EXHIBIT 10.41
SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO
SECURITY AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO SECURITY
AGREEMENT (this "Amendment") is entered into as of October 21, 1998, by and
among P-Com, Inc., a Delaware corporation ("Borrower"), the financial
institutions named on the signature pages hereof (each, a "Lender" and
collectively the "Lenders"), Union Bank of California, N.A., as administrative
agent for the Lenders ("Agent"), and Bank of America National Trust and Savings
Association, as syndication agent ("Syndication Agent"), with reference to the
following facts:
A. Borrower, Agent, Syndication Agent and Lenders are parties to that
certain Credit Agreement dated as of May 15, 1998, as amended (the "Credit
Agreement"). The Borrower and the Agent are parties to that certain Security
Agreement dated as of May 15, 1998 (the "Security Agreement"). The Credit
Agreement and all related and supporting documents collectively are referred to
in this Amendment as the "Loan Documents."
B. The parties desire to amend the Loan Documents in accordance with the
terms of this Amendment.
NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall
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have the same meanings as set forth in the Credit Agreement and the other Loan
Documents.
2. Amendments to Credit Agreement. The Credit Agreement is hereby
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amended as follows:
(a) The following defined term in Section 1.1 is amended to read as
follows: "Interest Payment Date:" As to any Base Rate Loan or LIBO Rate
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Loan until payment in full, the first Business Day of each month and the
Maturity Date.
(b) The following defined terms are added to Section 1.1 in their
proper alphabetical order:
"Consolidated Adjusted EBITDA": For any period of determination,
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the sum of net income, depreciation, amortization, interest expense and
income tax expense of the Borrower and its consolidated Subsidiaries for
the most recently ended fiscal quarter, minus any increases in accounts
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receivable or inventory during such fiscal quarter, minus any decreases
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payable during such fiscal quarter, plus any increases in accounts payable
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in accounts during such fiscal quarter, plus any decreases in accounts
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receivable or inventory during such fiscal quarter, in each case of the
Borrower and its consolidated Subsidiaries for such period determined and
consolidated in accordance with GAAP; provided, that any decreases in
inventory or accounts receivable resulting from write-downs shall be
excluded from this calculation.
"Consolidated Annualized Adjusted EBITDA:" For any period of
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determination, the sum of net income, depreciation, amortization, interest
expense and income tax expense of the Borrower and its consolidated
Subsidiaries for the most recently ended fiscal quarter, multiplied by
four, minus any increases in accounts receivable or inventory during such
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fiscal quarter, minus any decreases in accounts payable during such fiscal
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quarter, plus any increases in accounts payable during such fiscal quarter,
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plus any decreases in accounts receivable or inventory during such fiscal
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quarter, in each case of the Borrower and its consolidated Subsidiaries for
such period determined and consolidated in accordance with GAAP; provided,
that any decreases in inventory or accounts receivable resulting from
write-downs shall be excluded from this calculation.
(c) From the Effective Date until five (5) Business Days after
Agent's receipt of the Borrower's financial statements and Compliance
Certificate for the fiscal quarter ended September 30, 1998, the Applicable
Margin for Base Rate Loans, and the Commitment Fee Rate, shall be as set forth
in Level I in Exhibit E hereto. Notwithstanding any provision of the Credit
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Agreement to the contrary, from the Effective Date and for so long as Borrower's
ratio of Consolidated Funded Debt to Consolidated Annualized Adjusted EBITDA as
specified in Section 6.2(b) is equal to or greater than 4.00 to 1.00, (i)
Borrower shall not be permitted to request or receive LIBO Rate Loans, (ii) no
Loan may be converted to a Loan other than a Base Rate Loan, and (iii) any LIBO
Rate Loans shall bear interest on the unpaid principal amount thereof at a per
annum rate equal to the Base Rate plus the Applicable Margin for Base Rate
Loans.
(d) Section 2.5(f)(i) is amended to read as follows:
(i) with respect to each Letter of Credit, a Letter of
Credit fee for the period from and including the date of issuance of the
Letter of Credit to and including the date such Letter of Credit is drawn
in full, expires or is terminated for the ratable benefit of the Lenders at
a rate per annum equal to the Applicable Margin for LIBO Rate Loans (or,
for any period during which Borrower is not eligible to request or receive
LIBO Rate Loans, a rate per annum equal to 2.50%) multiplied by the stated
amount of the Letter of Credit, payable on the date of issuance of the
Letter of Credit for the period from the date of issuance to the first
Business Day of the next calendar month, and thereafter payable monthly in
arrears on the first Business Day of each month;
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(e) Section 6.1(a)(iii)(B) is amended to read as follows:
(B) a Compliance Certificate in the form of Exhibit D
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hereto demonstrating in reasonable detail compliance during and at the end of
such accounting periods with the restrictions contained in Sections 6.2(a), (b),
(c), (d), (e), (h), (w), and (x).
(f) Section 6.1(a) is amended by adding the following new clause
(v) in its proper alphanumeric order:
(v) as soon as available, but in any event within thirty
(30) days after the end of each calendar month, a copy of the unaudited
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated and consolidating statements of income and retained
earnings (or comparable statement) and changes in financial position and
cash flow for such period and year to date, setting forth in each case in
comparative form the figures as at the end of the previous fiscal year as
to the balance sheet and the figures for the previous corresponding period
as to the other statements, certified by a duly authorized officer of the
Borrower as being fairly stated in all material respects subject to year
end and audit adjustments, all such financial statements to be complete and
correct in all material respects and in accordance with GAAP subject to
normal year end and audit adjustments and the absence of footnotes, applied
consistently throughout the period reflected therein (except as approved by
such accountants and disclosed therein);
(g) Section 6.1(a) is amended by adding the following new clause
(vi) in its proper alphanumeric order:
(vi) as soon as available, but in any event within fifteen
(15) days after the end of each calendar month, aged listings of accounts
receivable and accounts payable, a summary of inventory, and an eight (8) week
rolling cash flow forecast, each in form and substance satisfactory to the
Agent;
(h) Section 6.1(b)(v) is amended to read as follows:
(v) promptly, but in any event within ten (10) days after
request, such budgets, sales projections, operating plans or other information
and data with respect to the Borrower or any of its Subsidiaries as from time to
time may be reasonably requested by the Agent or any Lender.
(i) Agent shall have a right from time to time hereafter to audit
the Collateral (as such term is defined in the Security Agreement) at
Borrower's expense, provided that such audits will be conducted no more
often than once in any period of twelve (12) consecutive months unless an
Event of Default or Potential Event of Default has occurred and is
continuing.
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(j) Section 6.2(a) is amended to read as follows:
(a) Quick Ratio. Permit the ratio of Consolidated Quick
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to Consolidated Current Liabilities as of the last day of each of the
fiscal quarters of Borrower listed below to be less than the correlative
Assets amount indicated below:
Quarter Ending: Ratio:
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September 30, 1998 0.70 : 1.00
December 31, 1998 0.80 : 1.00
March 31, 1999 0.90 : 1.00
June 30, 1999, and thereafter 1.00 : 1.00
(k) Section 6.2(b) is amended to read as follows:
(b) Leverage Ratio. As at the end of any fiscal quarter of
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the Borrower commencing with the fiscal quarter ending March 31, 1999,
permit the ratio of Consolidated Funded Debt as at the end of such fiscal
quarter, to Consolidated Annualized Adjusted EBITDA for such fiscal
quarter, to be greater than the correlative amount indicated below:
Quarter Ending: Ratio:
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March 31, 1999 8.50 : 1.00
June 30, 1999 5.00 : 1.00
September 30, 1999 5.00 : 1.00
December 31, 1999, and thereafter 4.00 : 1.00
For purposes of determining the ratio set forth in this Section
6.2(b), and for purposes of determining the "Applicable Margin" and
"Commitment Fee Rate" as set forth in Exhibit E, for any period of
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determination in which Consolidated Annualized Adjusted EBITDA is a sum
less than Zero Dollars ($0), such sum shall be deemed to be One Dollar
($1).
(l) Section 6.2(c) is amended to read as follows:
(c) Consolidated Tangible Net Worth. Commencing with the
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fiscal quarter ended September 30, 1998, permit Consolidated Tangible Net
Worth as of the last day of any fiscal quarter of Borrower to be less than
Thirty-Eight Million Dollars ($38,000,000) plus (i) 75% of Consolidated Net
Income (but not loss) for each fiscal quarter of the Borrower commencing
with the quarter ending September 30, 1998, plus (ii) 100% of the Net
Proceeds of any Equity Issuance by the Borrower after September 30, 1998.
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(m) Section 6.2(d) is amended to read as follows:
(d) Profitability. Permit (i) net income before taxes of
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the Borrower and its consolidated Subsidiaries to reflect a loss exceeding
$82,000,000 on a fiscal year-to-date basis, calculated as of the last day
of each of the fiscal quarters ended September 30, 1998, and December 31,
1998, or (ii) commencing with the fiscal quarter ended March 31, 1999,
permit (a) net income before taxes of the Borrower and its consolidated
Subsidiaries or (b) Consolidated Net Income to be less than Zero Dollars
($0) for any fiscal quarter of Borrower.
(n) Section 6.2(e) is amended to read as follows:
(e) Interest Coverage Ratio. As at the end of any fiscal
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quarter of Borrower commencing with the fiscal quarter ended March 31,
1999, permit the ratio of Consolidated Annualized Adjusted EBITDA for such
quarter, to Consolidated Interest Expense for the four fiscal quarters
ending on the last day of such fiscal quarter, to be less than the
correlative amount indicated below:
Quarter Ending: Ratio:
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March 31, 1999 2.00 : 1.00
June 30, 1999, and thereafter 3.00 : 1.00
(o) Clause (v) of Section 6.2(f) and clauses (iii) and (vi) of
Section 6.2(g) are deleted in their entirety; provided, however, that any Debt
in an aggregate amount of up to $5,000,000 incurred prior to September 30, 1998
that was permitted under clauses (iii) and (vi) of Section 6.2(g), and any Liens
created prior to September 30, 1998 that were permitted under clause (v) of
Section 6.2(f) shall be permitted notwithstanding this Clause (o); provided that
such Debt and Liens shall be listed on the Schedules delivered under clause
(iii) of Section 5(b) of this Amendment.
(p) Section 6.2(i) is amended in its entirety to read as follows:
(i) Consolidation, Merger. Consolidate or merge with any
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other Person, liquidate, wind-up or dissolve itself or acquire by purchase
or otherwise all or substantially all of the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any
Person, or permit any of its Subsidiaries to do any of the foregoing,
except that any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower or any wholly-owned Subsidiary of the Borrower,
or be liquidated, wound up or dissolved, or all or any substantial part of
its business, property or assets may be conveyed, sold, leased, transferred
or otherwise disposed of, in one transaction or a series of transactions,
to the Borrower or any wholly-owned Subsidiary of the Borrower; provided
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that, in the case of such a merger or consolidation, the Borrower or such
wholly-owned Subsidiary shall be the continuing or surviving corporation.
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(q) A new Section 6.2(w) is added to the agreement, which shall
read as follows:
(w) Minimum Consolidated EBITDA; Minimum Consolidated
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Adjusted EBITDA. Permit (i) Consolidated EBITDA to reflect a loss of
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more than $15,500,000 for the fiscal quarter ended September 30, 1998, or
(ii) Consolidated Adjusted EBITDA to reflect a loss of more than $2,000,000
for the fiscal quarter ended December 31, 1998. For purposes of calculating
Consolidated EBITDA for the fiscal quarter ended September 30, 1998, such
calculation may include, without duplication, one-time charges not
exceeding $27,000,000.
(r) A new Section 6.2(x) is added to the agreement, which shall
read as follows:
(x) Consolidated Capital Expenditures. Make, or permit any
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Subsidiary to make, Consolidated Capital Expenditures, other than:
(i) Consolidated Capital Expenditures for the Borrower's
fiscal quarter ending September 30, 1998, not in excess of $7,500,000;
(ii) Consolidated Capital Expenditures for the Borrower's
fiscal quarter ending December 31, 1998, not in excess of $7,500,000; and
(iii) Consolidated Capital Expenditures for the Borrower's
fiscal quarter ending March 31, 1999, and for each fiscal quarter
thereafter, not in excess of $5,000,000.
(s) Section 7.1(c) is amended to read as follows:
(c) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 3.1, 6.1(a), (b) or (c), 6.2(a),
(b), (c), (d), (e), (g), (h), (i), (j), (l), (p), (q), (r), (s), (t), (u),
(v), (w) or (x) on its part to be performed or observed; or
(t) Section 7.1(d) is amended to read as follows:
(d) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in this Agreement or any other Loan
Document other than those referred to in Sections 7.1(a), (b), and (c)
above on its part to be performed or observed and any such failure shall
remain unremedied or uncured for fifteen (15) days after the Borrower knows
of such failure or, in the event such failure cannot by its nature be cured
within such fifteen (15) day period or cannot after diligent attempts by
Borrower be cured within such fifteen (15) day period, and the Borrower
determines and so notifies the Agent within such fifteen (15) day period
that such a remedy or cure is practicable within an additional fifteen (15)
days, such failure shall remain unremedied or uncured for thirty
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(30) days after the Borrower knows of such failure, provided, however, that
the cure period provided in this Section 7.1(d) shall not be in addition to
any grace period provided in Section 7.1(g) or (h), and no grace period or
cure period shall be given for Events of Default under Section 7.1(f), (i),
(j), (k), (l) or (m); or
(u) Section 7.1(e) is amended to read as follows:
(e) Any Loan Party shall default in the performance of or
compliance with any term contained in any Loan Document other than this
Agreement and such default shall not have been remedied or waived (A)
within any applicable grace period or (B) if not specified in the
applicable Loan Document, within fifteen (15) days after such Loan Party
knows of such default or, in the event that such a remedy or cure is not
practicable within such fifteen (15) day period but the Borrower determines
and so notifies the Agent within such fifteen (15) day period that such a
remedy or cure is practicable within an additional fifteen (15) days, such
default shall remain unremedied or uncured for thirty (30) days after the
Borrower knows of such default; or
(v) A new subsection (j) is added to Section 7.1, Events of
Default, immediately following subsection (i), which shall read as follows:
(j) an "event of repurchase" or similar event shall occur
under any agreement to which any Loan Party is a party with a third party
or parties relating to the purchase of any Loan Party's accounts
receivable, other than one receivable due from Telkom S.A. Limited in an
amount not to exceed $5,500,000, which event results in a right by the
purchaser of such receivables, whether or not exercised, to require such
Loan Party to repurchase and pay for purchased accounts receivable in an
aggregate amount in excess of $1,000,000 for any fiscal year; or
(w) A new subsection (k) is added to Section 7.1, Events of
Default, immediately following subsection (j), which shall read as follows:
(k) A "Change of Control," as such term is defined in the
Indenture dated as of November 1, 1997, between the Borrower and State
Street Bank and Trust Company of California, N.A., as Trustee, relating to
the Borrower's 4 1/4% Convertible Subordinated Notes due 2002, shall occur;
or
(x) A new subsection (l) is added to Section 7.1, Events of
Default, immediately following subsection (k), which shall read as follows:
(l) Any event or series of events occurs that creates or
results in a material adverse effect on (i) the business, assets,
operations, prospects or financial or other condition of the Borrower,
individually, or the Loan Parties, taken as a whole, (ii) the Borrower's
ability to pay any of the obligations to Lenders in accordance with the
terms thereof, or (iii) the collateral or Lenders' security interests
therein or the priority of
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such security interests, or (iv) Agent's or any Lender's rights and
remedies under this Agreement and the other Loan Documents; or
(y) A new subsection (m) is added to Section 7.1, Events of
Default, immediately following subsection (l), which shall read as follows:
(m) The Borrower shall fail to receive, on or prior to
November 15, 1998, Net Proceeds of at least $10,000,000 from an Equity
Issuance after September 30, 1998, on terms satisfactory to Lenders;
(z) Exhibit D is deleted and replaced with Exhibit D hereto.
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(aa) Exhibit E is deleted and replaced with Exhibit E hereto.
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(bb) A new Section 9.17 is added to the Credit Agreement, which
shall read as follows:
9.17 Designated Senior Indebtedness. The indebtedness of
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the Borrower under the Credit Agreement and the other Loan Documents shall
be "Designated Senior Indebtedness" for purposes of the Indenture dated as
of November 1, 1997, between the Borrower and State Street Bank and Trust
Company of California, N.A., as Trustee, relating to Borrower's 4 1/4%
Convertible Subordinated Notes due 2002.
3. Amendments to Security Agreement. The Security Agreement is hereby
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amended as follows:
(a) Section 2 is amended by adding the following sentence at the end
thereof:
The term "Secured Obligations" shall also be deemed to include all
obligations and liabilities of every nature owed by Borrower to any Lender,
under or arising out of or in connection with the Credit Agreement or
otherwise.
4. Consent to Equity Issuance. Lenders hereby consent, pursuant to
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Section 6.2(r) of the Credit Agreement, to an Equity Issuance by Borrower after
the Effective Date, on terms substantially the same as those set forth in the
term sheet dated October 10, 1998 presented to Lenders on the date of this
Amendment, subject in any case to Section 6.2(h) of the Credit Agreement.
5. Conditions to Effectiveness.
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This Amendment shall become effective as of October 21, 1998 (the
"Effective Date"), only upon:
(a) receipt by the Agent from the Borrower of an amendment fee as set
forth separately in a letter agreement by and among the Borrower, the Agent
and the Lenders;
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(b) receipt by the Agent of the following (each of which shall be in
form and substance satisfactory to the Agent and its counsel):
(i) counterparts of this Amendment duly executed on behalf of
the Borrower and the Lenders;
(ii) copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, authorizing the execution and
delivery of this Amendment;
(iii) within 15 days after the date hereof, updated copies of
Schedules 6.2(f) (Liens), 6.2(g) (Debt), and 6.2(k) (Contingent Obligations),
and Exhibits A, B and C to the Intellectual Property Security Agreement and each
of the Subsidiary Intellectual Property Security Agreements;
(c) affirmations of the Guaranty, duly executed on behalf of each
Guarantor;
(d) copies of the Borrower's 1998 and 1999 fiscal plan, certified by
an officer of Borrower as having been prepared in accordance with GAAP.
6. Representations and Warranties. In order to induce the Lenders to
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enter into this Amendment, the Borrower represents and warrants to the Lenders
that the following statements are true, correct and complete as of the effective
date of this Amendment:
(a) Corporate Power and Authority. The Borrower has all requisite
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corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement"). The
Certificate of Incorporation and Bylaws of the Borrower have not been amended
since the copies previously delivered to the Lenders.
(b) Authorization of Agreements. The execution and delivery of this
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Amendment and the performance by the Borrower of the Amended Agreement have been
duly authorized by all necessary corporate action on the part of the Borrower.
(c) No Conflict. The execution and delivery by the Borrower of this
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Amendment do not and will not contravene (i) any law or any governmental rule or
regulation applicable to the Borrower, except to the extent not resulting in a
Material Adverse Effect, (ii) the Certificate of Incorporation or Bylaws of the
Borrower, (iii) any order, judgment or decree of any court or other agency of
government binding on the Borrower, or (iv) any material agreement or instrument
binding on the Borrower, except to the extent not resulting in a Material
Adverse Effect.
(d) Governmental Consents. The execution and delivery by the
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Borrower of this Amendment and the performance by the Borrower of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body (except routine
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reports required pursuant to the Securities and Exchange Act of 1934, as amended
(as such act is applicable to any Loan Party), which reports will be made in the
ordinary course of business).
(e) Binding Obligation. This Amendment and the Amended Agreement
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have been duly executed and delivered by the Borrower and are the binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, except in each case as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws and equitable principles relating to or affecting creditors'
rights.
(f) Incorporation of Representations and Warranties From Credit
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Agreement. The representations and warranties contained in Section 5.1 of the
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Credit Agreement are correct on and as of the effective date of this Amendment
as though made on and as of such date. Without limiting the generality of the
foregoing, Borrower represents and warrants that all of Borrower's Copyrights,
Patents, and Trademarks, in connection with the Material Products, including any
such property acquired from Cylink Corporation, are set forth in Exhibits A, B
and C to the Intellectual Property Security Agreement, and that all such
Copyrights, Patents, and Trademarks have been registered with the U.S. Copyright
Office, or the U.S. Patent and Trademark Office, as applicable.
(g) Absence of Default. After giving effect to this Amendment, no
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event has occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default.
7. Release.
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(a) Each Loan Party acknowledges that Lenders would not enter into
this Amendment without the Loan Parties' assurance that each Loan Party has no
claims against any Lender, the Agent, Syndication Agent, or any of such parties'
officers, directors, employees or agents, arising out of or related to the Loan
Documents or any other agreement between any Loan Party and any Lender. Except
for the obligations arising hereafter under the Amended Agreement, each Loan
Party releases each Lender, the Agent, Syndication Agent, and each of such
parties' officers, directors and employees from any known or unknown claims
which any Loan Party now has against any Lender, the Agent, or Syndication Agent
of any nature, arising out of or related to the Loan Documents or any other
agreement between any Loan Party and any Lender, including any claims that any
Loan Party, or any Loan Party's successors, counsel, and advisors may in the
future discover they would have had now if they had known facts not now known to
them, whether founded in contract, in tort or pursuant to any other theory of
liability. Each Loan Party waives the provisions of California Civil Code
section1542, which states:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
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(b) The provisions, waivers and releases set forth in this section are
binding upon each Loan Party and each Loan Party's shareholders, agents,
employees, assigns and successors in interest. The provisions, waivers and
releases of this section shall inure to the benefit of each Lender, the Agent,
Syndication Agent, and each such party's agents, employees, officers, directors,
assigns and successors in interest as parties to the Credit Agreement.
(c) The provisions of this section shall survive payment in full of
the obligations, full performance of all the terms of this Amendment and the
Loan Documents, and/or the Agent's or any Lender's actions to exercise any
remedy available under the Loan Documents or otherwise.
(d) Each Loan Party warrants and represents that each such Loan Party
is the sole and lawful owner of all right, title and interest in and to all of
the claims released hereby and each such Loan Party has not heretofore
voluntarily, by operation of law or otherwise, assigned or transferred or
purported to assign or transfer to any person any such claim or any portion
thereof. Each Loan Party shall indemnify and hold harmless each Lender, the
Agent, and Syndication Agent, from and against any claim, demand, damage, debt,
liability (including payment of reasonable attorneys' fees and costs actually
incurred whether or not litigation is commenced) based on or arising out of any
assignment or transfer.
8. Miscellaneous.
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(a) Reference to and Effect on the Credit Agreement and the Other Loan
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Documents.
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(i) On and after the Effective Date, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement," "thereunder," "thereof" or words
of like import referring to the Credit Agreement, shall mean and be a reference
to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the Agent
or Lenders under the Credit Agreement or any of the other Loan Documents.
(b) Fees and Expenses. All costs and expenses of the Agent and
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Lenders, including, but not limited to, reasonable attorneys' fees and the
reasonable estimate of the allocated cost of in-house counsel and staff,
incurred by the Agent and Lenders in the preparation and negotiation of this
Amendment constitute costs and expenses in connection with the amendment and
restructuring of the Loan Documents, and as such are payable by the Borrower in
accordance with Section 9.5 of the Credit Agreement.
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(c) Headings. Section and subsection headings in this Amendment are
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included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(d) Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
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CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(e) Counterparts. This Amendment may be executed in any number of
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counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
P-COM, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. Sophie
________________________________
TITLE: CFO/VP Finance
_____________________________
AGENT:
UNION BANK OF CALIFORNIA, N.A.
BY: ▇▇▇▇ ▇▇▇▇▇
________________________________
TITLE: Vice President
_____________________________
LENDERS:
UNION BANK OF CALIFORNIA, N.A.
BY: ▇▇▇▇ ▇▇▇▇▇
________________________________
TITLE: Vice President
_____________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
________________________________
TITLE: Vice President
_____________________________
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EXHIBIT D
[FORM OF COMPLIANCE CERTIFICATE]
1. This Compliance Certificate ("Compliance Certificate") is executed and
delivered by P-Com, Inc., a Delaware corporation (the "Borrower"), to Union Bank
of California, N.A. (the "Agent"), pursuant to Section 6.1(a)(iii)(B) of the
Credit Agreement dated as of May 15, 1998, among the Borrower, the financial
institutions named therein and the Agent. Any terms used herein and not defined
herein shall have the meanings defined in the Credit Agreement. This Compliance
Certificate covers the Borrower's:
Fiscal quarter ended _________, 19__
Fiscal year ended _________, 19__
2. The following paragraphs set forth calculations in compliance with
obligations pursuant to Section 6.2(a), (b), (c), (d), (e), and (h) of the
Credit Agreement, as of the end of the fiscal period set forth in paragraph 1
hereof.
A. Quick Ratio (Sec. 6.2(a)):
--------------------------
(a) Consolidated Quick Assets $_________
(b) Consolidated Current Liabilities $_________
Ratio (a) : (b) __________
Minimum Permitted Ratio
Quarter Ending: Ratio:
--------------- -----
September 30, 1998 0.70 : 1.00
December 31, 1998 0.80 : 1.00
March 31, 1999 0.90 : 1.00
June 30, 1999, and thereafter 1.00 : 1.00
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B. Leverage Ratio (Sec 6.2(b)):
---------------------------
(a) Consolidated Funded Debt as at the end of the
most recent fiscal quarter $_________
(b) Consolidated Annualized Adjusted EBITDA for the
most recently ended fiscal quarter
$__________
Ratio (a) to (b) __________
Maximum Permitted Ratio
Quarter Ending: Ratio:
-------------- -----
March 31, 1999 8.50 : 1.00
June 30, 1999 5.00 : 1.00
September 30, 1999 5.00 : 1.00
December 31, 1999, and thereafter 4.00 : 1.00
C. Consolidated Tangible Net Worth (Sec. 6.2(c)):
---------------------------------------------
(a) $38,000,000
(b) plus 75% of Consolidated Net Income (but not
loss) for each fiscal quarter of the Borrower
commencing with the fiscal quarter ending September
30, 1998 $_________
(c) plus 100% of Net Proceeds of any Equity Issuance
after September 30, 1998 $_________
Minimum Required Consolidated Tangible
Net Worth: (a) + (b) + (c): $_________
Actual Consolidated Tangible Net Worth: $_________
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D. Profitability (Sec 6.2(d)):
--------------------------
1. (a) Net income before taxes of Borrower
and its consolidated Subsidiaries on $_________
a fiscal year-to-date basis as of the
last day of the most recent fiscal
quarter, for the fiscal quarters
ended September 30, 1998,and December
31, 1998
Required: No loss exceeding $82,000,000
2. (a) Net income before taxes of Borrower
and its consolidated Subsidiaries $_________
for the most recent fiscal quarter,
commencing with the quarter ended
▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇) Consolidated Net Income for the most
recent fiscal quarter, commencing $_________
with the quarter ended March 31, 1999
Required: (a) and (b): > $0
E. Interest Coverage Ratio (Sec. 6.2(e)):
-------------------------------------
(a) Consolidated Annualized Adjusted EBITDA $_________
for the most recent fiscal quarter
(b) Consolidated Interest Expense for the $_________
four fiscal quarters ending on the last
day of the most recent fiscal quarter
Ratio (a) to (b) ____ : 1.00
Minimum Permitted Ratio
Quarter Ending: Ratio:
-------------- -----
March 31, 1999 2.00 : 1.00
June 30, 1999, and thereafter 3.00 : 1.00
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F. Dividends (Sec. 6.2(h)):
-----------------------
Dividends declared or paid in current fiscal year $_________
Permitted: $0
G. Minimum Consolidated EBITDA; Minimum Consolidated
-------------------------------------------------
Adjusted EBITDA (Sec. 6.2(w)):
-----------------------------
Consolidated EBITDA for the fiscal quarter ended $_________
September 30, 1998
Required: No loss exceeding $15,500,000
Consolidated Adjusted EBITDA for the fiscal quarter $_________
ended December 31, 1998
Required: No loss exceeding $2,000,000
H. Consolidated Capital Expenditures (Sec. 6.2(x)):
-----------------------------------------------
Consolidated Capital Expenditures of the Borrower and $_________
its Subsidiaries for the current fiscal quarter
Permitted:
---------
Quarter Ending: Not more than:
-------------- -------------
September 30, 1998 $7,500,000
December 31, 1998 $7,500,000
March 31, 1999, and thereafter $5,000,000
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its Subsidiaries
during the fiscal period covered by this Compliance Certificate. The undersigned
does not (either as a result of such review or otherwise) have any
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knowledge of the existence as of the date of this Compliance Certificate of any
condition or event that constitutes an Event of Default or a Potential Event of
Default, with the exception set forth below in response to which the Borrower is
taking or proposes to take the following actions (if none, so state):
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4. This Compliance Certificate is executed on _______________, ___, by the
Chief Executive Officer or Chief Financial Officer of the Borrower. The
undersigned hereby certifies that each and every matter contained herein is
derived from the Borrower's books and records and is, to the best knowledge of
the undersigned, true and correct.
P-Com, Inc.
A DELAWARE CORPORATION
BY:
------------------------------
TITLE:
---------------------------
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EXHIBIT E
PRICING GRID
The "Applicable Margin" and the "Commitment Fee Rate" shall mean the
variable number of percentage points determined in accordance with the grid set
forth below, based upon the Borrower's ratio of Consolidated Funded Debt as at
the end of each fiscal quarter to Consolidated Annualized Adjusted EBITDA as
specified in Section 6.2(b) (the "Leverage Ratio"), as determined by the Agent
with reference to the Borrower's most recently delivered financial statements
and Compliance Certificate. The effective date of any change in the Applicable
Margin and/or the Commitment Fee Rate shall be five (5) Business Days following
Agent's receipt of Borrower's financial statements and Compliance Certificate;
provided that if Borrower shall not have timely delivered its financial
statements and Compliance Certificate in accordance with Section 6.1(a), then
commencing five (5) Business Days following the date upon which such financial
statements should have been delivered and continuing until such financial
statements are actually delivered, it shall be assumed for purposes of
determining said rates that Borrower's Leverage Ratio is equal to or greater
than 7.00 to 1.00.
Applicable Applicable
Margin for Margin for
Leverage Commitment LIBO Rate Base Rate
Level Ratio Fee Rate Loans Loans
--------- ------------------------ ---------------- ---------------- ----------------
I. Equal to or greater than 0.50% N/A 1.00%
7.00 : 1.00
II. Equal to or greater than 0.50% N/A .50%
4.00 : 1.00 but less than
7.00 : 1.00
III. Equal to or greater than 0.30% 2.50% 0.00%
3.00 : 1.00 but less than
4.00 : 1.00
IV. Equal to or greater than 0.25% 1.50% 0.00%
2.00 : 1.00 but less than
3.00 : 1.00
V. Less than 2.00 : 1.00 0.20% 1.00% 0.00%
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AFFIRMATION OF GUARANTY
-----------------------
The undersigned Guarantors hereby acknowledge and agree to the terms of the
foregoing Second Amendment to Credit Agreement (the "Amendment"), and further
acknowledge and agree that nothing contained in the Amendment in any way affects
the validity and enforceability of that certain Subsidiary Guaranty (the
"Guaranty") dated as of May 15, 1998, executed by each of the undersigned
Guarantors in favor of Lenders, the validity and effectiveness of which Guaranty
is hereby reaffirmed as of the Effective Date of the Amendment.
CONTROL RESOURCES CORPORATION
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
NAME:
TITLE:
P-COM NETWORK SERVICES, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
NAME:
TITLE:
P-COM FINANCE CORPORATION
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
NAME:
TITLE:
P-COM UNITED KINGDOM, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
NAME:
TITLE:
TELEMATICS, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
NAME:
TITLE:
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