<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, 1998
Commission File Number 0-23248
SigmaTron International, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant, as Specified in its Charter)
Delaware 36-3918470
- --------------------------------------------------------------------------------
(State or other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification Number)
2201 Landmeier Road, Elk Grove Village, Illinois 60007
- --------------------------------------------------------------------------------
(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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
On March 4, 1998, there were 2,881,227 shares of the Registrant's Common Stock
outstanding.
<PAGE> 2
SIGMATRON INTERNATIONAL, INC.
Index
<TABLE>
<CAPTION>
Page No.
PART 1. FINANCIAL INFORMATION: --------
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets--January 31, 1998
and April 30, 1997 3
Condensed Consolidated Statements of Income--Three and
Nine Months Ended January 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--Nine Months
Ended January 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 9
PART II. OTHER INFORMATION
Item 6. Exhibits 10
</TABLE>
<PAGE> 3
SIGMATRON INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 31, April 30,
1998 1997
(UNAUDITED) (Audited)
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $222,381 $323,223
Accounts receivable, less allowance for doubtful
accounts of $15,000 at January 31,
1998 and $80,000 at April 30,1997 14,668,320 8,770,457
Inventories 17,336,791 17,665,600
Equipment lease receivables from affiliate 1,408,323 892,435
Prepaid expenses 390,268 225,780
Refundable income taxes - 98,666
Deferred income taxes 231,245 231,245
Other assets 1,015,486 512,206
----------- -----------
Total current assets 35,272,814 28,719,612
Machinery and equipment, net 11,363,573 10,343,060
Intangible assets, net of amortization of
$178,119 at April 30,1997 - 14,136
Equipment lease receivables from affiliate, less
current portion 1,549,438 1,467,336
Investment and advances with affiliate 384,813 527,238
Other assets 1,151,249 1,017,057
----------- -----------
Total assets $49,721,887 $42,088,439
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - Bank 152,779 166,668
Notes payable - Related parties - 42,596
Trade accounts payable 7,587,841 3,244,537
Trade accounts payable - Related parties 295,263 736,893
Accrued expenses 1,338,118 1,680,721
Income taxes payable 40,159 -
Capital lease obligations 1,991,712 1,199,212
----------- -----------
Total current liabilities 11,405,872 7,070,627
Notes payable - Banks, less current portion 16,017,720 14,714,943
Capital lease obligations, less current portion 3,950,498 2,469,372
Deferred income taxes 818,853 818,853
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, 2,881,227 and 2,875,227 shares issued and
outstanding at January 31, 1998 and April 30, 1997,
respectively 28,812 28,752
Capital in excess of par value 9,415,699 9,373,759
Retained earnings 8,084,433 7,612,133
----------- -----------
Total stockholders' equity 17,528,944 17,014,644
----------- -----------
Total liabilities and stockholders' equity $49,721,887 $42,088,439
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
SIGMATRON INTERNATIONAL, INC.
Condensed Consolidated Statements of Income
( Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS Three Months NINE MONTHS Nine Months
ENDED Ended ENDED Ended
JANUARY 31, 1998 January 31, 1997 JANUARY 31, 1998 January 31, 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $22,632,041 $21,910,286 $65,534,233 $70,086,628
Cost of products sold 20,740,001 19,051,065 59,387,383 59,861,218
--------------- --------------- --------------- ---------------
1,892,040 2,859,221 6,146,850 10,225,410
Selling and administrative expenses 1,367,459 1,185,831 4,139,505 4,546,409
--------------- --------------- --------------- ---------------
Operating income 524,581 1,673,390 2,007,345 5,679,001
Equity in net (income) loss of affiliate 131,004 26,841 142,426 52,805
Interest expense - banks and capital lease 514,788 483,980 1,428,191 1,399,110
obligations
Interest expense - related party 0 2,006 523 8,699
Interest income - related party (138,891) (101,167) (352,671) (300,259)
--------------- --------------- --------------- ---------------
375,897 384,819 1,076,043 1,107,550
--------------- --------------- --------------- ---------------
Income before income taxes 17,680 1,261,730 788,876 4,518,646
Income taxes 7,072 504,692 316,576 1,807,458
--------------- --------------- --------------- ---------------
Net income $10,608 $757,038 $472,300 $2,711,188
=============== =============== =============== ===============
Net income per common share - basic $0.00 $0.27 $0.16 $0.97
=============== =============== =============== ===============
Weighted average number of common
shares outstanding - basic 2,881,227 2,807,534 2,881,097 2,787,459
=============== =============== =============== ===============
Net income per common share - diluted $0.00 $0.25 $0.16 $0.93
=============== =============== =============== ===============
Weighted average number of common and common
equivalent shares outstanding - diluted 2,951,210 2,982,201 2,987,930 2,920,158
=============== =============== =============== ===============
</TABLE>
See accompanying notes.
4
<PAGE> 5
SIGMATRON INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 31,
1998 1997
OPERATING ACTIVITIES: ----------- ----------
<S> <C> <C>
Net income $472,300 $2,711,188
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 917,194 739,836
Equity in net loss of affiliate 142,426 52,805
Amortization 14,136 17,856
Compensation expense related to stock options - 75,000
Changes in operating assets and liabilities:
Provision for doubtful accounts 130,502 -
Write-off of uncollectible accounts (195,502) -
Accounts receivable (5,832,863) 975,328
Inventories 328,809 (4,971,463)
Prepaid expenses (164,456) (56,423)
Other assets (538,806) (1,029,373)
Trade accounts payable 4,343,304 2,571,698
Trade accounts payable - related parties (441,630) (365,705)
Accrued expenses (342,603) (372,423)
Income tax payable 40,159 641,803
----------- ----------
Net cash provided by (used in) operating
activities (1,127,030) 990,127
INVESTING ACTIVITIES:
Purchases of machinery and equipment (797,246) (2,397,566)
Proceeds from sale of investment in affiliate - 250
Proceeds from sale and leaseback of machinery
and equipment 1,429,899 -
Advances to affiliate - (100,000)
Proceeds from affiliate subleases 263,999 370,620
----------- ----------
Net cash provided by (used in) investing
activities 896,652 (2,126,696)
FINANCING ACTIVITIES:
Repayment of term loan and other notes payable (42,596) (119,913)
Net payments under capital lease obligations (1,158,756) (761,354)
Issuance of common stock 42,000 472,500
Net proceeds under line of credit 1,288,888 1,545,336
----------- ----------
Net cash provided by financing activities 129,536 1,136,569
Change in cash (100,842) 0
Cash at beginning of period 323,223 2,500
----------- ----------
Cash at end of period $222,381 $2,500
=========== ==========
Supplementary disclosure of cash flow information:
Acquisition of machinery and equipment 2,637,040 348,713
=========== ==========
</TABLE>
See accompanying notes.
5
<PAGE> 6
SIGMATRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
January 31, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed 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, 1998 are not necessarily indicative of the results
that may be expected for the year ending April 30, 1998. 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,
1997.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
January 31, April 30,
1998 1997
------------ ------------
<S> <C> <C>
Finished products $ 1,560,551 $ 2,966,415
Work-in-process 2,157,869 1,079,985
Raw materials 13,618,371 13,619,200
----------- -----------
$17,336,791 $17,665,600
=========== ===========
</TABLE>
NOTE C -- GUARANTY AND SURETY AGREEMENT
On January 31, 1998 the Company entered into a Guaranty and Surety Agreement
with Marine Midland Business Loans, Inc. ("MMBLI") to guaranty a portion of its
affiliate's debt. The Company owns approximately 42.5% of SMT Unlimited L.P.
("SMTU"), which provides service mount and ball grid array assembly services in
the electronic manufacturing services industry. The Company has agreed to
guaranty up to $500,000 of SMTU's debt with MMBLI. The Company has been
indemnified by one of the other SMTU limited partners in the amount of
$250,000. The Company will be released from the guaranty provided SMTU attains
specified financial covenants at April 30, 1998.
6
<PAGE> 7
NOTE D -- ADOPTION OF ACCOUNTING PRINCIPLE
During the quarter ended January 31, 1998, the Company adopted FASB Statement
128 "Earnings Per Share" which was issued in 1997. FASB 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the FASB 128 requirements.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, 1998 January 31, 1997 January 31, 1998 January 31, 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 10,608 $ 757,038 $ 472,300 $2,711,188
========= ========= ========== ==========
Denominator:
Denominator for
basic earnings per
share-
weight average
shares outstanding 2,881,227 2,807,534 2,881,097 2,787,459
Dilutive potential
common shares 69,983 174,667 106,833 132,699
Denominator for
diluted earnings
per share-
adjusted weighted
average
shares and
assumed conversions 2,951,210 2,982,201 2,987,930 2,920,158
========= ========= ========== ==========
Basic earnings per
share $ 0.0 $ 0.27 $ 0.16 $ 0.97
========= ========= ========== ==========
Diluted earnings
per share $ 0.0 $ 0.25 $ 0.16 $ 0.93
========= ========= ========== ==========
</TABLE>
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 periodic reports
filed with the Securities and Exchange Commission including, but not limited
to, its Annual Report on Form 10-K for the fiscal year ended April 30, 1997.
RESULTS OF OPERATIONS:
Net sales increased from $21,910,286 for the three month period ended January
31, 1997 to $22,632,041 for the three month period ended January 31, 1998. For
the first nine months of fiscal 1998 net sales decreased to $65,534,233 from
$70,086,628 for the comparable period of the prior year. The decrease in sales
for the nine months ended January 31, 1998 was due to softer demand from some
of the Company's key customers. Historically the Company 's highest level of
revenues are achieved in its second and third quarters due to seasonal trends.
Timing and rescheduling of orders has caused the Company to experience
significant quarterly fluctuations in its revenues and earnings. However,
based on the current customer schedules the fourth quarter of 1998 is expected
to be soft.
Gross profit decreased during the three month period ended January 31, 1998 to
$1,892,040 from $2,859,221 for the same period of the prior fiscal year. For
the nine months ended January 31, 1998 gross profit decreased to $6,146,850 as
compared to $10,225,410 for the same period in 1997. The decrease in gross
profit for the nine months ended January 31, 1998 is due to lower sales volume,
product mix and an increase in manufacturing overhead cost. In fiscal 1998 the
Company increased its capacity and surface mount technology capabilities in the
U.S. and Mexico. The expansion has caused the Company to continue to incur
higher expenses.
Selling and administrative expenses increased from $1,185,831 or 5.4% of net
sales for the three month period ended January 31, 1997 to $1,367,459 or 6.0%
of net sales in fiscal 1998. Selling and administrative expenses for the nine
month period ended January 31, 1998 decreased as a percent of net sales to 6.3%
from 6.5% as compared to the same period in the prior year. The decrease is
due to a reduction in bonus accruals and a decrease in commission expense
related to the lower revenue volume.
Interest expense for bank debt and capital lease obligations for the three
month period ended January 31, 1998 was $514,788 compared to $483,980 for the
same period in the prior year. For the nine months ended January 31, 1998
interest expense increased to $1,428,191 from $1,399,110 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.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -con't
As a result of the foregoing, net income decreased from $757,038 for the three
month period ended January 31, 1997 to $10,608. Diluted net earnings per share
for the third fiscal quarter ended January, 1998 were $.00 compared to $.25 for
the same period in the prior year. For the first nine months of fiscal 1998,
net income decreased to $472,300 compared to $2,711,188 for the same period in
the prior year. Diluted net earnings per share were $.16 for the nine months
ended January 31, 1998 compared to $.93 for the comparable period in fiscal
1997.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary source of liquidity has been borrowings from its secured
lender and cash provided by net income. The Company had working capital of
$23,866,942 at January 31, 1998 and $21,247,057 at January 31, 1997. This
represents a current ratio of 3.09 and 2.75 for these periods, respectively.
For the nine month period ended January 31, 1998, the primary use of cash from
operations was an increase in accounts receivable. The net cash provided by
investing activities for the same period was $896,652, which was primarily
attributable to proceeds received under a machinery and equipment leaseback
agreement.
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 reduced. The funds, for Mexican operations which
ordinarily derive from the Company's cash from operations and borrowings under
its revolving credit facility, equal approximately $1,978,000 for the three
month period ended January 31, 1998 and $6,365,500 for the nine month period
ended January 31, 1998.
Net cash provided by financing activities totaled $129,536 for the nine months
ended January 31, 1998 compared to $1,136,569 for the same period in the prior
year. The decrease was caused primarily by increased payments under capital
lease obligations.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks -
Not applicable
9
<PAGE> 10
SIGMATRON INTERNATIONAL, INC.
PART II - OTHER INFORMATION
January 31, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.38 Lease Agreement between the Company and International
Financial Services lease number 97-185 dated December 22, 1997.
Exhibit 10.39 Lease Agreement between the Company and General
Electric Capital Corporation lease number E002 dated
December 31, 1997.
Exhibit 10.40 Guaranty and Surety Agreement between SigmaTron
International, Inc. and Midland Business Loans Inc. dated January 31,
1998.
Exhibit 27 - Financial Data Schedule (EDGAR version only)
(b) No report on Form 8-K was filed during the quarter ended
January 31, 1998.
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 3/4/98
- -------------------------------------------- -------------------
Gary R. Fairhead Date
President and CEO (Principal Executive Officer)
/s/ Linda K. Blake 3/4/98
- -------------------------------------------- -------------------
Linda K. Blake Date
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE> 1
EXHIBIT 10.38
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: #97-185
ADDRESS: 2201 LANDMEIER ROAD CONTACT: MS. LINDA BLAKE, PHONE #:
ELK GROVE VILLAGE, IL 60007 847-956-8000
EQUIPMENT LOCATION IF OTHER THAN
ADDRESS OF LESSEE:
TYPE OF COMPANY: CORPORATION
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $13,248.00 per period for the first 60
PERIODS ARE: MONTHLY periods
TOTAL # OF LEASE PAYMENTS: 60 ADVANCE RENTALS, $26,496.00 payable at
EFFECTIVE DATE: SEE PARAGRAPH 25 the signing of this lease to be applied
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___
ACCEPTED 19 LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
------------ --- -----------------------------
INTERNATIONAL FINANCIAL SERVICES SIGNED BY: /s/ Linda K. Blake
CORP., Lessor ----------------------
BY TITLE: CFO
---------------------------- ------------------------------------
TITLE (INDICATE CORPORATE OFFICE, GENERAL
------------------------- PARTNER, OWNER, ETC)
LESSEE'S ORIGINAL SIGNATURE IN DATE: 11/4/97
INK IS REQUIRED ON LEASE PAGES ------------------------------------
1,2,3,4,5 - MUST BE ORIGINAL LEASE ORIGINAL - 1
SIGNATURES
<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 #97-185 LESSEE'S INITIALS LKB
CONTINUED -------
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 $13,248.00 will be adjusted in proportion to any increase or decrease
in five year treasury rates from October 9, 1997 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 #97-185 LESSEE'S INITIALS LKB
-------
LEASE ORIGINAL - 1
<PAGE> 4
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: #97-185
CONTACT: MS. LINDA BLAKE
ADDRESS: 2201 LANDMEIER ROAD PHONE #: 847-956-8000
ELK GROVE VILLAGE, IL
TYPE OF COMPANY: CORPORATION
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
TERM: 60 $13,248.00 per period for the first 60
PERIODS ARE: MONTHLY periods
TOTAL # OF LEASE PAYMENTS: 60 ADVANCE RENTALS, $26,496.00 payable at
EFFECTIVE DATE: SEE PARAGRAPH 25 the signing of this lease to be applied
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 LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
by lessee and returned to us before your ----------------------------------
invoice can be paid. SIGNED BY: /s/ Linda K. Blake
----------------------------------
TITLE: CFO
-----------------------------------------
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: 11/4/97
-----------------------------------------
</TABLE>
ACCEPTANCE NOTICE - 3
<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: #97-185
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:
</TABLE>
<TABLE>
<CAPTION>
TYPE OF COMPANY: CORPORATION
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
<S> <C>
TERM: 60 $13,248.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $26,496.00 payable at the signing of this lease to
TOTAL # OF LEASE PAYMENTS: 60 be applied to 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,
LEASE DATED DAY OF , 199
--- ------ --
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
--------------------------------
SIGNED BY: /s/ Linda K. Blake
--------------------------------
TITLE: CFO
--------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK (INDICATE CORPORATE OFFICE,
IS REQUIRED ON LEASE PAGES 1, 2, 3, GENERAL PARTNER, OWNER, ETC)
4,5 - MUST BE ORIGINAL SIGNATURES
DATE: 11/4/97
--------------------------------
EQUIPMENT DISCLAIMER AND AGREEMENT - 4
<PAGE> 6
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: #97-185
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 47650
</TABLE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASED AS LISTED ON THE ATTACHED SCHEDULE "A"
<TABLE>
<S> <C>
TERM: 60 $13,248.00 per period for the first 60 periods
PERIODS ARE: MONTHLY ADVANCE RENTALS, $26,496.00 payable at the signing of this lease to
TOTAL # OF LEASE PAYMENTS: 60 be applied to 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,
LEASE DATED DAY OF , 199
---- ------------- --------
LESSEE NAME: SIGMATRON INTERNATIONAL, INC.
-----------------------------------
SIGNED BY: /s/ Linda K. Blake
-----------------------------------
TITLE: CFO
-----------------------------------
LESSEE'S ORIGINAL SIGNATURE IN INK (INDICATE CORPORATE OFFICE, GENERAL
IS REQUIRED ON LEASE PAGES 1, 2, 3, PARTNER, OWNER, ETC)
4,5 - MUST BE ORIGINAL SIGNATURES
DATE: 11/4/97
-----------------------------------
LESSEE'S ACKNOWLEDGMENT - 5
<PAGE> 7
INTERNATIONAL FINANCIAL SERVICES CORPORATION
1113 S. MILWAUKEE AVENUE, LIBERTYVILLE, IL 60048
REVISED
SCHEDULE "A" TO LEASE #97-185
-----------------------------
AND/OR SECURITY AGREEMENT-MORTGAGE ON GOODS & CHATTELS
AND UNIFORM COMMERCIAL CODE #1 & #3 FILING FORM
DATED 11/4/97
----------------
LESSEE: Sigmatron International, Inc.
LESSOR: INTERNATIONAL FINANCIAL SERVICES CORPORATION
EQUIPMENT AS DESCRIBED BELOW:
One (1) New Fuji Model CP4-1 Chip Shooter; 1 Fuji Model MCS30 System
Controller;
1 Lot of 100 Feeders for Fuji Model CP4-1:
* Qty 70 8mm Feeders
* Qty 15 12mm Feeders
* Qty 10 16mm Feeders
* Qty 5 32mm Feeders
* Including all accessories and attachments thereto.
Including all accessories and attachments thereto
and all proceeds thereof.
INTERNATIONAL FINANCIAL SIGMATRON INTERNATIONAL, INC.
SERVICES CORPORATION
By: By: /s/ Linda K. Blake
-------------------- ----------------------------------------
Title: Title: CFO
----------------- -------------------------------------
<PAGE> 1
Exhibit 10.39
2803 Quasi FXD E.S.
EQUIPMENT SCHEDULE
------------------
(Quasi Lease - Fixed Rate)
SCHEDULE NO. E002
LESSOR & MAILING ADDRESS: LESSEE & MAILING ADDRESS:
GENERAL ELECTRIC CAPITAL CORPORATION SIGMATRON INTERNATIONAL, INC.
4 NORTH PARK DRIVE SUITE 500 2201 LANDMEIER RD.
HUNT VALLEY, MD 21030 ELK GROVE VILLAGE, IL 60007
Capitalized terms not defined herein shall have the meanings assigned to them
in the Master Lease Agreement identified above ("AGREEMENT"; said Agreement and
this Schedule being collectively referred to as "LEASE").
A. EQUIPMENT
Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to
Lessee the Equipment listed on Annex A attached hereto and made a part
hereof.
B. FINANCIAL TERMS
1. Advance Rent (if any) $11,796.95.
2. Capitalized Lessor's Cost: $471,651,78.
3. Basic Term Lease Rate Factor: 2,501200.
4. Daily Lease Rate Factor: .0833733.
5. Basic Term (No. of Months): 48.
6. Basic Term Commencement Date:
7. Equipment Location: STANDARD COMPONENTS DE MEXICO, S.A., ACUNA,
MEXICO.
8. Lessee Federal Tax ID No: 363918470.
9. Supplier: VARIOUS.
10. Last Delivery Date: APRIL 1, 1997
11. First Termination or Purchase Date: THIRTY-SIX (36) MONTHS AFTER THE
BASIC TERM COMMENCEMENT DATE.
12. Interest Rate: 9.69% per annum.
13. Lessee agrees and acknowledges that the Capitalized Lessor's Cost of
the Equipment as stated on the Schedule is equal to the fair market
value of the equipment on the date hereof.
14. Option Payment: $1.00
C. TERM AND RENT
1. Interim Rent. For the period from and including the Lease
Commencement Date to the Basic Term Commencement Date ("Interim Period"),
Lessee shall pay as rent ("INTERIM RENT") lessee shall pay as rent
("INTERIM RENT") for each unit of equipment, the product of the Daily
Lease Rate Factor times the Capitalized Lessor's Cost of such unit times
the number of days in the Interim Period.
2. Basic Term Rent. Commencing on the same day of each month thereafter
(each, a "RENT PAYMENT DATE") during the Basic Term, Lessee shall pay as
rent ("BASIC TERM RENT") the product of the Basic Term Lease Rate Factor
times the Capitalized Lessor's Cost of all Equipment on this Schedule.
3. Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no
more than 10% to account for equipment change orders, equipment returns,
invoicing errors, and similar matters. Lessee acknowledges and agrees
that the Rent shall be adjusted as a result of such change in the
Capitalized Lessor's Cost (pursuant to paragraphs 1 and 2 above). Lessor
shall send Lessee a written notice stating the final Capitalized Lessor's
Cost, if different from that disclosed on this Schedule.
<PAGE> 2
ADDENDUM NO. 001
TO SCHEDULE NO. EE02
TO MASTER LEASE AGREEMENT
THIS ADDENDUM ("Addendum") amends and supplements the above referenced
Schedule ("SCHEDULE") between GENERAL ELECTRIC CAPITAL CORPORATION ("LESSOR"),
and SIGMATRON INTERNATIONAL, INC. ("LESSOR"), and is hereby incorporated into
the Schedule as though fully set forth therein. Capitalized terms not
otherwise defined herein shall have the meaning set forth in the Lease .
1. Lessee hereby irrevocably agrees to purchase the equipment upon the
expiration of the Basic Term. Lessee shall pay the Lessor the purchase price
$1.00 in cash for the Equipment, on or at lease expiration.
2. The Equipment shall be sold to Lessee and possession made available to
Lessee "As-is and "Where-is"; Lessor will not make any representation or
warranty, express or implied, including, but not limited to any warranty as to
fitness for any particular or other purpose, merchantability, or patent
infringement, except that Lessor shall have the right to sell the Equipment and
shall transfer to Lessee good title free and clear of any superior lien or
encumbrance created by Lessor. Lessee is liable for any taxes payable as a
result of this sale.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease of the Equipment until executed on behalf
of Lessor and Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the Late first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation SigmaTron International, Inc.
By:
--------------------------------------- -------------------------------
Name:
------------------------------------- -------------------------------
Title:
------------------------------------ -------------------------------
Attest:
By:
-----------------------
<PAGE> 3
ANNEX B
TO
SCHEDULE NO. E002
TO MASTER LEASE AGREEMENT
BILL OF SALE
SIGMATRON INTERNATIONAL INC. (the "Seller"), in consideration of the sum of
FOUR HUNDRED SEVENTY ONE THOUSAND SIX HUNDRED FIFTY ONE AND 78/100 DOLLARS
($471,651.78) Plus sales taxes in the amount of ZERO DOLLARS (0.00) if
exemption from sales tax is claimed, an exemption certificate must be furnished
to Buyer herewith), paid by GENERAL ELECTRIC CAPITAL CORPORATION (the "BUYER"),
receipt of which is acknowledged, hereby grants, sells, assigns, transfers and
delivers to Buyer the equipment (the "EQUIPMENT") described in the above
schedule (said schedule and related lease being collectively referred to as
"LEASE"), along with whatever claims and rights Seller may have against the
manufacturer and/or supplier of the Equipment (the "SUPPLIER"), including but
not limited to all warranties and representations. At Buyer's request, Seller
will cause Supplier to execute the attached Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller pursuant to the
Lease. Seller represents and warrants to Buyer that (1) Buyer will acquire by
the terms of this Bill of Sale good title to the Equipment free form all liens
and encumbrances whatsoever; (2) Seller has the right to sell the Equipment;
and (3) the Equipment has been delivered to Seller in good order and condition,
and conforms to the specifications, requirements and standards applicable
thereto; and (4) the equipment has been accurately labeled, consistent with the
requirements of 40 CFR part 82 Subpart E, with respect to products manufactured
with a controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against any and all
federal, state, municipal and local license fees and taxes of any kind or
nature, including, without limiting the generality of the foregoing, any and
all excise, personal property, use and sales taxes, and from and against any
and all liabilities, obligations, losses, damages, penalties, claims, actions
and suits resulting therefrom and imposed upon, incurred by or asserted against
Buyer as a consequence of the sale of the Equipment to Buyer.
SELLER:
SIGMATRON INTERNATIONAL, INC.
By:
----------------------------
Title:
-------------------------
<PAGE> 4
ANNEX C
TO
SCHEDULE NO. E002
TO MASTER LEASE AGREEMENT
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("LESSOR")
Pursuant to the provisions of the above schedule and lease (collectively,
the "LEASE"), Lessee hereby certifies and warrants that (a) all Equipment
listed in the related invoices is in good condition and appearance, installed
(if applicable), and in working order; and (b) Lessee accepts the Equipment for
all purposes of the Lease and all attendant documents.
Lessee does further certify that as of the date hereof (I) Lessee is not
in default under the Lease; and (ii) the representations and warranties made by
Lessee pursuant to or under the Lease are true and correct on the date hereof.
By:
--------------------------------------
Title:
------------------------------------
Dated:
------------------------------------
<PAGE> 5
PAYMENT AUTHORIZATION
General Electric Capital Corporation
4 North Park Drive Suite 500
Hunt Valley, MD 21030
You are hereby authorized to pay the proceeds from our sale to you of
certain Equipment as evidenced on the attached Bill of Sale to the following
parties in the amount(s) designated below.
SigmaTron International Inc.
2201 Landmeier Road
Elk Grove, IL 60007 $471,651.78
Reimbursement of funds previously paid described on Annex A attached
hereto and made a part hereof
Very truly yours,
SigmaTron International, Inc.
By:
--------------------------------------
Title:
------------------------------------
Dated:
------------------------------------
<PAGE> 1
Exhibit 10.40
GUARANTY AND SURETY AGREEMENT
by
SIGMATRON INTERNATIONAL, INC., (the "Guarantor")
Chief Executive Office and Mailing Address:
2201 Landmeier Road
Elk Grove Village, Illinois 60007
in favor of
HSBC BUSINESS LOANS, INC. (the "Secured Party")
Mailing Address:
190 South LaSalle Street, Suite 1100
Chicago, Illinois 60603
Dated as of January 30, 1998
<PAGE> 2
GUARANTY AND SURETY AGREEMENT
This GUARANTY AND SURETY AGREEMENT (the "Guaranty") is made as of
January 30, 1998, by the Guarantor in favor of the Secured Party.
BACKGROUND
A. SMT Unlimited L.P. (the "Debtor") and the Secured Party, as the
assignee of Marine Midland Bank and Marine Midland Business Loans, Inc., are
currently parties to a Loan and Security Agreement, dated as of June 19, 1995
(such agreement, together with any amendments or modifications to it from time
to time, shall be referred to herein as the "Loan Agreement").
B. Pursuant to an amendment to the Loan Agreement being entered into
substantially concurrently herewith, the Secured Party has agreed to continue
to extend credit to the Debtor, waive certain covenant defaults, and revise
certain financial covenants conditioned upon the Guarantor's agreement to
execute and deliver this Guaranty to the Secured Party.
C. The Guarantor has independently determined that execution, delivery,
and performance of this Guaranty will directly benefit it and are within the
corporate purposes and best interests of the Guarantor.
NOW, THEREFORE, in consideration of these background recitals, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the
Guarantor and the Secured Party agree as follows:
SECTION 1. REFERENCE TO LOAN AGREEMENT.
(A) Reference is hereby made to the Loan Agreement for a statement of the
terms and conditions thereof.
(B) All capitalized terms utilized in this Guaranty which are defined in
the Loan Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Loan Agreement.
SECTION 2. GUARANTY OF PAYMENT AND PERFORMANCE; INDEMNIFICATION.
(A) The Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees and becomes surety for the full and prompt payment to the Secured
Party when due, whether by acceleration or otherwise, of any and all
indebtedness of the Debtor to the Secured Party, including, without
limitation, all extensions, renewals, and replacements of such indebtedness:
<PAGE> 3
(i) whether such indebtedness is for principal, interest, fees, costs,
expenses, or otherwise;
(ii) whether such indebtedness exists now or is hereafter incurred;
(iii) whether such indebtedness arises from the Loan Agreement, the
Transaction Documents, or otherwise;
(iv) whether such indebtedness is direct, indirect, related, unrelated,
similar, dissimilar, primary, absolute, secondary, contingent, secured,
unsecured, matured, or unmatured;
(v) whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred;
(vi) whether such indebtedness is contracted for with the Secured Party
or with another party or parties and acquired by the Secured Party;
(vii) whether such indebtedness is contracted for by the Debtor alone
or jointly or severally with another or others; and
(viii) whether such indebtedness is incurred by the Debtor prior to,
during, or after any filing by the Debtor or against the Debtor of any
petition or request for liquidation, reorganization, arrangement,
adjudication as a bankrupt, relief as a debtor, or other relief under
bankruptcy, insolvency, or similar laws now or hereafter in effect in the
United States of America or any state or territory thereof or any foreign
jurisdiction, and notwithstanding the Debtor's legal status as a debtor or
a debtor-in-possession or the Debtor's discharge in any such proceeding.
(B) The Guarantor hereby irrevocably, absolutely and unconditionally
guarantees and becomes surety for the due, full, prompt, and unconditional
performance of all present and future obligations and agreements of every kind
of the Debtor to or with the Secured Party. The indebtedness, obligations, and
agreements enumerated in Sections 2(A) and 2(B) of this Guaranty shall be
collectively referred to herein as the "Obligations".
(C) The Guarantor hereby acknowledges and agrees that:
(i) although applicable bankruptcy or insolvency laws may relieve all
or part of the Debtor's obligations for interest, default interest, fees,
costs, or expenses under the Transaction Documents or otherwise, the
Guarantor shall continue to be liable for such obligations as if
bankruptcy or insolvency of the Debtor had not occurred;
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<PAGE> 4
(ii) the Obligations of the Guarantor under this Guaranty may exceed
allowable obligations of the Debtor to the Secured Party under such
bankruptcy and insolvency laws; and
(iii) to this extent, the Guarantor's liability to the Secured Party
hereunder may not be co-extensive with the Debtor's liability to the
Secured Party under the Transaction Documents or otherwise.
SECTION 3. NATURE OF GUARANTY; TERMINATION.
(A) This Guaranty is a continuing guaranty of the Obligations
(irrespective of the aggregate amount thereof and whether or not the
Obligations from time to time exceed the amount of this Guaranty if this
Guaranty is limited pursuant to Section 10 hereof), independent of and in
addition to any other guaranty, endorsement, surety agreement, collateral, or
other agreement held by the Secured Party for the Obligations or any part
thereof, whether executed or granted by the Guarantor or otherwise. The
liability of the Guarantor hereunder shall be absolute and unconditional
irrespective of, and the Guarantor waives any defense which may otherwise act
as a result of, any of the following:
(i) any lack of validity or enforceability of any Transaction Document
or any other document, agreement, or writing creating or evidencing any of
the Obligations, including, without limitation, the lack of validity or
enforceability of all or any portion of any liens or security interests
securing all or any part of the Obligations;
(ii) any non-perfection of any lien on or security interest in the
Collateral or any collateral securing all or any part of the Obligations
or this Guaranty or any failure by the Secured Party to protect, preserve,
or insure the Collateral or any collateral securing all or any part of the
Obligations or this Guaranty; or
(iii) any event or circumstance which might operate under applicable
law to discharge the liability of the Guarantor hereunder or might
otherwise constitute or give rise to a defense available to the Debtor,
the Guarantor, or any other guarantor of any of the Obligations.
(B) This Guaranty is a guaranty of payment, not of collection.
(C) This Guaranty shall remain in full force and effect until all of the
Obligations and other fees, costs, and expenses payable by the Guarantor
pursuant to Section 4 hereof have been paid or performed in full and the
Secured Party has no further obligation or commitment to the Debtor to advance
funds under the Loan Agreement or otherwise. This Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any
payment of any of the Obligations is rescinded, voided, or rendered void or
voidable as a preferential transfer, impermissible set-off, or fraudulent
conveyance or must
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<PAGE> 5
otherwise be returned or disgorged by the Secured Party, as if such rescinded,
avoided, voided, or voidable payment had not been made.
SECTION 4. COSTS AND EXPENSES.
(A) The Guarantor agrees to pay on demand all fees, costs, and expenses
of every kind incurred by the Secured Party for any purpose arising from,
relating to, or in connection with the Obligations, the Debtor, or this
Guaranty, including, without limitation, fees, costs, and expenses incurred by
the Secured Party in enforcing this Guaranty, in collecting any Obligations
from the Debtor or the Guarantor, or in realizing upon or protecting the
Collateral or any collateral securing all or any part of the Obligations or
this Guaranty.
(B) The Guarantor specifically acknowledges and agrees that the fees,
costs, and expenses described in the preceding subsection include, without
limitation, actual attorneys' fees and expenses incurred by the Secured Party
in retaining counsel for any purpose arising from, relating to, or in
connection with the Obligations, the Debtor, or this Guaranty, including,
without limitation, attorneys' fees and expenses incurred by the Secured Party
in retaining counsel for advice, suit, or appeal, or for any bankruptcy,
insolvency, or similar proceeding under the Federal Bankruptcy Code or
otherwise.
SECTION 5. WAIVERS OF THE GUARANTOR.
(A) The Guarantor hereby agrees that the Guarantor shall not have, and
hereby expressly waives forever:
(i) any right to require promptness and diligence on the part of the
Secured Party;
(ii) any right to receive notices, including, without limitation,
notice of the acceptance of this Guaranty or of the incurrence of any
Obligation by the Debtor, notice of any action taken by the Secured Party
or the Debtor pursuant to any document, agreement, or writing relating to
the Obligations, notice of any Event of Default, notice of Secured Party's
intent to accelerate the Indebtedness or any part thereof, notice of such
acceleration, or notice of the intended disposition of the Collateral or
any collateral securing all or any part of the Obligations or this
Guaranty;
(iii) any right to contest any of the procedures or actions taken by
the Secured Party with respect to the Collateral or any collateral
securing all or any part of the Obligations or this Guaranty, pursuant to
Section 9-504(3) of the Uniform Commercial Code or otherwise; and
(iv) any right to require the Secured Party to advise the Guarantor of
any information known to the Secured Party regarding the financial or
other
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<PAGE> 6
condition of the Debtor, the Guarantor acknowledging that the Guarantor
is responsible for being and keeping informed regarding such condition.
(B) The Guarantor hereby agrees that the Guarantor shall not have, and
hereby expressly waives, until after all of the Obligations and any other
obligations of the Guarantor under Section 4 hereof have been irrevocably
satisfied, any right to subrogation, indemnification, or contribution and any
other right to payment from or reimbursement by the Debtor, in connection with
or as a consequence of any payment made by the Guarantor hereunder, any right
to enforce any right or remedy which the Secured Party has or may hereafter
have against the Debtor and any benefit of, and any right to participate in,
the Collateral or any collateral securing all or any part of the Obligations
or any payment made to the Secured Party or collection by the Secured Party
from the Debtor. If the Guarantor shall receive any amount or payment arising
from, relating to, or in connection with such subrogation, indemnification, or
contribution rights at any time when any of the Obligations or any other
obligations of the Guarantor hereunder remain unpaid, all such amounts or
payments shall be held in trust for the benefit of the Secured Party, shall be
segregated from any other funds of the Guarantor, and shall immediately be
delivered to the Secured Party to be applied by the Secured Party against the
Obligations or such other obligations, in the sole discretion of the Secured
Party.
SECTION 6. PAYMENT OF THE OBLIGATIONS.
If any Obligation is not paid punctually when due, subject to any
applicable grace period, including, without limitation, any Obligation due by
acceleration of the maturity thereof, the Guarantor shall immediately pay such
Obligation or cause such Obligation to be paid in full:
(A) without deduction for any set-off, recoupment, defense, or
counterclaim;
(B) without requiring and notwithstanding the lack of protest or
notice of nonpayment or default to the Guarantor, the Debtor, or any other
person;
(C) without demand for payment or proof of such demand; and
(D) without requiring and without any obligation on the part of the
Secured Party to resort first to the Debtor, to the Collateral, or to any
collateral securing all or any part of the Obligations or this Guaranty,
or to any other guaranty or endorsement which the Secured Party may hold
as security for payment of the Obligations.
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<PAGE> 7
SECTION 7. RIGHTS AND REMEDIES OF THE SECURED PARTY.
(A) The Guarantor acknowledges and agrees that the Secured Party may,
without the consent of, notice or demand to, or reservation of rights against
the Guarantor, and without affecting the Guarantor's obligations hereunder,
from time to time:
(i) renew, extend, increase, accelerate, or otherwise change the time
for payment of, the terms of, or the rate of interest applicable to the
Obligations or any part thereof;
(ii) accept and hold collateral securing payment of the Obligations, or
any part thereof, and exchange, enforce, or release the Collateral, such
collateral, or any part thereof;
(iii) accept and hold any endorsement or guaranty of payment of the
Obligations or any part thereof, and partially or fully discharge,
release, or substitute the obligations of any such endorser or guarantor,
or any person or entity who has pledged any collateral as security for
payment of the Obligations, or waive any rights or remedies with respect
to any thereof;
(iv) partially or fully discharge or release, or waive any rights or
remedies with respect to, the Debtor;
(v) dispose of the Collateral or any collateral securing all or any
part of the Obligations or this Guaranty in any manner or order as the
Secured Party, in its sole discretion, deems appropriate; and
(vi) determine the manner, amount, and time of application of payments
and credits to be made on all or any part of the Obligations (whether for
principal, interest, fees, costs, expenses, or otherwise), and, if this
Guaranty is limited in amount pursuant to Section 10 hereof, apply such
payments and credits first to reduce Obligations exceeding the amount of
this Guaranty.
(B) Upon the occurrence of any Event of Default, the Secured Party may,
at any time and from time to time without prior notice to the Guarantor,
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held and other indebtedness owing by the Secured Party to
or for the credit of the Guarantor against the Obligations, irrespective of
whether the Secured Party shall have made any demand under this Guaranty. The
Secured Party agrees to notify the Guarantor after any such set-off and
application, provided that failure to give such notice to the Guarantor shall
not affect the validity of such set-off and application.
-6-
<PAGE> 8
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor hereby represents and warrants as follows:
(A) The Guarantor is duly organized and existing in good standing under
the laws of the state of its incorporation and is duly licensed or qualified to
do business and is in good standing in every state in which the nature of its
business or ownership of its property requires such licensing or qualification.
(B) The execution, delivery, and performance of this Guaranty is within
the Guarantor's corporate powers, have been duly authorized by all necessary
and appropriate corporate and shareholder action, and are not in contravention
of any law or the terms of the Guarantor's articles or certificate of
incorporation or by-laws or any amendment thereto, or of any indenture,
agreement, undertaking, or other document to which the Guarantor is a party or
by which the Guarantor or any of the Guarantor's property is bound or
affected.
(C) No consent, license, approval, or authorization of, or registration,
declaration, or filing with, any court, governmental body, authority, or other
person or entity is required in connection with the valid execution, delivery,
or performance of this Guaranty other than filings and recordings in
connection with this Guaranty.
(D) This Guaranty constitutes the legal, valid, and binding obligation of
the Guarantor, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy or insolvency laws and
laws affecting creditors' rights generally.
(E) Except as disclosed in writing by the Guarantor to the Secured Party,
there are no actions, suits, proceedings, or investigations pending or, to the
knowledge of the Guarantor, threatened against the Guarantor or any basis
therefor which, if adversely determined, would, in any case or in the
aggregate, materially adversely affect the property, assets, or financial
condition of the Guarantor.
(F) The Guarantor is and during the term of this Guaranty will be at all
times Solvent (as hereinafter defined), both before and after giving effect to
the transactions contemplated by this Guaranty. "Solvent" means, with respect
to the Guarantor on a particular determination date, that on such date:
(i) the fair value of the property of the Guarantor is greater than
the total amount of debts and other liabilities, including, without
limitation, contingent and unliquidated liabilities of the Guarantor, and
the liabilities of the Guarantor under this Guaranty;
(ii) the present fair salable value of the assets of the Guarantor is
greater than the amount that will be required to pay the probable
liability of the Guarantor on its existing debts and other liabilities as
they become absolute and
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<PAGE> 9
matured, including, without limitation, the liabilities of the Guarantor
under this Guaranty;
(iii) the Guarantor is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations, and other commitments
as they mature in the normal course of business, including, without
limitation, the liabilities of the Guarantor under this Guaranty;
(iv) the Guarantor does not intend to, and does not believe that it
will, incur debts or other liabilities beyond the Guarantor's ability to
pay as such debts and other liabilities mature or become due, including,
without limitation, the liabilities of the Guarantor under this Guaranty;
and
(v) the Guarantor is not engaged in a business or a transaction, and
is not about to engage in a business or a transaction, including, without
limitation, the transactions contemplated by this Guaranty, for which the
Guarantor's property would constitute unreasonably small capital.
(G) The Guarantor has filed all federal, state, and local tax returns
required to be filed or has obtained valid extensions of the dates upon which
such returns are required to be filed, and has paid all taxes shown on such
returns to be due.
(H) No representation, warranty, or statement by the Guarantor contained
herein or in any certificate, financial statement, or other document furnished
by the Guarantor pursuant hereto or in connection herewith fails to contain any
statement of material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it is made. There is
no fact which the Guarantor knows or should know and has not disclosed to the
Secured Party which does or may materially or adversely affect the Guarantor,
the Debtor, or either of their respective operations.
SECTION 9. FINANCIAL STATEMENTS.
The Guarantor shall furnish to the Secured Party:
(A) within ninety (90) days after the end of each fiscal year, audited
consolidated and consolidating financial statements of the Guarantor as of the
end of such year, prepared by accountants satisfactory to the Secured Party,
fairly presenting the Guarantor's financial position, which statements shall
consist of a balance sheet and related statements of income, retained earnings,
cash flow, and a statement of changes in financial position covering the period
of the Guarantor's immediately preceding fiscal year;
(B) within twenty (20) days after the end of each month (except in the
case of each month ending on the last day of a fiscal quarter, in which case the
financial statements called for hereby shall be due within forty five (45) days
after the end of each such month), consolidated and consolidating financial
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<PAGE> 10
statements of the Guarantor as of the end of such month fairly presenting
the Guarantor's financial position, which statements shall consist of a
balance sheet and related statements of income, retained earnings, cash
flow, and a statement of changes in financial position covering the period
from the end of the immediately preceding fiscal year to the end of such
month, all in such detail as the Secured Party may request and certified to
be correct by the president or chief financial officer of the Guarantor or
other financial officer satisfactory to the Secured Party; and
(C) promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which the Guarantor sends to
its shareholders, and copies of any and all periodic and special reports
and registration statements which the Guarantor files with the Securities
and Exchange Commission.
SECTION 10. LIMITED AMOUNT OF GUARANTY ID.
(A) This Guaranty is unlimited in amount unless an amount is inserted in
the space at the end of this section. Only if an amount is so inserted, then the
Obligations shall be deemed to be limited to that amount (hereinafter referred
to as the "Limited Amount"), plus the sum of:
(i) all unpaid interest which accrues on the Limited Amount until
payment of the Limited Amount in full, calculated at the rate of interest
applicable to the Indebtedness, as provided in the Loan Agreement; and
(ii) all fees, costs, and expenses payable pursuant to Section 4 of
this Guaranty.
(B) The Limited Amount equals $500,000. [PARTIES MUST INITIAL]
on behalf of Guarantor /s/ GRF
---------
on behalf of Secured Party /s/ MJO'C
---------
SECTION 11. CONDITIONS TO RELEASE OF GUARANTY.
Upon the written request of the Guarantor made upon the Secured Party
within 120 days after the last day of the Debtor's most recently completed
fiscal year (commencing with the fiscal year ending April 30, 1998), the
Secured Party agrees to release this Guaranty provided that at the time of the
requested release and immediately after giving effect thereto the following
conditions precedent shall have been satisfied to the Security Party's
reasonable satisfaction (i) the Debtor's net profit after partnership
distributions in respect of income taxes for the most recently completed fiscal
year (commencing with the fiscal year ending April 30, 1998) is equal to or
greater than $500,000, (ii) the Debtor's cash flow (defined herein to mean the
Debtor's net income before interest expense and partnership
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<PAGE> 11
distributions in respect of income taxes) for the most recently completed
fiscal year (commencing with the fiscal year ending April 30, 1998) is greater
than the aggregate amount of current maturities of the Debtor's long-term debt
outstanding as of the last day of such fiscal year, and (iii) no Event of
Default, or event which with the lapse of time or the giving of notice, or
both, would constitute an Event of Default, exists.
SECTION 12. NOTICES.
Any notices and other communications provided for hereunder shall be made
by telegram, telex, electronic transmitter, overnight air courier, or certified
or registered mail, return receipt requested, and shall be deemed to be received
by the party to whom sent one (1) Business Day after sending, if sent by
telegram, telex, electronic transmitter, or overnight air courier, and three
(3) Business Days after mailing, if sent by certified or registered mail. All
such notices and other communications to a party shall be addressed to such
party at the address set forth on the cover page hereof or to such other
address as such party may designate for itself in a notice to the other party
given in accordance with this section.
SECTION 13. MISCELLANEOUS.
(A) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Secured
Party at its address as reflected on the cover page hereof.
(B) No modification, recission, waiver, release, or amendment of any
provision of this Guaranty shall be made, except by a written agreement signed
by the Guarantor and a duly authorized officer of the Secured Party.
(C) "Debtor" and "Guarantor" as used in this Guaranty shall include,
respectively:
(i) any successor, individual, association, partnership, or
corporation to which all or a substantial part of the business or assets
of the Debtor or the Guarantor shall have been transferred; and
(ii) any other corporation into which the Guarantor or the Debtor
(if the Guarantor is a corporation) shall have been merged, consolidated,
reorganized, or absorbed, except that the Guarantor shall not have the
right to assign its obligations hereunder or any interest herein.
(D) "Secured Party" shall include the successors and assigns of the Secured
Party.
(E) The rights and benefits of the Secured Party hereunder shall, if the
Secured Party so agrees, inure to any party acquiring any interest in the
Indebtedness or the Obligations, or any part thereof.
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<PAGE> 12
(F) No course of dealing between the Debtor or the Guarantor and the
Secured Party, and no delay or omission by the Secured Party in exercising any
right or remedy hereunder or with respect to the Obligations shall operate as a
waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. All rights and remedies of the Secured
Party are cumulative.
(G) From time to time, the Guarantor shall take such action and execute
and deliver to the Secured Party such additional documents, instruments,
certificates, and agreements as the Secured Party may reasonably request to
effectuate the purposes of this Guaranty.
(H) Section headings used in this Guaranty are for convenience only and
shall not affect the construction of this Guaranty.
(I) The provisions of this Guaranty are independent of and separable from
each other, and no such provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other such
provision may be invalid or unenforceable in whole or in part. If any provision
of this Guaranty is prohibited or unenforceable in any jurisdiction, such
provision shall be ineffective in such jurisdiction only to the extent of such
prohibition or unenforceability, and such prohibition or unenforceability shall
not invalidate the balance of such provision to the extent it is not prohibited
or unenforceable nor render prohibited or unenforceable such provision in any
other jurisdiction.
(J) THIS GUARANTY AND THE TRANSACTIONS EVIDENCED HEREBY SHALL BE GOVERNED
BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, AS THE SAME MAY FROM TIME TO TIME
BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM COMMERCIAL CODE AS IN
EFFECT IN SUCH STATE.
(K) THE GUARANTOR AND THE SECURED PARTY AGREE THAT ANY ACTION OR
PROCEEDING TO ENFORCE OR ARISING OUT OF THIS GUARANTY MAY BE COMMENCED IN ANY
COURT OF THE STATE OF ILLINOIS IN COOK COUNTY, OR IN THE DISTRICT COURT OF THE
UNITED STATES IN THE NORTHERN DISTRICT OF ILLINOIS, AND THE GUARANTOR WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
GUARANTOR, OR AS OTHERWISE PROVIDED BY THE LAWS OF SUCH STATE OR THE UNITED
STATES.
(L) This Guaranty may be executed in any number of counterparts and by
the Secured Party and the Guarantor on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same Guaranty.
-11-
<PAGE> 13
SECTION 14. WAIVER OF JURY TRIAL.
THE GUARANTOR AND THE SECURED PARTY (BY ACCEPTANCE HEREOF) HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THE
GUARANTOR OR THE SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR
IN EQUITY, IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS RELATED
THERETO. THE GUARANTOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT
OF THE SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE SECURED
PARTY WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY
TRIAL WAIVER. THE GUARANTOR ACKNOWLEDGES THAT THE SECURED PARTY HAS BEEN
INDUCED TO ACCEPT THIS GUARANTY BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS
SECTION.
[SIGNATURE PAGE TO FOLLOW]
-12-
<PAGE> 14
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by a
duly authorized officer, as of the date first above written.
Attest: Guarantor:
SIGMATRON INTERNATIONAL, INC.
By /s/ Linda K. Blake By /s/ Gary R. Fairhead
------------------------------ ---------------------------------
/s/ Linda K. Blake , CFO /s/ Gary R. Fairhead, President
-------------------- --------- --------------------- -----------
(Print or Type Name) (Title) (Print of Type Name) (Title)
ACKNOWLEDGED AND ACCEPTED:
HSBC BUSINESS LOANS, INC.
By /s/ Michael J. O'Connell
---------------------------------
/s/ Michael J. O'Connell, V.P.
------------------------- -------
(Print or Type Name) (Title)
<PAGE> 15
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
On January 30, 1998, before me, a Notary Public in and for the County and
State aforesaid, personally appeared GARY R. FAIRHEAD, a duly authorized
officer of SigmaTron International, Inc., a Delaware corporation, who
acknowledged the execution of the foregoing Guaranty and Surety Agreement as
his own free and voluntary act for and on behalf of such corporation and stated
that the representations herein contained are true and that his execution on
behalf of such corporation was duly authorized and approved by all appropriate
action of such corporation.
/s/ Nancy B. Geiser
-----------------------------
Notary Public
My commission expires:
4-25-01
- ----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) The
Consolidated Balance Sheet as of 1/31/98 and the Consolidated Earnings for the
Quarter Ended 1/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
Financial Statements.
(A) Identify specific financial statements.
(B) Identify filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> JAN-31-1998
<CASH> 222381
<SECURITIES> 0
<RECEIVABLES> 14668320
<ALLOWANCES> 15000
<INVENTORY> 17336791
<CURRENT-ASSETS> 35272814
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49721887
<CURRENT-LIABILITIES> 11405872
<BONDS> 0
28812
0
<COMMON> 0
<OTHER-SE> 17500100
<TOTAL-LIABILITY-AND-EQUITY> 17528944
<SALES> 22632041
<TOTAL-REVENUES> 22632041
<CGS> 20740001
<TOTAL-COSTS> 1498463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375897
<INCOME-PRETAX> 17680
<INCOME-TAX> 7072
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10608
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
