LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into
as of March 3, 1997 by and between P-Com, Inc. a Delaware
Corporation ("Borrower") and UNION BANK OF CALIFORNIA, N.A.
("Bank").
SECTION 1. THE LOAN
1.1.1 The Revolving Loan. Bank will loan to
Borrower an amount not to exceed Seventeen Million Five Hundred
Thousand Dollars ($17,500,000) 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 accordance with
the terms of the Revolving Note. All borrowing's of the
Revolving Loan must be made before March 31, 1998 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 accurately reflect both principal outstanding and
payments made. Omission of Bank to make any such entries shall
not discharge Borrower of its obligation to repay in full with
interest all amounts borrowed.
1.1.2 The Standby L/C Sublimit. As a sublimit to
the Revolving Loan, Bank shall issue, for the account of
Borrower, one or more irrevocable, standby letters of credit
(individually, an "L/C" and collectively, the "L/Cs"). All such
standby 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
standby L/C shall have an expiry date more than twelve months
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
for standby L/C applications and reimbursement agreements. No
L/C shall expire after June 30, 1998.
1.2 Terminology.
As used herein the following words shall have the following
definitions:
"Loan" shall mean, collectively, all the credit
facilities described above.
"Note" shall mean, collectively, all the
promissory notes described above.
"Loan Documents" shall mean all documents executed
in connection with this Agreement.
"Guarantor" or "Guarantors" shall mean Geritel,
Inc. and each and every entity in which Borrower now or hereafter
owns a majority interest, each Guarantor to execute a continuing
Guaranty of all Borrower's obligations to Bank and each such
Guaranty being in form and substance satisfactory to Bank.
1.3 Purpose of Loan. The proceeds of the Revolving
Loan shall be used for general short term working capital
purposes and issuance of performance Standby L/C's.
1.4 Interest. The unpaid principal balance of the
Loan shall bear interest at the rate or rates provided in the
Note and selected by Borrower. The Loan may be prepaid in full
or in part only in accordance with the terms of the Note and any
such prepayment shall be subject to the prepayment fee provided
for therein.
1.5 Fees. All fees in connection with the Loan are as
follows:
(a) 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 March
31, 1998, or the earlier termination of the Loan, Borrower shall
pay to Bank a fee of One Hundred Eighty Five Thousandths of One
percent (0.185%) 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;
(b) Standby L/C Issuance Fee shall be at One and
One-half of One Percent (1.50%) per annum.
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 and Banks
commitment to lend has been canceled.
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.
1.9 Further Definition. As used throughout this
Agreement, "material", "material adverse change," and/or
"material adverse effect," as each of these terms may appear in
this Agreement and any of the Loan Documents, shall mean, each in
context, a negative result or potential result arising directly
or indirectly from facts that, in the totality of the
circumstances, Bank considers substantive and germane to (a) the
business, assets, operations, or financial or other condition or
Borrower or any existing or future guarantor ("guarantor"); (b)
the ability of Borrower or any guarantor to pay or perform n
accordance with the terms of this Agreement and any Loan Document
to which either or any are a party; or c the rights and remedies
of Bank under this Agreement or any Loan Documents.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion
of the proceeds of the Loan or issue any L/C unless at or prior
to the time for the making of such disbursement, the following
conditions have been fulfilled to Bank's satisfaction:
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 Note and other documents deemed necessary
by Bank.
2.2 Guaranties. Borrower shall ensure Bank is
provided the Continuing Guaranties from the Guarantors.
2.3 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.
2.4 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, development, and marketing of short-haul
microwave radio systems for use in the telecommunications
marketplace.
3.2 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.
3.3 Financial Statements. The financial statements of
Borrower, including both a balance sheet at , December 31, 1995
and September 30, 1996, together with supporting schedules, and
an income statement for the twelve (12) months ended December
31, 1995, 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 December 31,
1995, and September 30, 1996, there has been no material adverse
change in the financial condition or operations of Borrower.
3.4 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,
adverse claims, and negative pledges, except those specifically
referred to in said financial statements.
3.5 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
or an aggregate of Five Hundred Thousand Dollars ($500,000).
3.6 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.
3.7 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.
3.8 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.
3.9 Authorization. This Agreement and all things
required by this Agreement have been duly authorized by all
requisite action of Borrower.
3.10 Qualification. Borrower is duly qualified and in
good standing in any jurisdiction where such qualification is
required, except to the extent that a failure to so qualify would
not have a material adverse effect on Borrower's financial
condition.
3.11 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.
3.12 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.
3.13 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.
3.14 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 Loan only as provided in subsection 1.4 above.
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 sixty (60) days after the close of
each fiscal quarter, its 10-Q as of the close of such fiscal
quarter, prepared in accordance with the generally accepted
accounting principles and the requirements of the Securities and
Exchange Commission;
(b) Within One Hundred (100) days after the close
of each fiscal year, Form 10-K as of the close of such fiscal
quarter, prepared in accordance with the generally accepted
accounting principles applied on a consistent basis with that of
last year and the requirements of the Securities and Exchange
Commission;
(c) Copies of such financial statements and
reports as Borrower may file with any state or federal agency,
including all state and federal income tax returns, as Bank may
reasonably request from time to time.
(d) Such other financial statements and
information as Bank may reasonably request from time to time;
(e) In connection with each financial statement
provided hereunder, a statement executed by the president or
chief financial officer 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;
(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;
(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 Zero Balance. Borrower shall maintain a zero
balance on the Loan for sixty (60) consecutive days during the
term of the agreement.
4.7 Quick Ratio. Borrower shall maintain at all times
a ratio of unrestricted cash, accounts receivable and marketable
securities to current liabilities of not less than 1.75:1.0, as
such terms are defined by generally accepted accounting
principles.
4.8 Tangible Net Worth. Until March 31, 1998,
Borrower will at all times maintain Tangible Net Worth of not
less than One Hundred Million Dollars ($100,000,000).
Thereafter, Borrower will at all times maintain a minimum
Tangible Net Worth that increases from said amount as of the end
of Borrower's fiscal year by ninety percent (90%) of Borrower's
net profit after taxes plus One Hundred Percent (100%) of the
proceed from any additional equity offerings. "Tangible Net
Worth" shall mean net worth increased by both indebtedness of
Borrower subordinated to Bank, and equity offerings, 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).
4.9 Debt to Tangible Net Worth. Borrower will at all
times maintain a ratio of total liabilities to tangible net worth
of not greater than 0.5:1.0. "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).
4.10 Profitability. Borrower will maintain its net
profit, after provision for income taxes, of not less than Six
Million Dollars ($6,000,000) for any fiscal year, and that there
will be no quarterly after tax losses as reported at the end of
such fiscal quarter.
4.11 Insurance. Borrower will keep all of its
insurable property, real, personal or mixed, insured by companies
and in amounts approved by Bank against fire and such other
risks, and in such amounts, as is customarily obtained by
companies conducting similar business with respect to like
properties. Borrower will furnish to Bank statements of its
insurance coverage, will promptly furnish other or additional
insurance deemed necessary by and upon request of Bank to the
extent that such insurance may be available and hereby assigns to
Bank, as security for Borrower's obligations to Bank, the
proceeds of any such insurance. Borrower will maintain adequate
worker's compensation insurance and adequate insurance against
liability for damage to persons or property. All policies shall
require at least ten (10) days' written notice to Bank before any
policy may be altered or canceled.
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.
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, negative pledge, 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. All of such
permitted property liens shall not exceed, in the aggregate,
Seven Million Dollars ($7,000,000) at any time.
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 in
connection with any ongoing lease financing arrangements having
an aggregate value up to Two Million Five Hundred Thousand
Dollars ($2,500,000) and which are in process as of the date of
this Agreement, 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, nor enter any
agreement to directly or indirectly obtain borrowed money, except
pursuant to 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 and to its subsidiaries, make any loans or advances,
become a guarantor or surety, pledge its credit or properties in
any manner or extend credit.
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 Xxxxx'x or Standard & Poor's, provided all such
permitted investments shall mature within eighteen months of
purchase.
5.6 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.
5.7 Capital Expenditures. Borrower will not make
capital expenditures in excess of Ten Million Dollars
($10,000,000) in any fiscal year; and shall only make such
expenditures as are necessary for Borrower in the conduct of its
ordinary course of business. No more than Five Million Dollars
($5,000,000) of which shall be unfinanced through third parties.
Each said expenditure shall be needed by Borrower in the ordinary
course of its business. Expenditures as used in this subsection
shall include the current expense portion of all leases whether
or not capitalized and shall also include the current portion of
any debt used to finance capital expenditures.
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,
which default continues for more than thirty (30) days;
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
twenty percent (20%) 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.
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 of
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.
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.
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.
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.
By: /s/ Xxxx X. Xxxxx
-----------------------
Name: Xxxx X. Xxxxx
Title: Vice President and Trade Finance Specialist
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President and Senior Credit Executive
P-Com, Inc.
By: /s/ Xxxxxxx Sophie
------------------------
Title: CFO/VP Finance
Address: 0000 Xxxxx Xxxxxxxxxx
Xxxxxxxx, XX 00000
