor shall cause each Third Party to execute and deliver to
Secured Party such Third Party's consent to this Amendment in the form
set forth below.
3. REPRESENTATIONS.
In order to induce Secured Party to execute and deliver this Amendment,
Debtor hereby represents to Secured Party that, as of the date hereof, the
representations and warranties set forth in the Loan Agreement and the other
Transaction Documents are and shall be and remain true and correct and Debtor
is in full compliance with all of the terms and conditions of the Loan
Agreement and the other Transaction Documents and no Event of Default or event
which with notice or lapse of time, or both, would constitute an Event of
Default has occurred and is continuing or shall result after giving effect to
this Amendment.
4. MISCELLANEOUS.
-3-
<PAGE> 4
(a) Except as specifically amended herein, the Loan Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Loan Agreement or
any other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Loan Agreement, any reference in any of such items to the Loan Agreement
being sufficient to refer to the Loan Agreement as amended hereby.
(b) Debtor acknowledges and agrees that the Loan Agreement and the
Security Interest created and provided for therein continue to secure the
payment of any and all indebtedness, and the performance of all obligations and
agreements, of Debtor to Secured Party. Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests
created and provided for by the Loan Agreement as to the indebtedness which
would be secured thereby prior to giving effect to this Amendment.
(c) Debtor agrees to pay on demand all costs and expenses of or incurred
by Secured Party in connection with the negotiation, preparation, execution and
delivery of this Amendment, including the fees and expenses of counsel for
Secured Party.
(d) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
[Signature Page to Follow]
-4-
<PAGE> 5
Dated as of December __, 1996.
SIGMATRON INTERNATIONAL, INC.
By
Its
-----------------------------
ATTEST:
- ------------------------------------
, Its Secretary
- --------------- -----
Accepted and agreed to in Chicago, Illinois as of the date and year last
above written.
HSBC MIDLAND BUSINESS LOANS, INC.
By
Its
-----------------------------
-5-
<PAGE> 6
CONSENT
The undersigned, National Material L.P. and Electro Magnetic Devices,
Inc., have heretofore executed in favor of Secured Party those certain
Subordination Agreements, each dated as of February 7, 1994, respectively, and
Gary R. Fairhead has heretofore executed in favor of Secured Party that certain
Guaranty of Validity of Collateral dated as of February 7, 1994, and each of
the undersigned hereby consents to the Tenth Amendment to Amended and Restated
Loan and Security Agreement set forth above and confirms that its Subordination
Agreement or Guaranty of Validity of Collateral, as the case may be, and all of
its obligations thereunder, remain in full force and effect. Without limiting
the foregoing, each of National Material L.P. and Electro Magnetic Devices,
Inc. hereby acknowledges and agrees that the additional availability under the
Borrowing Capacity constitutes Senior Debt under its respective Subordination
Agreement. Each of the undersigned hereby further agrees that the consent of
the undersigned to any further amendments to the Loan and Security Agreement
shall not be required as a result of this consent having been obtained, except
to the extent, if any, required by the agreements referred to above.
NATIONAL MATERIAL, L.P.
By: NM Holding, Inc. (f/k/a
C.T. One, Inc.),
Its General Partner
By:
Its:
----------------------
ELECTRO MAGNETIC DEVICES, INC.
By:
------------------------------
Its:
--------------------------
<PAGE> 7
---------------------------------
Gary R. Fairhead
-7-
<PAGE> 1
Exhibit 10.41
AMENDED AND RESTATED AGREEMENT
This Amended and Restated Agreement is effective as of the 15th day of
November, 1996, by and between Nighthawk Systems, Incorporated, a Colorado
corporation, whose principal place of business is at 4980 Centennial Boulevard,
Colorado Springs, CO 80919 ("NSI") and SigmaTron International, Inc., a
Delaware corporation, whose principal place of business is at 2201 Landmeier
Road, Elk Grove Village, Illinois 60007 ("SIGMATRON").
RECITALS
WHEREAS, NSI is a designer, manufacturer and seller of proprietary
devices that detect indoor levels of carbon monoxide gas; and
WHEREAS, SigmaTron is an independent contract manufacturer of
electronic components, printed circuit board assemblies and turnkey electronic
products; and
WHEREAS, pursuant to the Agreement, dated as of June 9, 1995, by and
between NSI and SigmaTron (the "1995 Agreement"), SigmaTron agreed to
manufacture and assemble carbon monoxide gas detectors exclusively for NSI in
exchange for NSI's commitment to purchase all of its requirements for such
detectors from SigmaTron; and
WHEREAS, NSI and SigmaTron wish to amend and restate the 1995
Agreement in its entirety to provide the following terms and conditions of
their business arrangement.
WHEREAS, Walter Kidde Portable Equipment, Inc. (the "Guarantor"), of
Mebane, North Carolina, wishes to guarantee unconditionally all of NSI's
obligations under the restated and amended agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the sufficiency of which
is hereby acknowledged, NSI and SigmaTron agree to amend and restate the 1995
Agreement in its entirety as follows:
1. DEFINITION OF CO DETECTORS; TERM OF AGREEMENT:
(a) This Amended and Restated Agreement provides for the
manufacture and assembly by SigmaTron of the models of devices
that detect indoor levels of carbon monoxide gas set forth on
Exhibit A to this Agreement and all comparable or replacement
models now and hereafter designed, manufactured or sold by NSI
(all such models and products shall be referred to
collectively as "CO DETECTORS" and singly as a "CO DETECTOR").
A comparable or replacement model is defined as a CO detector
that utilizes similar sensing technology, assembly equipment
and tooling to
<PAGE> 2
manufacture as the models listed on Exhibit A. NSI
shall amend Exhibit A as comparable and replacement models are
released and obsolete models discontinued. If at any time
during the Term, NSI plans to design, manufacture or sell a CO
detector that is not a replacement of or comparable to CO
Detectors, SigmaTron shall have the right to submit to NSI a
bid to manufacture and assemble such CO detector and to match
any competing bid received by NSI for the manufacture and
assembly of such CO detector. NSI shall provide SigmaTron
with such information as necessary to enable SigmaTron to
formulate its bids and a reasonable time in which to respond
to any competing bid. Should NSI determine that SigmaTron is
unable to match such bid, then NSI shall be free to accept the
competing bid, free of claim by SigmaTron hereunder. If NSI
accepts SigmaTron's bid for said CO detector, said CO detector
shall be added to Exhibit A to this Agreement and shall be
considered "CO Detectors" hereunder.
(b) Subject to termination pursuant to Sections 1(c) and 13 below
and subject to the last sentence of this subparagraph, this
Agreement shall be for an initial period which shall expire on
June 9, 1998. Each party shall give the other party a notice
of its desire regarding renewal or nonrenewal at least 6
months before the expiration of the initial period (or a
renewal period), whereupon the parties shall negotiate the
terms and conditions applicable during the renewal period, to
be effective upon expiration of the current period. (The
initial and any renewal period shall be referred to as the
"TERM"). If after such negotiations, the terms and conditions
are not acceptable to a party, then the party for whom the
terms and conditions are not acceptable, in its sole
discretion, may cause the Agreement to terminate (without
liability by reason of such termination) by delivery of a
written notice to that effect, in which case the initial
period or renewal period shall not expire until six months
after receipt by the other party of such notice.
(c) The parties acknowledge that, during the course of their
relationship, issues may arise as to the terms and conditions
of this Agreement and other aspects of their working
relationship. The parties agree to meet, upon ten days' prior
written notice, no less often than once per quarter to discuss
their business relationship. At the meeting, either party may
give to the other party written notice of an unresolved
concern relating to this Agreement, which notice shall specify
the nature of the concern and the notifying party's suggested
resolution. The recipient of such notice shall provide the
notifying party a written response within 15 days of
2
<PAGE> 3
receipt of the notice. If the response is not
acceptable to the notifying party in its sole discretion, the
notifying party shall have the right to terminate this
Agreement upon no less than 6 months' prior written notice, by
giving written notice of termination within 15 days after
receipt of the recipient's written response.
2. PURCHASE AND DELIVERY OF CO DETECTORS:
(a) NSI shall order CO Detectors from SigmaTron by executing and
delivering to SigmaTron a Master Production Schedule ("MPS").
On or before the first day of each month during the Term, NSI
will deliver to SigmaTron a MPS specifying NSI's requirements
and schedule for Delivery (as defined in Section 2(c)) for the
next succeeding three-month period (the "FIRM ORDER PERIOD")
and a forecast of orders for the nine-month period following
the Firm Order Period provided on a monthly basis (the
"FORECAST PERIOD"). Within thirty days thereafter, SigmaTron
will deliver to NSI a written acknowledgement of receipt and
approval of the MPS. Subject to Section 2(b), the quantities
and schedule for Delivery during the Firm Order Period may not
be amended by NSI without the prior written consent of
SigmaTron. Upon SigmaTron's receipt and approval of a MPS,
SigmaTron agrees to manufacture and Deliver and NSI shall be
obligated to accept Delivery and pay the Price (as defined in
Section 5) for the CO Detectors to be Delivered during the
Firm Order Period. Further, NSI shall be obligated, every
Monday, to accept Delivery of and pay the Price pursuant to
Section 5 for, at a minimum, all units of CO Detectors
completed during the prior calendar week in accordance with
the MPS.
(b) NSI may reschedule the quantity of CO Detectors to be
Delivered during each month of a Firm Order Period only as
follows:
Month in Permitted
Firm Order Variance
Period
(+) (-)
------------- ----------------
[S] [C] [C]
1st 0 0
2nd 0 15%
3rd 10% 30%
Any variations beyond the permitted variances shall be subject
to written acceptance by each of the parties. Neither party
will be
3
<PAGE> 4
obligated to accept a variance beyond a permitted variance.
(c) Delivery shall be deemed to occur upon the delivery by
SigmaTron to NSI's designated common carrier of finished CO
Detectors packaged for sale to the ultimate user, F.O.B.
SigmaTron's Del Rio, Texas warehouse ("DELIVERY"). NSI will
provide shipping instructions to SigmaTron in advance. Except
for Deliveries either made to satisfy NSI's obligations
described in the last sentence of Section 2(a) or otherwise
directed by NSI, SigmaTron will ship in full truck quantities
only.
(d) All NSI owned machinery and equipment, tooling, test chambers
and fixtures to be utilized in SigmaTron's manufacture and
assembly of CO Detectors (the "NSI EQUIPMENT") shall be
delivered to Del Rio, Texas by NSI at NSI's expense. Where
practicable, NSI will conspicuously mark each item of NSI
Equipment prior to delivery to SigmaTron with the following
statement: "This equipment is owned by Nighthawk Systems,
Incorporated." SigmaTron agrees it shall not remove, modify
or cover any such statement. NSI shall be responsible to
insure the NSI Equipment against property damage in an amount
not less than the replacement cost thereof, which insurance
shall comply with the terms of the second and third sentences
of Section 12 hereof. Said insurance shall cover the NSI
Equipment whether located in the United States or Mexico and
whether located at the facilities of SigmaTron or a third
party, such as an approved vendor. All non-recurring charges
for tooling, testing and agency certification shall be paid
for by NSI.
3. EXCLUSIVITY:
(a) Subject to Sections 3(b) and 3(c) below, NSI shall purchase
from SigmaTron all of NSI's requirements for CO Detectors for
resale in North America.
(b) If at any time during the Term, NSI's anticipated demand for
any month during the Firm Order Period or the Forecast Period
is greater than 300,000 CO Detectors, or if NSI's aggregate
purchases for the Firm Order Period and Forecast Period (taken
together) is greater than 2,000,000 CO Detectors, NSI may
request that SigmaTron provide assurances that it has the
capacity to meet NSI's requirements. If SigmaTron's
assurances to NSI do not satisfy NSI in NSI's reasonable
discretion that SigmaTron has the capacity to meet NSI's
requirements, NSI may obtain a second supplier to provide to
NSI CO Detectors to meet the excess
4
<PAGE> 5
demand only for the period of such excess demand.
(c) NSI's obligation to purchase CO Detectors from SigmaTron shall
not apply to indoor carbon monoxide gas detectors manufactured
by a third party that is acquired by NSI, Guarantor or
Williams Holding P.L.C. during the Term.
4. STORAGE AND RISK OF LOSS:
SigmaTron shall store all CO Detectors in its Del Rio, Texas
warehouse. The risk of loss for CO Detectors shall be the
responsibility of SigmaTron until Delivery to NSI's carrier has been
completed. SigmaTron agrees to provide security for the CO Detectors
stored in its Del Rio, Texas warehouse consistent with SigmaTron's
past practices.
5. PRICE; PAYMENT:
(a) NSI agrees to pay SigmaTron for each CO Detector Delivered to
NSI hereunder a purchase price ("PRICE") determined in
accordance with a separate agreement (the "Side Agreement")
dated November 15, 1996, the terms of which have been agreed
upon between the parties.
(b) Prices in the Side Agreement are quoted in U.S. dollars F.O.B.
SigmaTron's warehouse Del Rio, Texas.
(c) Prices are quoted on the basis that any taxes arising under
the federal, state or local laws of Mexico relating to
SigmaTron's manufacture of CO Detectors in Mexico and any
customs duties relating to the transfer of property from
Mexico to the United States are the responsibility of
SigmaTron and that all other property, sales, use or other
taxes assessed on the manufacture, storage or sale of CO
Detectors are the responsibility of NSI; provided, however,
that SigmaTron is responsible for taxes assessed on its
manufacturing operation in Mexico. The party responsible for
any such duties or taxes shall cause to be filed all returns
and reports required in connection with such duties or taxes
and shall indemnify and hold the other party harmless with
respect to such duties or taxes, as the case may be.
(d) Payment shall be received by SigmaTron on or before 60 days
after the date of SigmaTron's delivery of invoices to NSI.
SigmaTron shall issue invoices to NSI for CO Detectors upon
Delivery of CO Detectors.
5
<PAGE> 6
(e) NSI will pay SigmaTron a late payment fee at a rate equal to 1
1/2% per month on any sum not received by SigmaTron on or
before 60 days after the date of delivery of SigmaTron's
invoice.
6. CHANGE NOTICES; OBSOLETE INVENTORY:
(a) NSI may request changes of the models or to specifications for
CO Detectors by delivering to SigmaTron a change notice
("Change Notice") describing the changes and the proposed
effective date of such changes. Any increase or decrease in
the Bill of Material Cost of, or direct labor time required
for, implementation of the changes shall be reflected in the
Price for the affected CO Detectors set in accordance with the
formula set forth in the Side Agreement. NSI shall issue any
Change Notice that may be required as a result of a change in
Exhibit A.
(b) Implementation of a Change Notice may create obsolete or
surplus inventory of CO Detectors, components, materials or
supplies, whether in stock (including Safety Stock, as defined
in Section 10), subject to orders not cancelable by SigmaTron
without penalty, or not otherwise useable by SigmaTron in the
ordinary course of its business (all such inventory of CO
Detectors, components, materials or supplies shall be referred
to as "OBSOLETE INVENTORY"). NSI shall purchase from
SigmaTron:
(i) all Obsolete Inventory to the extent that it would
have been used by SigmaTron to fill orders to be
Delivered for the current month and during the Firm
Order Period beginning as of the first day of the
month following the effective date of the Change
Notice;
(ii) all Obsolete Inventory for orders beyond the Firm
Order Period that were purchased by SigmaTron with
NSI's written approval; and
(iii) all Safety Stock that becomes Obsolete Inventory.
(c) NSI shall purchase Obsolete Inventory from SigmaTron as
follows:
(i) NSI shall pay SigmaTron the Price for:
(a) all finished CO Detectors scheduled to be
Delivered for the current month and during
the first two months of the Firm Order Period
beginning as of
6
<PAGE> 7
the first day of the month following the
effective date of the Change Notice; and
(b) all finished CO Detectors held as Safety
Stock.
(ii) NSI shall pay SigmaTron 108% of the current Bill of
Material Cost for:
(a) a maximum of 110% of all finished CO
Detectors scheduled to be Delivered during
the third month of said Firm Order Period;
(b) all raw material CO Detector kits held as
Safety Stock; and
(c) all Obsolete Inventory for orders beyond the
Firm Order Period purchased with NSI's
written approval.
(d) SigmaTron shall invoice NSI for Obsolete Inventory within 15
days after notification to NSI of its exposure or as soon
thereafter as is practicable.
7. APPROVED VENDOR LIST:
(a) SigmaTron shall procure all components, materials and supplies
necessary for the assembly and manufacture of CO Detectors
from such third parties as have been approved in advance by
NSI as described on NSI's approved vendor list ("AVL").
SigmaTron will not procure any components, materials or
supplies for any model of CO Detector prior to receiving NSI's
final bill of material, including AVL, for that model. NSI
may change the AVL in its sole discretion and such changes
shall be effective as directed by NSI. SigmaTron and NSI
agree that any such changes that result in a change of model
or specification shall be treated as a Change Notice in
accordance with Section 6.
(b) SigmaTron shall not substitute any component, material or
supply without NSI's prior written consent, which consent may
be withheld in the exercise of NSI's sole discretion. Should
SigmaTron become aware of opportunities for the realization of
savings in component costs or direct labor costs, SigmaTron
shall inform NSI in writing. NSI shall conduct such
investigation as it may desire and shall decide, in the
exercise of its sole discretion, whether or not to proceed so
as to take advantage of the
7
<PAGE> 8
suggestion. Any cost savings realized because of changes
initially suggested to NSI by SigmaTron shall be shared by NSI
and SigmaTron on a 50/50 basis for the first 12 months after
the commencement of the cost savings realization. Thereafter,
the benefit of all such cost savings shall be enjoyed by NSI
solely.
(c) SigmaTron shall invoice NSI for SigmaTron's share of such cost
savings within 5 days after the end of each month for which
SigmaTron is entitled to share in cost savings.
(d) Any effect that cost savings may have on Price shall be
processed in a Change Notice under Section 6.
(e) NSI may inspect SigmaTron's accounting and purchasing records
related to SigmaTron's purchase of components, materials and
supplies necessary for the assembly and manufacture of CO
Detectors, during SigmaTron's regular business hours, at
SigmaTron's Elk Grove Village offices, upon two (2) business
days notice to SigmaTron. All such records are SigmaTron's
Confidential Information subject to the provisions of Section
11 of this Agreement.
8. ACCEPTANCE, TESTING AND REJECTION:
(a) The basic acceptance criteria shall be conformance to the
drawings, specifications and test criteria specified by NSI.
(b) SigmaTron shall conduct all quality assurance, burn-in and
tests required by NSI for each CO Detector and conform each CO
Detector to requirements of Underwriters' Laboratories ("UL")
as specified by NSI. All tests shall be conducted by
SigmaTron at its plant that has been dedicated to the final
assembly and testing of CO Detectors. SigmaTron further
agrees that said plant and its warehouse in Del Rio, Texas
shall be available for inspection by NSI and UL as desired.
Such inspections shall be conducted only during regular
business hours and subject to compliance with SigmaTron's
reasonable security requirements.
(c) NSI may reject lots of CO Detectors based on its reasonable
quality control methods of testing individual units. In the
event of such rejection, SigmaTron shall be responsible for
the freight cost for shipping the rejected units back to
SigmaTron and for the cost of retesting any lots so rejected.
(d) SigmaTron agrees that its Mexican manufacturing operations
will
8
<PAGE> 9
obtain ISO 9000 certification no later than July 1, 1997.
9. WARRANTY:
(a) The parties acknowledge that NSI is solely responsible for the
design and specifications of CO Detectors. SigmaTron warrants
to NSI that each CO Detector will meet NSI's applicable
specifications and will function in accordance with those
specifications when Delivered. SigmaTron further warrants to
NSI that each CO Detector will be free from defects in
workmanship for a period of five years from the date of
manufacture. SigmaTron will stamp a manufacture date code on
each CO Detector in order to create a reference date for such
purpose. SigmaTron does not warrant the functionality of the
design or specifications of any CO Detector, and does not
warrant any components, materials or supplies against defects
unless the defects are readily discoverable upon inspection.
These warranties shall not apply and SigmaTron is not
responsible for defects in any CO Detector that has been
subject to improper handling, misuse, accident, negligence,
exposure to casualty or the elements, has been operated in
excess of conditions specified for the CO Detector or has been
altered or repaired in an unauthorized manner. These
warranties are not assignable by NSI.
(b) The parties agree that NSI shall be solely responsible for any
warranty service of CO Detectors. To the extent that a CO
Detector is returned to NSI by its customer because it is
defective and the defect resulted from a breach by SigmaTron
of its warranty as set forth in Section 9(a) above or
SigmaTron's failure to use components, materials or supplies
from the AVL, NSI shall be credited with the full Price paid
to SigmaTron for the defective CO Detector plus NSI's
reasonable out-of-pocket costs associated with the return and
handling of the defective CO Detector not to exceed $3.00 per
returned CO Detector. A CO Detector shall not be considered
defective for purposes of this credit unless NSI has returned
it to SigmaTron for inspection and verification. No defective
CO Detector so returned to SigmaTron shall be resold to NSI as
a new unit.
(c) Unless the claim is primarily attributable to SigmaTron within
the meaning of the following sentence, NSI shall indemnify and
hold SigmaTron harmless from any losses, claims (including
product liability claims) and costs, including court costs and
attorneys' fees, which arise from claims of third parties
based upon the use, sale, design, specifications, or operation
of CO Detectors.
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<PAGE> 10
SigmaTron shall indemnify and hold harmless NSI from any
losses, claims, liabilities and costs, including court costs
and attorneys' fees, which arise from claims of third parties
which are primarily attributable to SigmaTron, namely arising
out of a breach by SigmaTron of its warranty as set forth in
Section 9(a) above or a failure by SigmaTron to use
components, materials or supplies from the AVL. The foregoing
indemnities shall be limited to $5,000,000 per claim. In the
event a third party proceeds against both SigmaTron and NSI in
an action that may result in indemnification rights under
either of the first two sentences of this Section 9(c), each
of SigmaTron and NSI shall defend itself in that action and
cooperate in the defense to the fullest extent possible
without adversely affecting its interests, and SigmaTron and
NSI agree not to assert cross-claims in the resulting
arbitration, mediation or litigation. The preceding sentence
shall not be construed as a waiver of the right to assert any
claim against the other in a different action. If NSI and
SigmaTron cannot agree as to which indemnification applies,
that question shall be resolved by arbitration pursuant to
Section 17(h).
(d) NOTWITHSTANDING SECTION 13(e) BELOW, NSI'S REMEDIES UNDER
SECTION 9(b) FOR SIGMATRON'S BREACH OF WARRANTY ARE EXCLUSIVE
OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND SIGMATRON
HEREBY SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY
OF ANY TYPE, INCLUDING WITHOUT LIMITATION THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE.
10. SAFETY STOCK:
(a) In recognition of the potential for unexpected fluctuations in
NSI's customers' demands for CO Detectors, when requested in
writing by NSI to do so, SigmaTron agrees to keep in its Del
Rio, Texas, warehouse an inventory equal to 20,000 units of
finished CO Detectors and 30,000 complete raw material CO
Detector kits (collectively, "SAFETY STOCK"). Prior to
Delivery, the Safety Stock shall be owned by SigmaTron.
SigmaTron shall bear the risk of loss with respect to Safety
Stock prior to Delivery. NSI may request delivery of Safety
Stock as follows:
(i) finished CO Detectors may be requested at any time
with no lead time constraints. SigmaTron shall
Deliver the requested CO Detectors within 48 hours
after SigmaTron's receipt of NSI's request;
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<PAGE> 11
(ii) finished CO Detectors assembled from the raw material
kits shall be Delivered by SigmaTron to NSI within 5
weeks of NSI's request.
(b) NSI shall pay SigmaTron the Price for CO Detectors Delivered
from Safety Stock.
(c) Any depletion in required levels of Safety Stock shall be
replenished by SigmaTron as soon as reasonably possible.
Deliveries of CO Detectors from Safety Stock are in addition
to Deliveries scheduled for any Firm Order Period.
11. CONFIDENTIALITY:
(a) During the course of their business relationship described in
this Agreement and for three years thereafter, each party
shall disclose to the other party confidential and proprietary
information, including without limitation financial
information, (all of such information being referred to herein
as "Confidential Information"), the unauthorized disclosure of
which may adversely affect the competitive advantage of the
disclosing party. Therefore, each of NSI and SigmaTron hereby
agrees that it shall maintain the Confidential Information of
the other party in strictest confidence and use such
Confidential Information only to fulfill its obligations to
the other party under this Agreement or as otherwise permitted
under this Agreement and shall not disclose Confidential
Information to any third party without the prior written
consent of the owner; provided however, that either party may
disclose Confidential Information of the other to lenders,
accountants, counsel, and other third parties with a duty of
confidentiality to the disclosing party, as long as such
disclosing party takes reasonable efforts to require such
third parties to keep such information confidential. Upon the
termination of this Agreement, each party shall return or
destroy any Confidential Information received from the other
party upon request.
(b) Confidential Information does not include matters:
(i) which are or become generally known to the public;
(ii) independently developed by the recipient (provided
that the recipient has not used the Confidential
Information of the disclosing party);
(iii) independently developed by a third party without
breach of
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<PAGE> 12
a confidentiality obligation to the disclosing party;
or
(iv) required to be disclosed pursuant to order of court
or other governmental authority so long as the party
being required to make the disclosure gives prompt
notice thereof to the other party prior to such
disclosure (if possible).
(c) Each party acknowledges that a breach or threatened breach of
its obligations hereunder may cause irreparable damage to the
other party not adequately compensated by monetary damages.
Therefore, each party agrees that the non-breaching party
shall have the right to obtain, without the necessity of bond,
equitable remedies including without limitation specific
performance and injunctive relief, upon application.
(d) SigmaTron's Confidential Information may constitute material
non-public information which may be important to an investor
in making a decision to purchase or sell securities in
SigmaTron. Until such time as Confidential Information is
made public, NSI agrees not to utilize such information in
purchasing or selling securities of SigmaTron and to use
reasonable efforts not to disclose any portion of such
information to a third party who might trade on the
Confidential Information or disclose it to others.
12. INSURANCE:
Each party agrees that at all times during the Term of this Agreement
it shall carry property damage and general liability insurance
(including without limitation product liability and business
liability) coverage in an amount no less than $5,000,000 per
occurrence and $5,000,000 overall. Each party shall name the other
party as additional insured under such policy and shall deliver to the
other party a Certificate of Insurance as proof of such coverage
status within ten days of the effective date of this Agreement and
within ten days of the renewal date of any such insurance coverage.
Each policy will also provide that no change or cancellation will be
effective without 30 days' written notice to such additional insured.
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<PAGE> 13
13. DEFAULT AND REMEDIES; TERMINATION:
(a) Either party may declare the other party in default:
(i) if the defaulting party defaults in any payment to
the non-defaulting party and such failure continues
unremedied for a period of twenty (20) days after the
date of receipt by the defaulting party of written
notice specifying the default in reasonable detail;
or
(ii) if the defaulting party defaults in its performance
of any other material term or condition of this
Agreement, or of any MPS issued pursuant to this
Agreement, and such default continues unremedied for
a period of thirty (30) days after the date of
receipt by the defaulting party of written notice
specifying the default in reasonable detail; or
(iii) if the defaulting party files a petition in
bankruptcy, has a petition in bankruptcy filed
against it and such petition is not dismissed within
90 days, makes an assignment for the benefit of
creditors, suffers foreclosure of all or
substantially all of its assets or seeks the
appointment of a receiver for all or substantially
all of its assets.
(b) In the event of a default hereunder, the non-defaulting party
may, by thirty (30) days prior written notice to the
defaulting party, terminate this Agreement and all or any of
the privileges, permissions and rights granted to the
defaulting party hereunder or in connection herewith in whole
or in part. The effective date of termination will be the
date therefor stated in any termination notice given
hereunder, which date will not be before the expiration of any
applicable cure period provided for herein. Any such
termination will not effect the liability of either party for
any breach arising prior to such termination.
(c) Upon expiration of the Term or in the event of an unremedied
event of default by NSI (and the expiration of any cure
periods), SigmaTron may exercise any one or more of the
following remedies, in addition to any other remedies
available to it hereunder:
(i) all inventory, components and materials (including
the Safety Stock), either in stock, on order and not
cancelable by SigmaTron without penalty, or not
useable by SigmaTron in the ordinary course of its
business, may be
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<PAGE> 14
(ii) treated by SigmaTron as Obsolete Inventory
under Section 6;
SigmaTron may terminate its obligations to
manufacture and assemble CO Detectors
exclusively for NSI;
(iii) SigmaTron may sell to third parties any inventory,
components or materials in SigmaTron's possession,
including without limitation, finished CO Detectors
produced on or before the date SigmaTron declares NSI
in default and Safety Stock (as finished goods or in
the form then retained by SigmaTron), free of claim
by NSI and on any terms and conditions (including
without limitation price) determined by SigmaTron; or
(iv) SigmaTron shall be entitled to hold shipments of CO
Detectors required to be Delivered to NSI until
SigmaTron receives full payment therefor.
(d) Upon expiration of the Term or in the event of an unremedied
event of default by SigmaTron (and the expiration of any cure
periods), SigmaTron will complete all work in process and then
make available for removal by NSI all NSI Equipment.
(e) Except as provided in Section 9 above, the remedies provided
for in this Agreement are not exclusive and shall be in
addition to any other remedies available to the non-defaulting
party, at law or in equity.
14. ASSIGNMENT; CHANGE OF CONTROL; GUARANTY:
(a) Neither party may assign its rights or obligations hereunder
without the prior written consent of the other party, which
consent may be withheld in the sole discretion of such party.
(b) In the event that all or substantially all of NSI's assets or
a change in control of NSI is to be effected by a merger,
consolidation, reorganization, or a sale of capital stock of
NSI, NSI shall give notice to SigmaTron of such pending event
so that SigmaTron may attempt to enter into a requirements
contract similar to this Agreement with the third party
acquiror, to become effective upon the consummation of the
sale. If SigmaTron is not able to execute a mutually
acceptable agreement with the third party, the terms of this
Agreement shall bind said third party, at SigmaTron's option,
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<PAGE> 15
for a period of 12 months after consummation of the sale.
SigmaTron will exercise its option, if at all, by giving
written notice to NSI not later than 30 days after the
occurrence of a meeting among NSI, SigmaTron and the third
party commencing the negotiation of such an agreement.
SigmaTron agrees to make its representative available for such
meeting upon three days' prior written notice.
(c) In the event that all or substantially all of SigmaTron's
assets or a change in control of SigmaTron is to be effected
by a merger, consolidation, reorganization, or a sale of
capital stock of SigmaTron, SigmaTron shall give notice to NSI
of such pending event. Upon occurrence of such pending event,
NSI may at its option terminate this Agreement upon 30 days
written notice.
(d) All of NSI's obligations under this Agreement shall be
unconditionally guaranteed by Walter Kidde Portable Equipment,
Inc. pursuant to the terms of a Guaranty Agreement in such
form as is reasonably acceptable to SigmaTron.
15. PROJECT MANAGERS:
Each party shall appoint an individual to act as its project manager
for this Agreement. Each project manager shall be primarily
responsible for technical and service liaison with the other party for
all elements of this business relationship. Initially, NSI appoints
John J. Andres as its project manager and SigmaTron appoints Gregory
A. Fairhead as its project manager. Each party shall have the right
to change its project manager at any time by written notice sent to
the other party.
16. PROPRIETARY RIGHTS:
(a) The parties acknowledge that the design and specifications of
CO Detectors, the know-how associated with the components of
CO Detectors and all of NSI's customer lists are proprietary
to NSI. Nothing in this Agreement shall be construed as
granting to SigmaTron or conferring on SigmaTron any rights by
license or otherwise to NSI's patents, trademarks, copyrights
or other proprietary rights except as necessary for SigmaTron
to perform its obligations under this Agreement or exercise
its right to sell finished CO Detectors under Section 13(c) of
this Agreement.
(b) (i) NSI shall, at its own expense, defend, indemnify and
hold SigmaTron harmless from any loss, liability or
expense (including court costs and attorney's fees)
resulting from any actual or alleged infringement or
other violation of any
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<PAGE> 16
patent, trademark, copyright or other proprietary
right of any third party to the extent that such
infringement is based on SigmaTron's production for
NSI of CO Detectors in accordance with specifications
provided by NSI to SigmaTron under this Agreement.
(ii) If NSI is not able to procure from the person or
persons claiming infringement the right for SigmaTron
to continue production of the affected CO Detectors
on such terms as are mutually acceptable by the
parties, NSI shall purchase from SigmaTron each of
the following that results from the inability of
SigmaTron to use the infringing goods (all such
inventory of CO Detectors, components, materials or
supplies, whether in stock (including Safety Stock),
subject to orders not cancelable by SigmaTron without
penalty, or not otherwise useable by SigmaTron in the
ordinary course of its business is herein called
"Infringing Obsolete Inventory"):
(a) all Infringing Obsolete Inventory to the
extent that it would have been used by
SigmaTron to fill orders to be Delivered for
the current month and during the Firm Order
Period beginning as of the first day of the
month following the date on which SigmaTron
was required to cease production of the
infringing product;
(b) all Infringing Obsolete Inventory for orders
beyond the Firm Order Period that were
purchased by SigmaTron with NSI's written
approval; and
(c) all Safety Stock that becomes Infringing
Obsolete Inventory.
(iii) NSI shall purchase Infringing Obsolete Inventory from
SigmaTron as follows:
(a) NSI shall pay SigmaTron the Price for:
1. all finished CO Detectors scheduled
to be Delivered for the current
month and during the first two
months of the Firm Order Period
beginning as of the first day of the
month following the date on which
SigmaTron was required to cease
production
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<PAGE> 17
of the infringing product; and
2. all finished CO Detectors held as
Safety Stock.
(B) NSI shall pay SigmaTron 108% of the current
Bill of Material Cost for:
1. 110% of all finished CO Detectors
scheduled to be Delivered during the
third month of said Firm Order
Period;
2. all raw material CO Detector kits
held as Safety Stock; and
3. all Infringing Obsolete Inventory
for orders beyond the Firm Order
Period purchased with NSI's written
approval.
(iv) SigmaTron shall invoice NSI for Infringing Obsolete
Inventory within 15 days after notification to NSI of
its exposure or as soon thereafter as practicable.
(c) NSI represents to SigmaTron that NSI has received no notice of
any claim and is aware of no threatened claim that any CO
Detector infringes or violates any patent, trademark,
copyright or other proprietary right of any third party. NSI
agrees that it shall immediately notify SigmaTron when NSI has
knowledge that such claim or threatened claim has been
asserted with respect to any CO Detector.
17. MISCELLANEOUS:
(a) Effect of Headings: The headings contained in this Agreement
are to facilitate reference only, do not form a part of this
Agreement and shall not in any way affect the construction or
interpretation hereof.
(b) Non-waiver: The failure of either party to enforce or
exercise any provision, right or option under this Agreement
shall not prejudice any other right which that party may
otherwise have under this Agreement, at law or in equity.
(c) Notices: Any notice, request, instruction, invoice or other
document required or permitted to be given hereunder shall be
in
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<PAGE> 18
writing and addressed as follows (or to such different address
as has been set forth in a notice to the other party):
SigmaTron International, Inc.
2201 Landmeier Road
Elk Grove Village, Illinois 60007
Facsimile: 847/956-8082
Attn: Gary R. Fairhead, President
with a copy to:
Henry J. Underwood, Jr.
Defrees & Fiske
200 South Michigan Avenue
Suite 1100
Chicago, Illinois 60604
Facsimile: 312/939-5617
John Andres
President
Nighthawk Systems, Incorporated
4980 Centennial Boulevard
Colorado Springs, CO 80919
Facsimile: 719/598-8550
Notices so given shall be deemed delivered one business day
after machine confirmation of facsimile transmission if sent
via facsimile, or on the next business day if sent via
recognized overnight courier, all fees prepaid.
(d) Release of Publicity: Neither party shall, without first
securing the written consent of the other party hereto,
advertise or release any publicity regarding the existence of
this Agreement or its contents. As a public company,
SigmaTron is required to give notice to the public of all of
its material agreements and any changes thereto. NSI
acknowledges that this Agreement is material to SigmaTron and
consents to the issuance of a press release announcing the
execution of this Agreement. In addition, if SigmaTron is
required by applicable regulatory requirements to announce
publicly other aspects of its business relationship with NSI
or this Agreement, NSI shall respond reasonably and promptly
to SigmaTron's requests for approval of the content of
announcements.
(e) Applicable Law: This Agreement and all matters connected with
the performance hereof shall be construed, interpreted,
applied,
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<PAGE> 19
and governed in all respects according to the laws of the
State of Colorado notwithstanding any conflicts of law rules
that may provide otherwise.
(f) Modification of Agreement: This Agreement, the Guaranty and
the Side Agreement set forth the entire understanding and
agreement between the parties on the subject matter hereof and
merges and supersedes all previous communications,
negotiations, warranties, representations, purchase orders and
agreements, either oral or written, with respect to the
subject matter hereof, including without limitation the 1995
Agreement, and no addition to or modification of this
Agreement shall be binding on either party hereto unless
reduced to writing and duly executed by the party to be
charged.
(g) Severability: If any term or provision of this Agreement is
found to be illegal or unenforceable then, notwithstanding
such partial invalidity, the remaining portions of this
Agreement shall remain in full force and effect.
(h) Arbitration: Any controversy or claim arising out of a breach
of this Agreement shall be settled by binding arbitration in
Denver, Colorado. Said arbitration shall be conducted in
accordance with the commercial arbitration rules of the
American Arbitration Association then in force. One
arbitrator shall be selected to settle the controversy or
claim. The arbitrator shall be a person experienced in
negotiating and consummating contract manufacturing
agreements, and a written opinion shall be issued specifying
the basis for the decision, which may include injunctive
relief, specific performance or other remedies in the nature
of equitable remedies. A judgment upon the award entered by
the arbitrator may be entered by any court having jurisdiction
thereof. The parties will share equally the costs of any
arbitration proceeding.
(i) Independent Contractors: Each of NSI and SigmaTron will
perform its work under this Agreement as an independent
contractor and not as an agent or employee of the other.
Subject to the terms and conditions of this Agreement, each
party shall at its sole discretion, choose the means to be
employed and the manner of carrying out its obligations
hereunder.
(j) Use of Standard Forms: Either party may use its standard
purchase order or invoice forms during the course of their
business relationship. However, the preprinted terms and
conditions of
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<PAGE> 20
such form shall not be binding upon the parties, their
intention being that the terms and conditions of their
business relationship shall be governed by this Agreement.
(k) Force Majeure: Neither party hereto will be liable for any
failure to perform any obligation under this Agreement, or for
delay in such performance, to the extent such failure to
perform or delay is caused by circumstances beyond its
reasonable control, including without limitation fire, storm,
flood, earthquake, explosion, accident, war, rebellion,
insurrection, sabotage, restrictions, labor disputes or
shortages, transportation embargoes, delays in transportation,
shortages of materials due to circumstances beyond reasonable
control, shortages of fuels or power, acts of God, acts of any
government or any agency thereof, and judicial action. Any
suspension of performance by reason of this Section 17(k) will
be limited to the period during which the cause of suspension
exists and will apply only to the extent that the party whose
performance is affected by such event uses reasonable efforts
to minimize the effect of any failure to perform or to
minimize the period of any delay.
(l) Non-Compete:
(i) In consideration of NSI's covenants hereunder and so
long as NSI is not in default hereunder, including
without limitation, in default of NSI's obligation to
pay, SigmaTron agrees (and agrees to cause any
affiliate of SigmaTron) as follows:
A. during the Term, to manufacture any device
that detects indoor levels of carbon monoxide
gas exclusively for NSI;
B. during the Term and for one year after either
expiration of this Agreement by its own terms
or early termination of this Agreement by
either party in accordance with the
provisions of Section 1(c) hereof, not to
produce, manufacture, assemble or sell its
own brand of carbon monoxide detector
("SigmaTron Detector");
C. during the Term and for two years after the
termination of this Agreement by NSI as a
direct result of an unremedied event of
default by SigmaTron hereunder, not to
produce, manufacture,
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<PAGE> 21
assemble or sell a SigmaTron Detector;
D. during the Term and for three months after
either the expiration of this Agreement by
its own terms or early termination of this
Agreement by either party in accordance with
the provisions of Section 1(c), not to
provide services as a contract manufacturer
to any other person or entity for the
production, manufacture, assembly or sale of
any product that has as its primary purpose
the detection of carbon monoxide levels
("Contract Manufacturing Services"); and
E. during the Term and for one year after the
termination of this Agreement by NSI as a
direct result of an unremedied event of
default by SigmaTron hereunder, not to
provide Contract Manufacturing Services.
Notwithstanding the foregoing, SigmaTron shall be immediately
released from its obligations under this subsection (i) if
SigmaTron terminates this Agreement as a direct result of an
unremedied event of default by NSI.
(ii) Each of SigmaTron and NSI agrees, for itself and its
affiliates, that it will not solicit any employees of
the other party or its affiliates for employment for
a period of two years following any expiration or
termination of this Agreement.
(iii) Each party agrees that the foregoing restrictions
shall apply to any activity in any part of the world.
Each party acknowledges that the manufacture and
distribution of carbon monoxide detectors is a
worldwide market and further acknowledges that the
geographic scope, functional scope and duration of
each of the foregoing restrictions are reasonable.
In light of the fact that damages for a breach of any
such restrictions might be difficult to ascertain,
each party agrees that the non-breaching party shall
be entitled to injunctive relief in the event of an
unremedied breach by the other party of any of the
foregoing restrictions, in addition to whatever
remedies at law may be available to the non-breaching
party in connection with such breach.
(m) Consequential Damages: Neither party shall be liable to the
other
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<PAGE> 22
or any third party for loss of profits, or indirect, special,
incidental, or consequential damages.
(n) Right of Set-Off: Each party is entitled to set off against
amounts it may owe to the other party amounts owed to it by
the other party in connection with this Agreement or any other
agreement between them.
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Agreement to be executed by their respective duly authorized officers, under
seal, effective as of the date first above written.
Nighthawk Systems, Incorporated SigmaTron International, Inc.
By: By:
------------------------ ------------------------
Name: Name: Gary R. Fairhead
------------------------
Title: Title: President and Chief
------------------------ Executive Officer
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<PAGE> 1
Exhibit 10.42
MASTER LEASE
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into by and
between INDUSTRIAS IRVIN DE MEXICO S.A. DE C.V., hereinafter referred to in
this Lease as "Lessor" by and through its representative Sr. MIGUEL DEL
CASTILLO, Legal Representative and STANDARD COMPONENTS DE MEXICO S.A.
hereinafter referred to in this Lease as "Lessee" by and through its
representative, DANIEL P. CAMP, Legal Representative.
WITNESSETH
In consideration of the mutual convenants and agreements set forth in this
Lease, and other good and valuable considerations, Lessor does hereby demise
and Lease to Lessee, and Lessee does hereby Lease from Lessor a total of 78,300
Sq. Ft., Commercial Space and land as described herein as the "Leased
Premises".
The premises described herein on Exhibit "A" together with any
improvements thereon and the personal property described on Exhibit "B" are
referred to in this Lease as "the Leased Premises", and the Building located
thereon is also referred to in this Lease as "the Building".
LEASE TERM
SECTION 1
1.01 The initial term of this Lease shall be for a period of five (5) years,
commencing on the fifteenth day of January, 1997. Thereafter Lessee shall have
the right to extend this Lease for Two (2) additional successive terms of three
(3) years by giving to the Lessor written notice of its intention to extend the
term at least one hundred eighty (180) days prior to the end of the particular
term. The monthly rental payment during any extensions of the initial term
shall be established according with the terms in Section 2, Subsection 2.03.
1.02 Lessee has the right to extend this Lease beyond the expiration date
provided in SECTION 1.01, upon the following terms and conditions:
<PAGE> 2
(a) Should Lessee fully and faithfully perform all of the terms and
conditions of this Lease, Lessee may extend the term of this Lease with the
extended term to begin on the day following the expiration date of the previous
term, as specified in SECTION 1.01, provided however, that if at the date of
expiration of the original term, Lessee is in default beyond any grace period
provided in this Lease, the remaining option shall be null and void. All the
terms, convenants, and provisions of the original Lease term, including rent,
shall apply to any extending Lease term.
(b) Lessee may exercise the option to extend this Lease by giving Lessor
notice of its intention to do so not later than One Hundred Eighty (180) days
prior to the expiration date of the original Lease term or extended Lease term,
as appropriate. To constitute effective notice of an intention to exercise the
option under this Lease, the notice must be in writing and must be sent by
certified or registered mail to Lessor at the address provided in SECTION 16 of
this Lease, and must be postmarked no later than One Hundred Eighty (180) days
prior to the expiration date of the original Lease term or extended Lease term,
as appropriate, for Lessee to exercise its option.
1.03 If Lessee holds over and continues in possession of the Lease Premises
after expiration of the term of this Lease, or the extension of that term,
other than as provided in SECTION 1.01, Lessee will be deemed to be occupying
the leased premises in violation of the terms of the Lease, and the Lessee will
be obligated to vacate the Leased premises without any official notice.
LEASED PREMISES AND RENTAL
SECTION 2
2.01 An initial lump sum rental shall be paid upon execution of this Lease in
the amount of $51,000.00 U.S. DOLLARS which reflects payments of the first and
last months Lease payments. The monthly rental payment for the total Leased
Premises will be $25,500.00 U.S. DOLLARS payable in advance on the fifteenth
day of each month during the term.
2.02 All payments will be made in equivalent Pesos converted at the exchange
rate as determined by the Peso sales price of Banco Nacional de Mexico S.A.,
Hidalgo and Matamoros, Ciudad Acuna, Coahuila, Mexico on the date of the
payment or any responsible financial institution as determined by Industrias
Irvin de Mexico S.A. de C.V.
2.03 The monthly rental payment for the Leased Premises during any extension of
the term hereof shall be established at the beginning of each such extension
and will be an amount equal to the monthly rental for the initial five year
term increased by one-half (1/2) the percentage change in the cost of living as
measured by the United States Producers Price Index from January 1, 1997 to
January 1 of the first year of the particular extended term, as that Index
compiled and published by the United States Department of Labor, Bureau of
Labor Statistics.
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<PAGE> 3
2.04 The Lessee agrees to pay the Lessor the amount of value added tax ("IVA")
on the rent each month. A late fee at the rate equal to .05 cents per dollar
of the amount due shall also be due for payments made more than ten (10) days
after the date such payment was due.
2.05 Rental payments shall be paid to Lessor at the offices of the INDUSTRIAS
IRVIN DE MEXICO S.A. DE C.V., with address in Carretera Presa La Amistad km.
6.0 Ciudad Acuna, Coahuila Mexico, or at such other place as Lessor may
hereinafter, in writing, designate.
2.06 As security and assurance for the payment of rent Lessee agrees to provide
to Lessor a revolving letter of credit, open during the initial term of the
Lease or any extension thereof equivalent to six months Lease payments which is
$153,000.00 U.S. DOLLARS, in favor of Lessor from a financial institution
reasonably satisfactory to Lessor.
Lessor shall be authorized to make draws against the letter of credit in
the amount of any unpaid installment of rent in the event Lessee shall have
failed to pay such installment of rent within two weeks after its due date.
USE OF THE LEASED PROPERTY
SECTION 3
3.01 Lessee or its agents will use the Leased Premises and improvements located
thereon only to operate an industrial operation and/or warehousing, including
office facilities and employees cafeteria, unless Lessor shall give Lessee
prior written consent for a different use, which shall not be unreasonably
withheld.
3.02 Lessee shall not use, or permit the use of, the Leased Premises in any
manner that would cause a cancellation of or an increase in the existing rates
for fire, liability, or other insurance policies insuring the Leased Premises,
or any improvements on the Leased Premises, or insuring the Lessor or any
liability in connection with ownership of the Leased Premises. Lessor
acknowledges that Lessee is in the business of assembly and contract
manufacturing of printed circuit boards, electronic components, and finished
electro-mechanical products and that such business use will not breach the
provision of this section.
3.03 Lessee shall not use, or permit the use of, the Leased Premises in any
manner that results in waste of the Leased Premises or constitutes a nuisance
nor shall Lessee use, or permit the use of , the Leased Premises for any
illegal purpose. Lessee, at its own expense, will comply and will cause its
officers, employees, agents, and investors to comply with all applicable laws,
ordinances, rules, and regulations of governmental agencies concerning the use
of the Leased Premises.
3
<PAGE> 4
MAINTENANCE, REPAIRS AND REPLACEMENTS
SECTION 4
THE RESPONSIBILITY FOR MAINTENANCE REPAIR AND REPLACEMENT SHALL BE
GOVERNED BY THE FOLLOWING STIPULATIONS:
4.01 Lessee shall, throughout the term of this Lease, and any extension of that
term, at its own cost and expense, maintain the Leased Premises, and all
improvements on the Leased Premises, in good order and condition except for
capital repairs and structural maintenance (as set forth in SECTION 4.05) which
will be the responsibility of Lessor. Except as otherwise provided herein,
Lessee shall further be responsible, at its own cost and expense, for
maintaining and repairing all equipment owned by Lessor and installed therein,
including but not limited to the heating and air conditioning (HVAC) systems.
Maintenance must be performed promptly when required, and in a manner that will
not depreciate the value or damage the Leased building or Premises.
4.02 Lessor represents and warrants to Lessee that all building systems,
including but not limited to the heating and air conditioning (HVAC Systems),
plumbing, electricity, water, sewage, and gas will be in good working order at
the time Lessee takes beneficial occupancy.
4.03 Lessor represents and warrants that the legal description of the Leased
Premises contained in Exhibit A attached hereto and incorporated herein by
reference, is true and accurate and will remain so. The Leased Premises
includes the building located thereon consisting of 78,300 sq. ft. and the
other items described in Exhibits "A" and "B".
4.04 Lessee will conduct an inspection of the Leased Premises at its own cost
and expense. Upon the completion of said inspection, Lessee will provide
Lessor with a report identifying any damage to the Leased Premises (the
"Inspection Report"). Lessor shall repair or cause the repair of any damages
identified in the Inspection Report as well as those items on Exhibit "C"
attached hereto at its own cost and expense. The repair of the Leased Premises
shall be completed within 60 days after Lessee takes possession of the Leased
Premises.
4.05 Lessee shall be responsible for all damages attributable to the negligence
of Lessee that require the maintenance, repairs, and the replacement of any
matter to the Leased Premises, the Leased building, including but not limited
to its structure, foundation, roof, walls contents, and equipment owned by
Lessor, plumbing, exterior and interior paint, air conditioning, heating (HVAC)
systems, and landscaping. Otherwise, Lessor shall be responsible, at its own
costs and expense, for all repairs and maintenance which are capital or
structural in nature including but not limited to the Building structure,
foundation, roof, walls, the Building plumbing, electricity, water, sewage, gas
systems and landscaping.
4
<PAGE> 5
4.06 Lessee agrees that the Leased Premises will be returned to Lessor in as
good condition as the same was received at the beginning of the Lease, normal
wear and tear excepted.
UTILITIES
SECTION 5
5.01 Lessee will contract and directly pay all public services required.
Lessor states that all necessary public services including water, electricity,
heat and telephone, are available, and hooked-up to Building with all of their
corresponding connections and/or installations having been made. Lessee will
be responsible for the final hook-up and contracting of said services.
5.02 Lessee shall pay all utility charges for water, electricity, heat, gas (if
applicable), and telephone service used in and about the Lease Premises during
the term of this Lease, or any extension thereof, all such charges to be paid
by Lessee directly to the utility company of municipality furnishing the same,
before the same shall become delinquent.
5.03 Lessee shall pay for the removal of all garbage and rubbish from the
Leased Premises during the term of the Lease.
MODIFICATIONS
SECTION 6
6.01 Lessee shall not make any alterations, additions, or improvements to the
Leased Premises without the prior written consent of Lessor which will not be
unreasonably withheld. Consent for nonstructural alterations, additions or
improvements shall not be unreasonably withheld by Lessor.
6.02 All alterations, additions or improvements to the Leased Premises
made by Lessee shall become the property of Lessor at the termination of this
Lease. Lessor may, however, require that Lessee remove any and all alterations,
additions and/or improvements installed or made by Lessee, and other property
placed on the Leased Premises by Lessee upon termination of the Lease. In the
event that Lessor requires Lessee to remove such alterations, additions, or
improvements Lessee shall repair any damage to the Leased Premises caused by
such removal.
6.03 If Lessee is not in default under both the initial five (5) five year
Lease term and if applicable any extension hereof. Lessee shall be able to
remove all machinery, equipment, or any other trade fixtures in, on or about
the Leased Premises so long as the fixtures can be removed without structural
damage to the Building. Any fixtures that have not been removed by Lessee at
the termination of this Lease shall be deemed abandoned by the Lessee and shall
automatically become the property of Lessor. In the event fixtures are
abandoned, Lessee must pay Lessor any reasonable expenses actually incurred by
Lessor to remove the fixture from the Leased Premises.
5
<PAGE> 6
TAXES
SECTION 7
7.01 The Lessor will be responsible for the payment of the real estate property
tax imposed over the Leased Premises. The Lessee agrees to reimburse fifty
percent (50%) of the cost incurred by the Lessor for the real estate taxes paid
with respect to the Leased Premises and attributable to the term thereof. The
Lessee will be responsible for the value added tax imposed over the rentals
payable pursuant to this Lease. Lessor will be responsible for payment of the
net asset tax and the income taxes imposed over the rental income derived
herefrom. Any other taxes will be paid by the party which may correspond
pursuant to the applicable legal provisions. If any such taxes for which
Lessee is liable hereunder are levied or assessed against Lessor or Lessor's
property, and if Lessor elects to pay the same, Lessee shall pay to Lessor,
upon demand, that part of such taxes for which Lessee is primarily liable under
SECTION 7.02. Lessor shall have the right to terminate this Lease agreement if
Lessee fails to reimburse those amounts in taxes Lessor paid for Lessee, except
as provided in SECTION 7.02.
7.02 The Lessee shall obey and comply with all Governmental Orders and their
requirements, rules, regulations, laws and ordinances of all legally
constituted authorities, in any way affecting this Lease, the above described
Leased Premises, the Building and improvements now or hereafter thereon or the
use of the same, existing at any time during the continuance of this Lease
(subject to the rights of the Lessee to contest the validity of any such law,
ordinance, rule, regulation or other requirement).
TOTAL OR PARTIAL DESTRUCTION OF THE LEASE PREMISE
SECTION 8
8.01 In the event less than Fifty percent (50%) of the Leased Premises are
damaged or destroyed by Act of God, fire or other casualty but to such an
extent as to render the Leased Premises substantially unusable in both the
Lessor's and Lessee's judgment, then Lessor shall cause the damage to be
repaired within a commercially reasonable amount of time from the time all of
the insurance proceeds relating to the damages to the Leased Premises are
received and rent shall abate entirely until such time as the Leased Premises
shall again be usable in Lessor's and Lessee's judgment.
8.02 Should less than Fifty percent (50%) of the Leased Premises be so damaged
or destroyed by any of the aforesaid causes as to render the same partially
unusable in both the Lessor's and Lessee's judgment, then Lessor shall cause
the damage to be repaired within a commercially reasonable amount of time from
the time all of the insurance proceeds relating to the Leased Premises are
received and the rent shall abate proportionally until such time as the Leased
Premises shall again be usable in Lessor's and Lessee's judgment. In the event
the damaged material impairs the Lessee's operations and is not repaired within
45 days, Lessee at its option may terminate the Lease by giving written notice
to Lessor.
6
<PAGE> 7
8.03 If the impediment or damage other than the mentioned in SECTION 8.04 was
or is the result of gross negligence or reckless behavior of the Lessee, its
agents, employees, representatives, or visitors, the Lessee shall continue to
pay the rent as if it were using said Building, and the Lessor will rebuild the
Leased Building within a commercially reasonable time after having received the
applicable insurance proceeds, including any deductible amount from those
proceeds provided that if such impediment or damage occurs within One Hundred
Eighty (180) days of the expiration of the initial term or extended term of
this Lease, then SECTION 8.05 will apply.
8.04 Should more than Fifty percent (50%) of the Leased Premises be so damaged
or destroyed by any of the aforesaid causes or damaged or destroyed to an
extent rendering the same substantially unusable in Lessor's and Lessee's
judgment, then this Lease shall forthwith cease and terminate, in which event,
the rent shall be paid to the day of such damage and any unearned rent paid in
advance shall be refunded to Lessee within ten (10) days of said termination.
8.05 If the Leased Premises are destroyed or damaged more than Fifty percent
(50%) within One Hundred Eighty (180) days from the expiration of the initial
Lease term or extended term, Lessor is not required to rebuild or repair the
damages unless Lessee under the term to this contract has agreed to extend the
term of the Lease as provided under this Lease Agreement through the next
option period and Lessee is not in violation of any provisions contained in
this Lease Agreement including Lessee being current with all Lease payments.
If the extended term falls under these circumstances described in this section,
the Lessor will then be allowed a commercially reasonable amount of time to
repair or rebuild, taking into consideration the receipt of insurance proceeds
to cover repairs and the rebuilding of the damaged property.
INSURANCE AND INDEMNITY
SECTION 9
9.01 Lessee shall, at its own expense, during the term of this Lease, or any
extension thereof, obtain and maintain adequate general liability insurance
with respect to the Leased Premises in an amount not less than five million
($5,000,000.00) U.S. Dollars. The combined limit which shall name the Lessor
as additional insured.
9.02 Each party shall indemnify and save harmless the other, its employees,
agents and invitees from and against all liability, demands, claims, loss,
costs, damage, death and personal injury of whatsoever nature or kind arising
out of, as a result of , or in connection with the performance of this Lease
which is occasioned by the actions or omissions of the other party, its
employees, agents or invitees to the extent the same is covered by their
respective insurance companies. Each party shall furnish the other with a
Certificate of Insurance evidencing such coverage and the amount of coverage.
7
<PAGE> 8
9.03 Lessee shall, at its own expense, during the term of this lease, or any
extension thereof, obtain and maintain insurance coverage on the contents and
personal property within the Leased Premises and for any leasehold improvements
added during any term of the Lease.
9.04 Lessor shall, at its own expense during the term of this Lease, or any
extension thereof obtain and maintain fire and extended all risk perils
insurance policy with reputable insurance companies in the amount of the
replacement cost of all buildings and improvements on the Leased Premises.
ENTRY ON LEASED PREMISES BY LESSOR
SECTION 10
10.1 Lessee's authorization shall be required for entries by Lessor into the
Leased Premises, and said authorization shall not be unreasonably withheld by
Lessee. With this authorization, or if authorization is unreasonably withheld
Lessor, its officers, agents, employees and representatives, shall have the
right to enter into and upon all parts of the Leased Premises at all reasonable
hours for purposes, including but not limited to the inspection by prospective
tenants, cleaning, maintenance, repairs, alterations, or additions to the
Leased Premises as Lessor may deem reasonably necessary, but without any
obligation to perform any of these functions, except as expressly provided in
this Lease. Lessor's right of entry shall not disturb Lessee's quiet enjoyment
of the Leased Premises so long as Lessee is not in default hereunder.
LIENS ON THE LEASED PREMISES
SECTION 11
11.01 Lessee agrees that it will not permit any mechanic's or other liens to
stand against the Leased Premises for work or materials furnished by, through,
or under Lessee, provided however, that Lessee shall have the right to contest
the validity of any lien or claim.
ASSIGNMENT AND SUBLETTING
SECTION 12
12.01 Lessor shall have the right to transfer any or all of its interests under
the terms of this Lease upon ten (10) days prior written notice to Lessee and
transfer of any prepaid rents and other amounts of Lessee to assignee.
12.02 Lessee shall not assign or sublet, this Lease without the prior written
consent of the Lessor. Lessor may not unreasonably withhold its consent.
Lessor may withhold its written consent if Lessee is in default under this
Lease agreement either during the initial Lease period, or through the option
period. Notwithstanding the foregoing, Lessee may assign or sublet the
8
<PAGE> 9
Leased Premises without consent to any corporation which is controlled by or is
under common control of Lessee, or to any corporation resulting from the merger
or consolidation with Lessee or to any entity which acquires all of the assets
of Lessee as a going concern of the business that is being conducted on the
Leased Premises, provided that the assignee assumes, in full, the obligations
of the Lessee under this Lease. Unless agreed to in writing, no such
assignment shall operate to relieve Lessee from the obligations imposed under
this Lease.
DEFAULT
SECTION 13
13.01 In the event that Lessee shall have failed to timely pay Lessor three (3)
monthly rental payments within each calendar year of this Lease beginning on
the anniversary of said Lease, and Lessee shall not have cured said delinquency
within ten (10) days of notice thereof by Lessor, Lessor may terminate this
Lease by giving Lessee at least thirty (30) days written notice of such
intention. In the event Lessee elects this option, the Lease will be
terminated on the date designated on Lessor's notice.
13.02 Unless otherwise agreed to by Lessor in writing, in the event Lessee is
in violation of any other provisions of this Lease aside from the violations
listed in 13.01, and violation remains for a period of thirty (30) days after
Lessor, by written notice, has informed Lessee of such violations, Lessor shall
have the right to terminate this Lease unless Lessee has cured its violation
within a period of thirty (30) days from the date of written notice.
13.03 Unless otherwise agreed to by Lessor in writing, in the case of a default
the cure of which has not been commenced within a period of forty five (45)
days after Lessor, by written notice, has informed Lessee of such violation,
then Lessee shall be deemed to be in default and Lessor may at its option,
terminate this Lease and/or exercise any right or remedy provided by the law or
this Lease including but not limited to immediately enter upon Leased Premises
and again have, repossess and enjoy the same as if this Lease had not been
made, and everything herein contained on the part of the Lessor to be done and
performed shall cease and terminate, without prejudice however, to the right of
Lessor to recover the total amount of the Lease payments remaining under the
Lease Agreement, and if applicable, the credit of amounts received by Lessor in
reletting the same Leased Premises. Lessor may relet the Leased Premises for
the remainder of the current term for the highest rent reasonably obtainable
and may recover from the Lessee any deficiency between the amount so obtained
and the rent herein reserved; however, the Lessor shall be obligated in such
reletting of the Leased Premises for the best rent obtainable; and the Lessor
may pursue any other rights and remedies it may have in law in equity.
13.04 A waiver by either Lessor or Lessee of a breach of this Lease by the
other party does not constitute a continuing waiver or a waiver of any
subsequent breach of this Lease.
9
<PAGE> 10
13.05 If Lessor defaults in the performance of any terms, covenant or condition
required to be performed by it under this Lease. Lessee may elect to:
(a) Terminate this Lease upon giving at least thirty (30) days written
notice to Lessor of such intention. In the event Lessee elects this option,
the Lease will be terminated on the date designated in Lessee's notice, unless
Lessor has commenced to cure the default prior to the expiration of the thirty
(30) day period and completes such cure within a commercially reasonable time
after such commencement to cure but in no event later than sixty (60) days
after Lessee's notice, or unless Lessee provides written consent to cure.
(b) Pursuit of any of the remedies provided in this Lease by either Lessor
or Lessee shall not preclude pursuit of any of the other remedies provided in
this Lease or at law or inequity. Pursuit of any remedies provided in this
Lease or by law by either party shall not constitute a forfeiture or waiver of
any of the damages accruing to either party by reason of violation of any of
the terms, provisions, and covenants contained in this Lease, nor shall pursuit
of any remedies provided in this Lease by Lessor constitute a waiver, or
forfeiture or waiver of any rent due to Lessor under this Lease.
13.06 No waiver by either party of any default or violation or breach of any of
the terms, provisions and/or covenants contained in this Lease shall be deemed
or construed to constitute a waiver of any other violation or breach of any of
the terms, provisions and covenants of the Lease. Forbearance by either party
to enforce one or more of the remedies provided in this Lease or by law upon
any event of default shall not be deemed or construed to constitute a waiver of
such default. Lessor's acceptance shall not be construed as Lessor's waiver of
the default.
SUBROGATION
SECTION 14
14.01 Lessee agrees, at the request of Lessor, to subordinate this Lease to
any Deeds of Trust or mortgages that might now or later constitute a lien upon
the Building, or on improvements in the Building, or on the Leased Premises.
Lessee agrees to execute any instruments that are required by any mortgages for
the purpose of subsecting and subordinating this Lease to the lien of any such
Deed of Trust or mortgage. With respect to any Deed of Trust or mortgage
constituting a lien on the Building, or improvements in the Building, or on the
Leased Premises, Lessor has the right to waive the applicability of this
section so that this Lease will not be subject and subordinate to any such Deed
of Trust or mortgage. Notwithstanding such subordination, Lessee's right to
quiet possession of the Leased Premises shall not be disturbed if Lessee is not
in default and so long as Lessee shall pay the rent and observe and perform all
of the provisions of this Lease, unless this Lease is otherwise terminated
pursuant to its term.
10
<PAGE> 11
PURCHASE OPTION
LEASED PREMISES
SECTION 15
15.01 Lessee shall have the right to purchase the Leased Premises at the end of
the initial five (5) year Lease period or at any time during the optional
extension periods.
15.02 The purchase price of the Leased Premises shall be the fair market value
of the Leased Premises and shall be paid in cash at closing. The fair market
value of the Leased Premises shall be determined by negotiation among the
parties, provided, however, that if the parties shall fail to reach agreement,
each party, shall appoint an independent third-party arbitrator knowledgeable
in the real estate market in the general area of the Leased Premises and the
two arbitrators so appointed shall select a third arbitrator with appropriate
qualifications to establish the fair market value of the Leased Premises. Such
determination shall be made by majority approval of the arbitrators so
selected. Each party shall bear the cost of its arbitrators and one-half of
the cost of the third arbitrator. Any such notice may be contingent upon
Lessee's satisfaction with the fair market value of the Leased Premises and in
any event, if Lessee does not agree with the fair market value established it
may refuse or fail to purchase the Leased Premises without liability on its
part.
15.03 Lessor hereby grants Lessee a right of first refusal to purchase the
Leased Premises at the same price and on the same terms as Lessor could sell
Leased Premises to a qualified bona fide third party purchaser. Such right
shall be effective at the end of the initial five (5) year term or as extended.
In the event Lessor desires to accept any offer to sell or transfer the Leased
Premises, or any part thereof, Lessor shall give Lessee a written notice of the
terms and conditions of such sale including the purchase price, the identity of
prospective purchaser and a date not sooner than ninety (90) days nor later
than one hundred eighty (180) days within which Lessee can exercise its right
of first refusal. Lessee shall give Lessor at least thirty (30) days advance
written notice of its intention to exercise right of first refusal.
11
<PAGE> 12
NOTICES
SECTION 16
16.01 All notices, demand and requests required under this Lease shall be in
writing. All such notices, demands and requests shall be deemed to have been
properly given if served personally or if sent by registered or certified mail,
return receipt requested, addressed to Lessor or Lessee as the case may be, at
its respective address last designated by notice to the other party for that
purpose. Until Lessor and Lessee designated other addresses, their addresses
shall be as follows:
Lessor: INDUSTRIAS IRVIN DE MEXICO S.A. DE C.V.
CARRETERA PRESA LA AMISTAD K.M. 6
PARQUE INDUSTRIAL
CIUDAD ACUNA, COAHUILA, MEXICO C.P. 26228
ATTENTION: SR. MIGUEL DEL CASTILLO
Lessee: STANDARD COMPONENTS DE MEXICO S.A.
C/U SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, ILLINOIS 60007
ATTENTION: DANIEL P. CAMP
APPLICABLE LAWS AND JURISDICTION
SECTION 17
17.01 This Lease shall be bound by and subject to the Laws of the State of
Coahuila, Mexico and both parties submit themselves to the jurisdiction of the
Courts where the Leased Premises are located.
SUCCESSOR AND ASSIGNS
SECTION 18
18.01 The agreements, terms, covenants and conditions herein shall bind and
insure the benefit of Lessor and Lessee and its respective heirs, personal
representatives, successors, and its permitted assigns.
12
<PAGE> 13
ENVIRONMENTAL
SECTION 19
THE LESSOR REPRESENTS, WARRANTS AND GUARANTEES THE FOLLOWING:
19.01 That the Leased Premises are in compliance with all applicable Municipal,
State and Federal Laws, Regulations and Official Mexican Norms and/or
Ecological Technical Standards concerning environmental matters;
19.02 That the Leased Premises are free of any notices of violations of
environmental provisions, notice of fines, shutdowns, whether temporary or
partial, whether imposed by Local, State or Federal Mexican Environmental
authorities.
19.03 That the Leased Premises are free of any patent or latent environmental
contamination, whether soil or water, and has not been subject to any spill,
accident of ecological nature or final disposal or recycling of any material or
waste that is deemed hazardous or dangerous by the General Law of Ecological
Equilibrium and Environmental protection, its corresponding regulations and/or
the Applicable Mexican Norms. Lessee, at their own expense, shall have 60
working days from the date of Lessee occupancy of the Leased Premises to effect
environmental site investigation work on the Leased Premises to assess the
quality of the Leased Premises environmental status.
If said investigation work were to uncover any conditions of the Leased
Premises in violation of applicable Mexican environmental laws, regulations and
official Mexican Norms and/or Ecological Technical Standards with respect to
the prevention of soil, air and water pollution, Lessor, after having been
notified of the findings of Lessee will, at Lessor's expense, take all
necessary steps under Mexican Environmental laws and any other applicable legal
provision as sanctioned by the Secretariat of Social Development SEMARNAP to
remedy such violation and restore the property and Leased Premise to its
original condition or, if that were the case, in accordance with the Social
Development Secretariat's official requests.
19.04 Lessor shall immediately request from SEMARNAP reports, files and
documents as to the environmental condition of the Leased Premises (as herein
defined) and shall deliver such reports to Lessee as received. Lessor hereby
agrees to indemnify and hold Lessee harmless from and against all liability,
claims , obligations or damage suffered by Lessee (including attorney fees)
arising out of or related to the condition of the Leased Premises prior to the
date of this Lease including any liability, claim, damage or obligation related
to environmental contamination or indemnify and hold Lessor harmless from and
against all liabilities, expenses, claims, obligations, or damage related to
the condition of the Leased Premises arising after the date hereof and which
were caused by Lessee, its agents, employees, directors or officers.
13
<PAGE> 14
19.05 Lessee's environmental responsibilities here under will continue after
the termination of this Lease unless an environmental site assessment
equivalent to terms and condition referenced in SECTION 19.03 is performed by
Lessee evidencing that the Leased Premises do not show any signs of
contaminations caused by Lessee after the date hereof, same which must be
delivered to Lessor, by Lessee, for its release.
DESCRIPTIVE HEADING
SECTION 20
20.01 The descriptive headings herein are for convenience only and shall not be
deemed to affect the meaning or construction of any provision hereof.
SECTION 21
21.01 Neither Lessor nor Lessee shall be required to perform any term,
condition or covenant in this Lease so long as such performance is delayed or
prevented by Force Majeure, which shall mean Acts of God, material or labor
restrictions by any governmental authority, civil riots, floods, and any other
cause not reasonably within the control of Lessor or Lessee and which by the
exercise of due diligence Lessor or Lessee is unable, wholly or in part, to
prevent or overcome.
BOTH PARTIES STATE:
SECTION 22
22.01 This Lease is final, and constitutes the sole and only agreement of the
parties and supersedes all prior written or oral agreements respecting the
subject matter of this Lease, and shall be binding upon, and insure to the
benefit of, the parties to the Lease, and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, when permitted
by this Lease.
22.02 This Lease shall be construed under and in accordance with the laws of
the State where the Leased Premises are located and all obligations of the
parties created by this Lease are performable in the same state.
22.03 In case any one or more of the provisions contained in this Lease shall
for any reason be held to be invalid, illegal, void, or unenforceable, such
provision shall not affect any other provision of the Lease, and this Lease
shall be construed as if such invalid, illegal or unenforceable provision had
never been included in the Lease.
22.04 No amendment, modification or alteration of the terms of this Lease shall
be binding unless the same is in writing, dated subsequent to the date of this
Lease, and duly executed by the parties to this Lease.
14
<PAGE> 15
22.05 Time is of the essence of this Lease.
Executed in multiple counterparts this 23 day of December, 1996.
LESSOR: INDUSTRIAS IRVIN DE MEXICO S.A. DE C.V.
BY:
-----------------------------
SR. MIGUEL DEL CASTILLO
LEGAL REPRESENTATIVE
LESSEE: STANDARD COMPONENTS DE MEXICO S.A.
BY:
-----------------------------
SR. DANIEL P. CAMP
LEGAL REPRESENTATIVE
15
<PAGE> 1
Exhibit 11 Statement RE: Computation of Earnings Per Share
(00's omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31 January 31 January 31
1997 1996 1997 1996
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 2,807.5 2,737.5 2,787.2 2,737.5
Net effect of dilutive stock options
- -based on the treasury stock
method using average market
price 174.7 0.6 133.0 0.3
-------- -------- -------- --------
Total 2,982.2 2,738.1 2,920.2 2,737.8
======== ======== ======== ========
Net Income $757.0 $709.4 $2,711.2 $1,744.4
======== ======== ======== ========
Per share amount $0.25 $0.26 $0.93 $0.64
Fully dilutive:
Average shares outstanding 2,807.5 2,737.5 2,787.2 2,737.5
Net effect of dilutive stock options
- -based on the treasury stock
method using quarter end market
price 219.1 - 239.4 -
-------- -------- -------- --------
Total 3,026.6 2,737.5 3,026.6 2,737.5
======== ======== ======== ========
Net income $757.0 $709.4 $2,711.2 $1,744.4
======== ======== ======== ========
Per share amount $0.25 $0.26 $0.93 $0.64
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF 1/31/97 AND THE STATEMENT OF CONSOLIDATED
EARNINGS FOR THE QUARTER ENDED 1/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
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