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EXHIBIT 10.46
[UNION BANK OF CALIFORNIA LETTERHEAD]
AMENDMENT AND WAIVER LETTER
UNION BANK OF CALIFORNIA
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March 30, 1999
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
SMARTFLEX SYSTEMS, INC.
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Re: THIRD AMENDMENT AND WAIVER ("Amendment" or "Waiver") to the Amended and
Restated Loan Agreement dated September 26, 1997 (this Amendment and the
Amended and Restated Loan Agreement together called the "Agreement")
Dear ▇▇. ▇▇▇▇▇▇:
In reference to the Agreement defined above between UNION BANK OF CALIFORNIA,
N.A. ("BANK") AND SMARTFLEX SYSTEMS, INC. ("Borrower"), Bank and Borrower desire
to amend the Agreement and waive certain breaches of the Agreement. Capitalized
terms used herein which are not otherwise defined shall have the meanings given
them in the Agreement.
1. Amendments to the Agreement:
(a) Section 4.6, is hereby amended in its entirety to read as
follows:
"TANGIBLE NET WORTH. From December 31, 1998, Borrower will
at all times maintain Tangible Net Worth of not less than
THIRTY MILLION DOLLARS ($30,000,000). 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 one hundred percent
(100%) of any new equity capital additions plus one
hundred percent (100%) of the cumulative amortization of
goodwill for fiscal periods ending subsequent to December
31, 1998. "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)."
(b) Section 4.7, is hereby amended in its entirety to read as
follows:
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Smartflex Systems, Inc.
Third Amendment to Amended and Restated Loan Agreement
March 30, 1999
Page 2
"DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to tangible net
worth of not greater than 1.75 to 1.00."
(c) Section 4.8, is hereby amended in its entirety to read as
follows:
"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; provided, however, restructuring charges in
amounts not to exceed Four Million Five Hundred Thousand
Dollars ($4,500,000) shall be excluded from the
calculation for the fiscal year ending on or about
December 31, 1999."
(d) Section 4.9 shall be deleted in its entirety and replaced
with the following:
"FIXED CHARGE COVERAGE. Borrower will maintain a ratio of
Cash Flow to Fixed Charges of not less than 1.85 to 1.00.
Compliance with this subsection shall be measured at the
end of each fiscal quarter. "Cash Flow" shall mean
earnings before interest, taxes, depreciation and
amortization ("EBITDA") to which rent expense and lease
expense are added for the twelve (12) months immediately
preceding the date of calculation. "Fixed Charges" shall
mean that portion of long term debt and capital leases
coming due within twelve (12) months to which taxes, rent,
lease expense and interest expense are added for the
twelve (12) month period immediately preceding the date of
calculation."
(e) Section 4.10 shall be amended by substituting (1) the
ratio ".9:1.0" for the ratio "1.25:1.0" and (2) the date
"December 31, 1999" for the date "6/30/98.
(f) Section 5.3 is hereby amended by substituting the amount
"Three Million Dollars ($3,000,000)" for the amount "Ten
Million Dollars ($ 10,000,000)" appearing in the last line
thereof.
(g) Section 5.6 is hereby amended in its entirety to read as
follows:
"LOSSES. Borrower will not incur 2 or more consecutive
quarterly net losses in any fiscal year subsequent to June
30, 1999."
(h) Section 5.10 is hereby added in its entirety as follows:
"CAPITAL EXPENDITURES AND LEASE OBLIGATIONS. Borrower will
not acquire by purchase, nor become obligated as a lessee
under capital leases or operating leases for obtaining the
use of, property, plant and equipment
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Smartflex Systems, Inc.
Third Amendment to Amended and Restated Loan Agreement
March 30, 1999
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whose cost exceeds Twelve Million Dollars ($12,000,000)
for the two (2) year period ending December 31, 2000.
2. Waivers to the Agreement:
(a) Bank hereby provides a waiver of Borrower's breach of
Section 1.3 of the Agreement.
"The proceeds of the Term Loan I shall be used to
purchase real property.
(b) Borrower has advised Bank of its purchase of certain
assets and assumption of certain obligations of Tanon
Manufacturing, Inc. ("Tanon"), a wholly owned subsidiary
of EA Industries on or about February 2, 1999 for total
consideration of approximately $15,000,000 (the
"Transaction"). Borrower acknowledges that the Transaction
constitutes Events of Default under Section 5.3 of the
Loan Agreement (which prohibits acquisitions which are
consummated, in whole or in part, with Loans from Bank,
and which exceed Ten Million Dollars ($10,000,000) per
transaction), and Section 5.5 of the Loan Agreement (which
prohibits the purchase of debt or equity in another
entity), unless Bank agrees to waive such Events of
Default as provided for in this Amendment.
Bank's agreement to waive the aforementioned Events
of Default is hereby made subject to the following
conditions:
(1) On or before April 15, 1999, Borrower shall
provide a copy of the definitive purchase
agreement evidencing the Transaction and
executed by the parties thereto.
In consideration for the Amendment and Waiver, Borrower shall pay to Bank a fee
of Thirty Five Thousand Dollars ($35,000) concurrent with the execution and
return of the acknowledgement copy specified below.
Except as specifically amended hereby, the Agreement shall remain in full force
and effect and is hereby ratified and confirmed. This Third Amendment and Waiver
shall not be a waiver of any existing or future default or breach of a condition
or covenant unless specified herein.
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Smartflex Systems, Inc.
Third Amendment to Amended and Restated Loan Agreement
March 30, 1999
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This Third Amendment and Waiver shall become effective when Bank shall have
received the acknowledgment copy of this Third Amendment and Waiver executed by
Borrower.
Very truly yours,
UNION BANK OF CALIFORNIA, N.A.
By //s// ▇▇▇▇▇▇ ▇▇▇▇▇▇ AGREED AND ACCEPTED TO THIS 31ST
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Vice President SMARTLFEX SYSTEMS, INC.
By: //s// ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President
By: //s// ▇▇▇ ▇▇▇▇
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Vice President