Exhibit 10.1

 

ELEVENTH AMENDMENT TO

REVOLVING CREDIT AND SECURITY AGREEMENT

 

This Eleventh Amendment to Revolving Credit and Security Agreement (the
“Amendment”) is made as of this 22nd day of November, 2016 by and among SMTC
Corporation, a Delaware corporation (“SMTC”), SMTC Manufacturing Corporation of
California, a California corporation (“SMTC California”), SMTC Mex Holdings,
Inc., a Delaware corporation (“SMTC Mex”), ZF ARRAY TECHNOLOGY, INCORPORATED, a
Delaware corporation (“ZF Array”), HTM Holdings, Inc., a Delaware corporation
(“HTM” and together with SMTC, SMTC California, SMTC Mex and ZF Array each a “US
Borrower” and collectively the “US Borrowers”), SMTC Manufacturing Corporation
OF Canada, a corporation organized under the laws of the Province of Ontario
(“Canadian Borrower” and together with US Borrowers and each other Person joined
to the Credit Agreement as a borrower from time to time, each a “Borrower” and
collectively the “Borrowers”), the financial institutions which are now or which
hereafter become a party to the Credit Agreement (each a “Lender” and
collectively, the “Lenders”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as
agent for the Lenders (in such capacity, the “Agent”).

 

BACKGROUND

 

A.                On September 14, 2011, Borrowers, Lenders and Agent entered
into, inter alia, a certain Revolving Credit and Security Agreement (as same has
been or may be amended, modified, supplemented, renewed, extended, replaced or
substituted from time to time, the “Credit Agreement”) to reflect certain
financing arrangements between the parties thereto.

 

B.                 The Borrowers have requested, and the Agent and the Lenders
have agreed, subject to the terms and conditions of this Amendment, to modify
certain definitions, terms and provisions of the Credit Agreement.

 

NOW, THEREFORE, with the foregoing background hereinafter deemed incorporated by
reference herein and made part hereof, the parties hereto, intending to be
legally bound, promise and agree as follows:

 

1.                  Definitions.

 

(a)                Interpretation. All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Credit Agreement. In the
case of a direct conflict between the provisions of the Credit Agreement and the
provisions of this Amendment, the provisions of this Amendment shall govern and
control.

 

(b)               Additional Terms. The following definitions shall be added to
Section 1.2 of the Credit Agreement in their proper alphabetical order:

 

“Eleventh Amendment” shall mean that certain Eleventh Amendment to Revolving
Credit and Security Agreement dated as of the Eleventh Amendment Date by and
among Borrowers, Guarantors, Agent and Lenders.

 

 

 

“Eleventh Amendment Date” shall mean November 22, 2016.

 

(c)             Amendments to Definitions. The definitions below contained in
Section 1.2 of the Credit Agreement are hereby amended and restated in their
entirety as follows:

 

“Applicable Margin” shall mean (a) an amount equal to one-quarter of one percent
(0.25%) for Revolving Advances consisting of Domestic Rate Loans, (b) an amount
equal to three percent (3.00%) for Revolving Advances consisting of Eurodollar
Rate Loans, (c) an amount equal to three-quarters of one percent (0.75%) for
Advances under the Term Loan consisting of Domestic Rate Loans, and (d) an
amount equal to three and one-half of one percent (3.50%) for Advances under the
Term Loan consisting of Eurodollar Rate Loans.

 

“Availability Reserve” shall mean, on the Eleventh Amendment Date, $10,000,000;
provided, that, such amount shall be reduced by $500,000 on January 1, 2017 and
on the first day of each calendar quarter thereafter.

 

“Debt Payments” shall mean and include (a) all cash actually expended by any
Borrower to make interest payments on any Advances hereunder (other than amounts
previously treated as Debt Payments under clause (b)), plus (b) accrued but
unpaid interest on account of Eurodollar Rate Loans, plus (c) scheduled
principal payments in respect of the Term Loan; provided, however, to the extent
the Term Loan is reserved in the Formula Amount, any amortization payments shall
be excluded from this definition, plus (d) to the extent not already deducted in
the calculation of EBITDA, all cash actually expended by any Borrower to make
payments for all fees, commissions and charges set forth herein and with respect
to any Advances, plus (e) all cash actually expended by any Borrower to make
payments on Capitalized Lease Obligations, plus (f) all cash actually expended
by any Borrower to make payments with respect to any other Indebtedness for
borrowed money (including any Earnout Payments, but excluding repayment of any
Revolving Advances).

 

“EBITDA” shall mean, for any period, the sum of (i) Earnings Before Interest and
Taxes for such period, plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period, plus (iv) the amendment fee in the
amount of $50,000 payable by Borrowers pursuant to the Eleventh Amendment (to
the extent paid by Borrowers during such period), plus (v) the Commitment Fee in
the amount of $50,000 payable by Borrowers pursuant to the Project Apache Letter
Agreement (to the extent paid by Borrowers during such period), plus
(vi) non-recurring transaction related expenses for such period related to the
proposed Acquisition (as such term is defined in the Project Apache Letter
Agreement) in an aggregate amount not to exceed $650,000, plus (vii) non-cash
stock compensation expense for such period, not to exceed $500,000 in the
aggregate during any fiscal year, plus (viii) costs incurred in connection with
severance expenses (x) during the fiscal year ending December 31, 2016 in an
aggregate amount not to exceed $200,000 for such fiscal year and (y) during the
fiscal year ending December 31, 2017 in an aggregate amount not to exceed
$1,000,000 for such fiscal year, plus (ix) non-recurring office move expenses
for such period in an aggregate amount not to exceed $750,000.”

 

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“Maximum Revolving Advance Amount” shall mean $30,000,000.

 

“Maximum US Revolving Advance Amount” shall mean $30,000,000.

 

“Term Note” shall mean that certain Amended and Restated Term Note, dated as of
the Eleventh Amendment Date, by US Borrowers in favor of Agent.

 

2.                  Sublimit for Revolving Advances made against Inventory.
Section 2.1(c) of the Credit Agreement is hereby amended by deleting such
Section in its entirety and replacing it with the following:

 

“(c) The aggregate amount of Revolving Advances made to Borrowers against (i)
Eligible Inventory shall not exceed $14,000,000 in the aggregate at any time
outstanding; and (ii) Eligible US Inventory located in Mexico in the aggregate
shall not exceed $9,000,000 in the aggregate at any time outstanding.”

 

3.                  Term Loan. Section 2.4 of the Credit Agreement is hereby
amended by deleting such Section in its entirety and replacing it with the
following:

 

“2.4 Term Loan. As of the close of business on November 21, 2016, the aggregate
principal amount of the existing term loan outstanding under this Agreement was
$4,250,000 (the “Existing Term Loan”). Subject to the terms and conditions of
this Agreement and the Eleventh Amendment, on the Eleventh Amendment Date, each
Lender, severally and not jointly, will make a term loan to US Borrowers in the
amount equal to such Lender’s Commitment Percentage of $5,750,000, which amount
shall be deemed to be added to and part of the “Existing Term Loan” under this
Agreement and now referred to as the “Term Loan”, such that the outstanding
principal balance of the Term Loan as of the Eleventh Amendment Date shall be
$10,000,000. The Term Loan shall be, with respect to principal, payable as
follows, subject to acceleration upon the occurrence of an Event of Default
under this Agreement or termination of this Agreement: consecutive quarterly
installments each in the amount of $500,000.00 commencing on January 1, 2017 and
continuing on the first day of each calendar quarter thereafter followed by a
payment of all unpaid principal, accrued and unpaid interest and all unpaid fees
and expenses on the last day of the Term. The Term Loan shall be evidenced by
the Term Note. The Term Loan may consist of Domestic Rate Loans or Eurodollar
Rate Loans, or a combination thereof, as Borrowing Agent may request, and in the
event that US Borrowers desire to obtain or extend any portion of the Term Loan
as a Eurodollar Rate Loan or to convert any portion of the Term Loan from a
Domestic Rate Loan to a Eurodollar Rate Loan, Borrowing Agent shall comply with
the notification requirements set forth in Sections 2.2(b) and/or 2.2(e) and the
provisions of Sections 2.2(b) through 2.2(h) shall apply. The Term Loan may be
prepaid in whole or in part at any time without premium or penalty, except for
payment of any early termination fee payable on termination of this Agreement
pursuant to Section 13.1. Once repaid or prepaid, the Term Loan may not be
reborrowed.”

 

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4.                  Use of Proceeds. Section 2.22 of the Credit Agreement is
hereby amended by deleting such Section in its entirety and replacing it with
the following:

 

“2.22 Use of Proceeds. Borrowers shall use the proceeds of Advances to (i) pay
fees and expenses relating to the transactions contemplated by this Agreement,
and (ii) provide for general corporate purposes, including but not limited to
working capital needs, capital expenditures and reimbursement of drawings under
Letters of Credit. Without limiting the generality of the foregoing, neither the
Borrowers, the Guarantors, nor any other Person which may in the future become
party to this Agreement or the Other Documents as a Borrower or Guarantor,
intends to use nor shall they use any portion of the proceeds of the Advances,
directly or indirectly, for any purpose in violation of the Trading with the
Enemy Act or any Anti-Terrorism Laws.”

 

5.                  Collateral Evaluation Fee. Section 3.4(b) of the Credit
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:

 

“(b) Borrowers shall pay to Agent immediately in accordance with Section 2.2(a)
hereof, following any month in which Agent performs any collateral evaluation -
namely any field examination, collateral analysis or other business analysis,
the need for which is to be determined by Agent and which evaluation is
undertaken by Agent or for Agent’s benefit - a collateral evaluation fee in an
amount equal to $1,000 per day for each person employed to perform such
evaluation, plus all reasonable costs and disbursements incurred by Agent in the
performance of such examination or analysis; provided that, so long as no
Default or Event of Default has occurred and is then continuing, Borrowers shall
not be obligated to reimburse Agent for more than three (3) field examinations
per year.”

 

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6.                  Unfunded Capital Expenditures. Section 7.6 of the Credit
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:

 

“7.6 Unfunded Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for Unfunded Capital Expenditures in an aggregate
amount for all Borrowers not to exceed $4,000,000 in any fiscal year; provided,
however, in the event Capital Expenditures during any fiscal year are less than
the amount permitted for such fiscal year, then the unused amount (the
“Carryover Amount”) may be carried over and used in the immediately succeeding
fiscal year; provided, further, that any Carryover Amount shall be deemed to be
the last amount spent in such succeeding fiscal year.”

 

7.                  Litigation. Section 9.4 of the Credit Agreement is hereby
amended by deleting such Section in its entirety and replacing it with the
following:

 

“9.4 Litigation. Promptly notify Agent in writing upon becoming aware of any
claim, litigation, suit or administrative proceeding affecting any Borrower or
any Guarantor, which in any such case materially affects the Collateral or which
could reasonably be expected to have a Material Adverse Effect.”

 

8.                  Term. Section 13.1 of the Credit Agreement is hereby amended
by deleting such Section in its entirety and replacing it with the following:

 

“13.1 Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until January 2, 2021 (the “Term”) unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon 10 Business Days’ prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full (whether voluntary
or involuntary, including after acceleration thereof) and this Agreement is
terminated prior to the last day of the Term (the date of such prepayment
hereinafter referred to as the “Early Termination Date”), Borrowers shall
concurrently pay to Agent for the benefit of Lenders an early termination fee in
an amount equal to (x) one percent (1%) of the Maximum Loan Amount if the Early
Termination Date occurs on or after the Eleventh Amendment Date to and including
the second anniversary of the Eleventh Amendment Date, and (y) zero percent (0%)
of the Maximum Loan Amount if the Early Termination Date occurs after the second
anniversary of the Eleventh Amendment Date.”

 

9.                  Representations and Warranties. Each Borrower hereby:

 

(a)             reaffirms all representations and warranties made to Agent and
Lenders under the Credit Agreement and all of the Other Documents and confirms
that all are true and correct in all respects as of the date hereof as if made
on and as of the date hereof, except for representations and warranties which
related exclusively to an earlier date, which shall be true and correct in all
respects as of such earlier date;

 

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(b)             reaffirms all of the covenants contained in the Credit
Agreement, covenants to abide thereby until all Advances, Obligations and other
liabilities of Borrowers to Agent and Lenders under the Credit Agreement of
whatever nature and whenever incurred, are satisfied and/or released by Agent
and Lenders;

 

(c)             represents and warrants that no Default or Event of Default has
occurred and is continuing under the Credit Agreement or any of the Other
Documents;

 

(d)            represents and warrants that it has the authority and legal right
to execute, deliver and carry out the terms of this Amendment, that such actions
were duly authorized by all necessary corporate action and that the officers
executing this Amendment on its behalf were similarly authorized and empowered,
and that this Amendment does not contravene any provisions of its articles of
incorporation, bylaws or other formation documents, or of any contract or
agreement to which it is a party or by which any of its properties are bound;
and

 

(e)             represents and warrants that this Amendment and all assignments,
instruments, documents, and agreements executed and delivered in connection
herewith are valid, binding and enforceable in accordance with their respective
terms except as such enforceability may be limited by equitable principles or
any applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally.

 

10.              Conditions Precedent/Effectiveness Conditions. This Amendment
shall be effective upon:

 

(a)             execution and delivery hereof by all parties hereto;

 

(b)             receipt by Agent of the Amended and Restated Term Note, duly
executed and delivered by an authorized officer of each US Borrower;

 

(c)             receipt by Agent of the results of UCC, tax lien, and judgment
searches against each Borrower in its jurisdiction of formation and in each
jurisdiction in which such entity is engaged in business operations;

 

(d)            receipt by Agent of a non-refundable amendment fee in an amount
equal to $50,000, which Borrowers acknowledge Agent shall have earned in full as
of the date hereof, which shall not be subject to proration, and which may be
charged to Borrowers’ Account;

 

(e)             on the date of this Amendment and after giving effect hereto, no
Default or Event of Default shall exist or shall have occurred and be
continuing.

 

11.              Further Assurances. Borrowers hereby agree to take all such
actions and to execute and/or deliver to Agent and Lenders all such documents,
assignments, financing statements and other documents, as Agent and Lenders may
reasonably require from time to time, to effectuate and implement the purposes
of this Amendment.

 

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12.              Payment of Expenses. Borrowers shall pay or reimburse Agent and
Lenders for their reasonable attorneys’ fees and expenses in connection with the
preparation, negotiation and execution of this Amendment and the documents
provided for herein or related hereto.

 

13.              Reaffirmation of Credit Agreement. Except as modified by the
terms hereof, all of the terms and conditions of the Credit Agreement, as
amended, and all of the Other Documents are hereby reaffirmed and shall continue
in full force and effect as therein written.

 

14.              Acknowledgment of Guarantors. By execution of this Amendment,
each Guarantor hereby covenants and agrees that each of its respective Guaranty
and Suretyship Agreements, dated September 14, 2011, shall remain in full force
and effect and shall continue to cover the existing and future Obligations of
Borrowers to Agent and Lenders.

 

15.              Miscellaneous.

 

(a)             Third Party Rights. No rights are intended to be created
hereunder for the benefit of any third party donee, creditor, or incidental
beneficiary.

 

(b)             Headings. The headings of any paragraph of this Amendment are
for convenience only and shall not be used to interpret any provision hereof.

 

(c)             Modifications. No modification hereof or any agreement referred
to herein shall be binding or enforceable unless in writing and signed on behalf
of the party against whom enforcement is sought.

 

(d)            Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York.

 

(e)             Counterparts. This Amendment may be executed in any number of
counterparts and by facsimile or electronic transmission, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Any signature to this Amendment delivered
by a party by facsimile or other electronic means of transmission shall be
deemed to be an original signature hereto.

 

[Remainder of Page Intentionally Left Blank]

 

 

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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and
delivered by their duly authorized officers as of the date first above written.

 

 

BORROWERS: SMTC CORPORATION   SMTC MANUFACTURING CORPORATION OF    CALIFORNIA  
SMTC MANUFACTURING CORPORATION OF    CANADA   SMTC MEX HOLDINGS INC.   ZF ARRAY
TECHNOLOGY, INCORPORATED   HTM HOLDINGS INC.       By: /s/ Sushil Dhiman   Name:
Sushil Dhiman   Title: President and Chief Executive Officer   GUARANTORS: RADIO
COMPONENTES DE MEXICO, S.A. DE C.V.   SMTC de Chihuahua, S.A. de C.V.   SMTC
Holdings, LLC   SMTC Manufacturing Corporation of    Massachusetts     By: /s/
Sushil Dhiman   Name: Sushil Dhiman   Title: President and Chief Executive
Officer     AGENT AND LENDERS: PNC BANK, NATIONAL ASSOCIATION,   as Agent and
Lender     By: /s/ Jason T. Sylvester   Name: Jason T. Sylvester   Title: Vice
President

 

 

 

 

 

 

[Signature Page to ELEVENTH Amendment to Revolving Credit and Security Agreement
(SMTC)]

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