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EXHIBIT 10.33
[UNION BANK OF CALIFORNIA LOGO]
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and entered
into as of September 26, 1997 by and between Smartflex Systems, Inc., a Delaware
corporation ("Borrower") and UNION BANK OF CALIFORNIA, N.A., ("Bank"). This
Agreement amends and restates in its entirety that certain loan agreement dated
September 29, 1995 between Bank and Borrower.
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an amount
not to exceed TWENTY FIVE MILLION DOLLARS ($25,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay and
reborrow all or part of the Revolving Loan in amounts of not less than Ten
Thousand Dollars ($10,000) in accordance with the terms of the Revolving Note.
All borrowings of the Revolving Loan must be made before September 30, 1999 at
which time all unpaid principal and interest of the Revolving Loan shall be due
and payable. The Revolving Loan shall be evidenced by a promissory note (the
"Revolving Note") on the standard form used by Bank for commercial loans. Bank
shall enter each amount borrowed and repaid in Bank's records and such entries
shall be deemed to be the amount of the Revolving Loan outstanding. Omission of
Bank to make any such entries shall not discharge Borrower of its obligation to
repay in full with interest all amounts borrowed.
1.1.1.1 THE LETTER OF CREDIT SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable, commercial or standby letters of credit (individually, an "L/C" and
collectively, the "L/Cs"). All such L/Cs shall be drawn on such terms and
conditions as are acceptable to Bank. The aggregate amount available to be drawn
under all outstanding L/Cs and the aggregate amount of unpaid reimbursement
obligations under drawn L/Cs shall not exceed Two Million Dollars ($2,000,000)
and shall reduce, dollar for dollar, the maximum amount available under the
Revolving Loan. No L/C shall have an expiry date more than one (1) year from its
date of issuance and each L/C shall be governed by the terms of (and Borrower
agrees to execute) Bank's standard form of L/C application and reimbursement
agreement. No L/C shall expire after September 30, 1999.
1.1.2 THE TERM LOAN. Bank will loan to Borrower the sum of Two
Million Two Hundred Dollars ($2,200,000) (the "Term Loan") at Borrower's
request, in one or more disbursements of not less than Five Hundred Thousand
Dollars ($500,000) on or before. September 30, 1997 in accordance with the terms
of the Term Note. In the event of a prepayment of principal and payment of any
resulting fees, any prepaid amounts shall be applied to the scheduled principal
payments in the reverse order of their maturity. The Term Loan shall be
evidenced by a promissory note (the "Term Loan") on the standard form used by
Bank for commercial loans.
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1.2 TERMINOLOGY.
As used herein the word "Loans" shall mean, collectively,
all the credit facilities described above.
As used herein the word "Notes" shall mean, collectively,
all the promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for general working capital purposes and the proceeds of the Term Loan
shall be used for capital additions and tenant improvements.
1.4 INTEREST. The unpaid principal balance of the Revolving Loan
shall bear interest at the rate as more specifically provided in the Revolving
Note and the principal balance of the Term Loan shall bear interest at the rate
as more specifically provided in the Term Note.
1.5 UNUSED COMMITMENT FEE. On the last calendar day of the third
month following the execution of this Agreement and on the last calendar day of
each three-month period thereafter until September 30, 1999, or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of one eighth of one
percent (.125%) per year on the average unused portion of the Loan for the
preceding quarter computed on the basis of actual days elapsed of a year of 360
days.
1.5.1 TERM LOAN COMMITMENT FEE. Borrower has paid in advance a
commitment fee of Five Thousand Five Hundred Dollars ($5,500). A one quarter of
one percent (.25%) fee shall be paid upon the funding on the amount of each
advance on the Term Loan. No portion of these fees shall be reimbursable.
1.6 BALANCES. Borrower shall maintain its major depository
accounts with Bank until the Note and all sums payable pursuant to this
Agreement have been paid in full.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.8 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and any Note or any of the other Loan
Documents, the terms of such Note or other Loan Documents will prevail over the
terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Bank's
satisfaction:
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2.1 COMPLIANCE. Borrower shall have performed and complied with
all terms and conditions required by this Agreement to be performed or complied
with by it prior to or at the date of the making of such disbursement and shall
have executed and delivered to Bank the Notes and other documents deemed
necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
design and manufacture of flexible electronic circuit devices.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest) and their addresses, and the names of
Borrower's principal shareholders, are as provided on a schedule delivered to
Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance
of this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms of
any indenture, agreement or undertaking to which Borrower is a party or by which
it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of Borrower,
including both a balance sheet at December 31, 1996, together with supporting
schedules, and an income statement for the six (6) months ended June 28, 1997,
have heretofore been furnished to Bank, and are true and complete and fairly
represent the financial condition of Borrower during the period covered thereby.
Since June 28, 1997, there has been no material adverse change in the financial
condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in
the ordinary course of business, Borrower has good and marketable title to all
of the property reflected in its financial statements delivered to Bank and to
all property acquired by Borrower since the date of said financial statements,
free and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.
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3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any
of its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the state of its organization, and has the power and authority to
carry on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into
this Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by
this Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently
planned by Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loans
only as provided in subsection 1.3 above.
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4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims levied
or imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within forty five (45) days after the close of each
fiscal quarter, except for the final quarter of each fiscal year, its unaudited
balance sheet as of the close of such fiscal quarter, its unaudited income and
expense statement with supportive schedules and statement of retained earnings
for that fiscal quarter, prepared in accordance with generally accepted
accounting principles and a copy of its 10-Q report as soon as it becomes
available;
(b) Within ninety (90) days after the close of each fiscal
year, a copy of its consolidated and consolidating statement of financial
condition including at least its balance sheet as of the close of such fiscal
year, its income and expense statement and retained earnings statement for such
fiscal year, examined and prepared on an audited basis by independent certified
public accountants selected by Borrower and reasonably satisfactory to Bank, in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the previous year and a copy of its 10-K report and
annual report as they become available;
(c) Such other financial statements and information as Bank
may reasonably request from time to time;
(d) In connection with each financial statement provided
hereunder, a statement executed by the president or chief financial officer or
controller of Borrower, certifying that no default has occurred and no event
exists which with notice or the lapse of time, or both, would result in a
default hereunder;
(e) In connection with each fiscal year-end statement
required hereunder, any management letter of Borrower's certified public
accountants;
(f) Prompt written notice to Bank of all events of default
under any of the terms or provisions of this Agreement or of any other
agreement, contract, document or instrument entered, or to be entered into with
Bank; and of any litigation which, if decided adversely to Borrower, would have
a material adverse effect on Borrower's financial condition; and of any other
matter which has resulted in, or is likely to result in, a material adverse
change in its financial condition or operations;
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(g) Prior written notice to Bank of any changes in Borrower's
officers and other senior management; Borrower's name; and location of
Borrower's assets, principal place of business or chief executive office.
4.6 TANGIBLE NET WORTH. From December 31, 1995, Borrower will at
all times maintain Tangible Net Worth of not less than Forty Million Dollars
($40,000,000). Thereafter, Borrower will at all times maintain a minimum
Tangible Net Worth that increases from said amount as of the end of each of
Borrower's fiscal years by Seventy-Five percent (75%) of Borrower's net profit
after taxes plus 100% of any new equity capital additions or Forty Million
Dollars ($40,000,000), whichever is greater. "Tangible Net Worth" shall mean net
worth increased by indebtedness of Borrower subordinated to Bank and decreased
by patents, licenses, trademarks, trade names, goodwill and other similar
intangible assets, organizational expenses, and monies due from affiliates
(including officers, shareholders and directors).
4.7 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to tangible net worth of not greater than
1.0:1.0.
4.8 PROFIT FROM OPERATIONS. Borrower will maintain a net profit
from operations, as defined by generally accepted accounting principles, of any
positive amount for each fiscal year.
4.9 CASH FLOW. Borrower will maintain a ratio of Cash Flow to
Debt Service of not less than 2.0:1.0. Compliance with this subsection shall be
measured as of the end of each fiscal year. "Cash Flow" shall mean net profit
after taxes to which depreciation, amortization and other noncash expenses are
added for the twelve (12) month period immediately preceding the date of
calculation. "Debt Service" shall mean that portion of long-term liabilities and
capital leases coming due within twelve (12) months of the date of calculation.
4.10 QUICK RATIO. Borrower shall maintain at all times a ratio of
cash, accounts receivable and marketable securities to current liabilities
(including any balances outstanding on the Revolving Loan) of not less than
1.25:1.0. Current liabilities will exclude current restructure charge related
accruals for Quick Ratio calculation purposes through 6/30/98.
4.11 INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties. Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.
4.12 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand
by Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.
4.13 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly
to Bank upon demand, reasonable attorneys' fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
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4.14 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorneys' fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and legal staff.
4.15 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank,
as soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, except for certain equipment held by its wholly-owned subsidiary,
Smartflex Systems-Singapore, in an amount not to exceed One Million Three
Hundred Thousand Dollars ($1,300,000) and agreements made with Bank.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in
the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner or extend credit except for guarantees for loans to the wholly owned
Smartflex Systems-Singapore, in an amount not to exceed One Million Three
Hundred Thousand Dollars ($1,300,000).
5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of deposit
of Bank, direct U.S. Government obligations and commercial paper issued by
corporations with the top ratings of Moody's or Standard & Poor's, provided all
such permitted investments shall mature within two year of purchase.
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5.6 LOSSES. Borrower will not incur 2 or more consecutive
quarterly net losses in any fiscal year.
5.7 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any
dividends other than a dividend payable in its own common stock, or authorize or
make any other distribution with respect to any of its stock now or hereafter
outstanding which exceeds in the aggregate for any fiscal year twenty-five
percent (25%) of Borrower's net profit after taxes.
5.8 RETIREMENT OF STOCK. Borrower will not acquire or retire any
share of its capital stock for value.
5.9 PARENT AND SUBSIDIARY PROPERTY. Borrower will not transfer
any property to its parent or any affiliate of its parent, except for value
received in the normal course of business as business would be conducted with an
unrelated or unaffiliated entity. In no event shall management fees or fees for
services be paid by Borrower to any such direct or indirect affiliate without
Bank's prior written approval.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue the Loan
and automatically, unless otherwise provided under the Note, shall make all sums
of interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or observance
of any covenant or condition of the Loan Documents; or
6.4 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or
6.5 There is a change in ownership or control of ten percent
(10%) or more of the issued and outstanding stock of Borrower or any Guarantor,
or (if Borrower is a partnership) there is a change in ownership or control of
any general partner's interest.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of set off or banker's
lien.
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7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing
signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may
be changed from time to time by notice delivered as provided above.
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THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK OF CALIFORNIA, N.A. SMARTFLEX SYSTEMS, INC.,
a Delaware Corporation
By: By:
------------------------------------ --------------------------------
Title: Title:
--------------------------------- ----------------------------
By: By:
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Title: Title:
-------------------------------- ----------------------------
Address: 000 Xxxxx Xxxx Xxxxxx Xxxxx 000 Address: 00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxx
00000-0000
Attention: Xxxx Xxxxxx, VP Attention: Xxxx X. Xxxxxxx, CFO
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
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