Item 1.01 Entry into a Material Definitive Agreement.
Sixth Amendment to Amended and Restated Revolving Credit and Security Agreement
On December 28, 2020, SMTC Corporation, a Delaware corporation (the "Company"),
entered into that certain Sixth Amendment to the Amended and Restated Revolving
Credit and Security Agreement ("PNC Amendment"), by and among the Company, SMTC
Manufacturing Corporation of California, a California corporation ("SMTC
California"), SMTC Mex Holdings, Inc., a Delaware corporation ("SMTC Mex"), HTM
Holdings, Inc., a Delaware corporation ("HTM"), MC Test Service, Inc., a Florida
corporation ("MC Test"), MC Assembly International LLC, a Delaware limited
liability company ("MC Assembly International"), MC Assembly LLC, a Delaware
limited liability company ("MC Assembly" and together with the Company, SMTC
California, SMTC Mex, HTM, MC Test and MC Assembly International, and each other
person joined thereto as a borrower from time to time, the "Borrowers"), the
financial institutions party to that certain Amended and Restated Revolving
Credit and Security Agreement, dated as of November 8, 2018 (as disclosed on the
Company's Current Report on Form 8-K filed on November 9, 2018), as amended on
March 29, 2019 (as disclosed on the Company's Current Report on Form 8-K filed
on April 4, 2019), as amended on August 8, 2019 (as disclosed on the Company's
Current Report on Form 8-K filed on August 12, 2019), as amended on September
27, 2019 (as disclosed on the Company's Current Report on Form 8-K filed on
October 2, 2019), as amended on June 26, 2020 (as disclosed on the Company's
Current Report on Form 8-K filed on June 29, 2020), as amended on September 25,
2020 (as disclosed on the Company's Current Report on Form 8-K filed on
September 28, 2020) (such agreement, the "PNC Agreement" and, such lenders
thereto, the "PNC Lenders"), and PNC Bank, National Association ("PNC"), as
agent for the PNC Lenders (in such capacity, the "Agent"), which governs the
credit facilities among the Borrowers, the PNC Lenders and PNC (the "PNC
Facilities").
The PNC Amendment, among other things: (i) amends the definition of
"Consolidated EBITDA" by permitting addbacks with respect to the Company's
Zacatecas, Mexico facility for (A) restructuring and severance charges, accruals
and reserves in connection with permanent headcount reductions in an amount not
to exceed an additional $1,000,000 for the period from June 1, 2020 through and
including July 31, 2020, (B) cash severance and other facility closure and
relocation costs in an amount not to exceed an additional $4,000,000 from
December 28, 2020 and ending on June 30, 2021, and (C) write-offs of accounts
receivable, inventory and fixed assets in an amount not to exceed an additional
$1,500,000 from December 28, 2020 and ending on June 30, 2021; and (ii) revises
the required liquidity covenants from the period beginning on December 28, 2020
and ending on the later to occur of June 30, 2021 or the permanent closure of
the Company's Zacatecas, Mexico facility.
The foregoing description of the PNC Amendment does not purport to be complete
and is qualified in its entirety by reference to the full text of the PNC
Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8K and
is incorporated herein by reference.
Seventh Amendment to Financing Agreement
On December 28, 2020, the Company entered into that certain Amendment No. 7 to
the Financing Agreement (the "TCW Amendment"), by and among the Company, each
person that is a borrower under that certain Financing Agreement, dated as of
November 8, 2018 (as disclosed on the Company's Current Report on Form 8-K filed
on November 9, 2018), as amended on March 29, 2019 (as disclosed on the
Company's Current Report on Form 8-K filed on April 4, 2019), as amended on July
3, 2019 (as disclosed on the Company's Current Report on Form 8-K filed on July
5, 2019), as amended on August 8, 2019 (as disclosed on the Company's Current
Report on Form 8-K filed on August 12, 2019), as amended on September 27, 2019
(as disclosed on the Company's Current Report on Form 8-K filed on October 2,
2019), as amended on June 26, 2020 (as disclosed on the Company's Current Report
on Form 8-K filed on June 29, 2020), as amended on September 25, 2020 (as
disclosed on the Company's Current Report on Form 8-K filed on September 28,
2020) (as amended to date, the "Financing Agreement"), each other loan party
that is a party to the Financing Agreement, each financial institution that is a
party to the Financing Agreement (collectively, the "TCW Lenders"), TCW Asset
Management Company LLC, as administrative agent for the TCW Lenders (in such
capacity, the "Administrative Agent"), and TCW Asset Management Company LLC, as
collateral agent for the TCW Lenders.
The TCW Amendment, among other things: (i) amends the definition of
"Consolidated EBITDA" by permitting addbacks with respect to the Company's
Zacatecas, Mexico facility for (A) restructuring and severance charges, accruals
and reserves in connection with permanent headcount reductions in an amount not
to exceed an additional $1,000,000 for the period from June 1, 2020 through and
including July 31, 2020, (B) cash severance and other facility closure and
relocation costs in an amount not to exceed an additional $4,000,000 from
December 28, 2020 and ending on June 30, 2021, and (C) write-offs of accounts
receivable, inventory and fixed assets in an amount not to exceed an additional
$1,500,000 from December 28, 2020 and ending on June 30, 2021, (ii) prohibits
the Liquidity (as defined in the TCW Amendment) of the Company and its
subsidiaries from being less than $7,500,000 during the period beginning on
December 28, 2020 and ending on the later to occur of June 30, 2021 or the
permanent closure of the Company's Zacatecas, Mexico facility; and (iii)
provides for the issuance to the TCW Lenders or their designees of the Warrants
(as defined below).
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The foregoing description of the TCW Amendment does not purport to be complete
and is qualified in its entirety by reference to the full text of the TCW
Amendment, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and
is incorporated herein by reference.
Subscription Agreement and Warrants
In connection with and as part of the consideration paid by the Company for the
TCW Amendment, on December 28, 2020, the Company entered into the Seventh
Amendment Subscription Agreement (the "Subscription Agreement") with certain of
the TCW Lenders, relating to the issuance and sale by the Company of warrants
(the "Warrants") to purchase an aggregate of 140,000 shares of the Company's
common stock (the "Warrant Shares"). The Warrants are exercisable beginning on
the date of original issuance at a nominal exercise price of $0.01 per share,
subject to adjustment as provided therein, and expire 84 months after the date
of issuance. The Warrants also provide for an adjustment in the number of shares
of the Company's common stock underling the Warrants if the Company, subject to
certain exceptions, issues, or is deemed to have issued, shares of the Company's
. . .
Item 3.02 Unregistered Sale of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K
regarding the issuance of the Warrants and the Private Placement is incorporated
into this Item 3.02 by reference.
Item 5.05 Amendments to the Registrant's Code of Ethics, or Waiver of a Provision
of the Code of Ethics.
Effective December 30, 2020, the board of directors of the Company adopted a new
Code of Business Conduct and Ethics (the "Code"). The Code applies to all
employees, officers and directors of the Company, as well as to the Company's
agents and contractors. The Code was adopted to reflect what the Company
considers to be current best practices and policies, reduce complexity, and
improve readability. The adoption of the Code did not relate to or result in any
waiver, explicit or implicit, of any provision of the prior Code of Business
Conduct and Ethics.
The above description of the Code does not purport to be complete and is
qualified in its entirety by reference to the full text of the Code which is
incorporated herein by reference. The Company intends to satisfy its filing
obligation under Item 406(c) of Regulation S-K with respect to the Code by
posting a copy thereof on the Company's investor relations website at
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https://www.smtc.com/investors/corporate-governance/governance-documents.
Information on any of the Company's websites shall not be deemed incorporated by
reference into, or to be a part of, this Current Report on Form 8-K, and the
foregoing website reference is not intended to be made through an active
hyperlink.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
4.1 Form of Warrant.
10.1 Sixth Amendment to Amended and Restated Revolving Credit and Security
Agreement, by and among SMTC Corporation, SMTC Manufacturing Corporation
of California, SMTC Mex Holdings, Inc., HTM Holdings, Inc., MC Test
Service, Inc., MC Assembly International LLC, MC Assembly LLC, the
financial institutions party thereto and PNC Bank, National Association,
as agent for the lenders, dated December 28, 2020. †
10.2 Amendment No. 7 to Financing Agreement, by and among SMTC Corporation,
the borrowers party thereto, each other loan party thereto, the lenders
party thereto, TCW Asset Management Company LLC, as administrative agent
for the lenders, and TCW Asset Management Company LLC, as collateral
agent for the lenders, dated December 28, 2020.
10.3 Seventh Amendment Subscription Agreement, by and among SMTC
Corporation and the subscribers party thereto, dated December 28,
2020.
10.4 Seventh Amendment Registration Rights Agreement, by and among SMTC
Corporation and the investors party thereto, dated December 28, 2020.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
† Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10)
of Regulation S-K. The omitted information is (i) not material and (ii) would
likely cause competitive harm to the Company if publicly disclosed.
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