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EXHIBIT 10.14
[GRAPHIC OMITTED] SILICON VALLEY BANK
AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
BORROWERS: EMULEX CORPORATION, A CALIFORNIA CORPORATION
0000 XXXXXX XXXXXXXXX
XXXXX XXXX, XXXXXXXXXX 00000
INTERCONNECTIONS, INC.
00000 XX 00XX XXXXX
XXXXXXXX, XXXXXXXXXX 00000
EMULEX EUROPE LIMITED
MULBERRY BUSINESS PARK, XXXXXXXXX XXXX
XXXXXXXXX, XXXXXXXXX
XXXXXX XXXXXXX XX00 0XX
DATE: SEPTEMBER 18, 1996
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into on the
above date between SILICON VALLEY BANK ("Silicon"), whose address is 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and the borrowers named above (jointly and
severally referred to as the "Borrower"), whose chief executive offices are
located at the above address ("Borrower's Address"), and this Agreement amends
and restates in its entirety, effective as of the date hereof, the Loan and
Security Agreement between Silicon and Borrower, dated March 31, 1994, as
amended by that Amendment to Loan Agreement dated April 25, 1994, as amended by
that Amendment to Loan Agreement dated July 1, 1994, as amended by that
Amendment to Loan Agreement dated June 26, 1995, as amended by that Amendment to
Loan Agreement dated July 24, 1995, as amended by that Amendment to Loan
Agreement dated October 5, 1995, as amended by that Amendment to Loan Agreement
dated January 18, 1996, as amended by that Amendment to Loan Agreement dated
April 18, 1996, and as otherwise amended prior to the date hereof.
1. LOANS.
1.1 LOANS. Silicon, in its reasonable discretion, will make loans to the
Borrower (the "Loans") in amounts determined by Silicon in its reasonable
discretion up to the amount (the "Credit Limit") shown on the Schedule to this
Agreement (the "Schedule"), provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default has
occurred. The Borrower is responsible for monitoring the total amount of Loans
and other Obligations outstanding from time to time, and Borrower shall not
permit the same, at any time, to exceed the Credit Limit. If at any time the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, the Borrower shall immediately pay the amount of the excess to Silicon,
without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule hereto. Interest shall be payable monthly, on
the due date shown on the monthly billing from Silicon to the Borrower. Silicon
may, in its discretion, charge interest to Borrower's deposit accounts
maintained with Silicon*.
*; SILICON AGREES TO USE ITS STANDARD PROCEDURE TO PROVIDE WRITTEN
CONFIRMATION OF THE CHARGING OF ANY SUCH INTEREST, PROVIDED ANY FAILURE BY
SILICON TO SO
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NOTIFY THE BORROWER SHALL NOT AFFECT THE RIGHT OF SILICON TO CHARGE AND COLLECT
SUCH INTEREST.
1.3 FEES. The Borrower shall pay to Silicon a loan origination fee in the
amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable. *
* BORROWER SHALL ALSO PAY A COMMITMENT/UNUSED LINE FEE AS SET FORTH IN
PARAGRAPH 4 OF THE SECTION OF THE SCHEDULE TO LOAN AGREEMENT ENTITLED "OTHER
COVENANTS (SECTION 4.1)."
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement means the
following: the obligation to pay all Loans and all interest thereon when due,
and to pay and perform when due all other present and future indebtedness,
liabilities, obligations, guarantees, covenants, agreements, warranties and
representations of the Borrower to Silicon, whether joint or several, monetary
or non-monetary, and whether created pursuant to this Agreement or any other
present or future agreement or otherwise. Silicon may, in its discretion,
require that Borrower pay monetary Obligations in cash to Silicon, or charge
them to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans. Silicon may also, in its discretion, charge
any monetary Obligations to Borrower's deposit accounts maintained with Silicon.
2.2 COLLATERAL. * all of the Borrower's interest in the types of property
described below, whether now owned or hereafter acquired, and wherever located:
(a) All accounts, contract rights, chattel paper, letters of credit, documents,
securities, money, and instruments, and all other obligations now or in the
future owing to the Borrower; (b) All inventory, goods, merchandise, materials,
raw materials, work in process, finished goods, farm products, advertising,
packaging and shipping materials, supplies, and all other tangible personal
property which is held for sale or lease or furnished under contracts of service
or consumed in the Borrower's business, and all warehouse receipts and other
documents; and (c) All equipment, including without limitation all machinery,
fixtures, trade fixtures, vehicles, furnishings, furniture, materials, tools,
machine tools, office equipment, computers and peripheral devices, appliances,
apparatus, parts, dies, and jigs; (d) All general intangibles including, but not
limited to, deposit accounts, goodwill, names, trade names, trademarks and the
goodwill of the business symbolized thereby, trade secrets, drawings,
blueprints, customer lists, patents, patent applications, copyrights, security
deposits, loan commitment fees, federal, state and local tax refunds and claims,
all rights in all litigation presently or hereafter pending for any cause or
claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against Silicon, all rights
to purchase or sell real or personal property, all rights as a licensor or
licensee of any kind, all royalties, licenses, processes, telephone numbers,
proprietary information, purchase orders, and all insurance policies and claims
(including without limitation credit, liability, property and other insurance),
and all other rights, privileges and franchises of every kind; (e) All books and
records, whether stored on computers or otherwise maintained; and (f) All
substitutions, additions and accessions to any of the foregoing, and all
products, proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records relating to any of
the foregoing.
Silicon's security interest in any present or future technology (including
patents, trade secrets, and other technology) shall be subject to any licenses
or rights now or in the future granted by the Borrower to any third parties in
the ordinary course of Borrower's business; provided that if the Borrower
proposes to sell, license or grant any other rights with respect to any
technology in a transaction that, in substance, conveys a major part of the
economic value of that technology, Silicon shall first be requested **
* THE TERM "COLLATERAL" SHALL MEAN
** TO GRANT ITS CONSENT TO ANY SUCH TRANSACTION, AND SILICON MAY
WITHHOLD SUCH CONSENT IN ITS REASONABLE DISCRETION
2.2A GRANT OF SECURITY INTEREST IN COLLATERAL. THE BORROWER GRANTS SILICON A
CONTINUING SECURITY INTEREST IN ALL OF THE BORROWER'S INTEREST IN THE TYPES OF
PROPERTY DESCRIBED BELOW, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND WHEREVER
LOCATED (COLLECTIVELY, THE "COLLATERAL") AS SECURITY FOR ALL OBLIGATIONS: (A)
ALL ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER, LETTERS OF CREDIT, DOCUMENTS,
SECURITIES, MONEY, AND INSTRUMENTS, AND ALL OTHER OBLIGATIONS NOW OR IN THE
FUTURE OWING TO THE BORROWER; (B) ALL INVENTORY, GOODS, MERCHANDISE, MATERIALS,
RAW MATERIALS, WORK IN PROCESS, FINISHED GOODS, FARM PRODUCTS, ADVERTISING,
PACKAGING AND SHIPPING MATERIALS, SUPPLIES, AND ALL OTHER TANGIBLE PERSONAL
PROPERTY WHICH IS HELD FOR SALE OR LEASE OR FURNISHED UNDER CONTRACTS OF SERVICE
OR CONSUMED IN THE BORROWER'S BUSINESS, AND ALL WAREHOUSE RECEIPTS AND OTHER
DOCUMENTS; AND (C) ALL EQUIPMENT, INCLUDING WITHOUT LIMITATION ALL MACHINERY,
FIXTURES, TRADE FIXTURES, VEHICLES, FURNISHINGS, FURNITURE, MATERIALS, TOOLS,
MACHINE TOOLS, OFFICE EQUIPMENT, COMPUTERS AND PERIPHERAL DEVICES, APPLIANCES,
APPARATUS, PARTS, DIES, AND JIGS; (D) ALL GENERAL INTANGIBLES INCLUDING, BUT NOT
LIMITED TO, DEPOSIT ACCOUNTS, GOODWILL, NAMES, TRADE NAMES, TRADEMARKS AND THE
GOODWILL OF THE BUSINESS SYMBOLIZED THEREBY, TRADE SECRETS, DRAWINGS,
BLUEPRINTS, CUSTOMER LISTS, PATENTS, PATENT APPLICATIONS, COPYRIGHTS, SECURITY
DEPOSITS, LOAN COMMITMENT FEES, FEDERAL, STATE AND LOCAL TAX REFUNDS AND CLAIMS,
ALL
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RIGHTS IN ALL LITIGATION PRESENTLY OR HEREAFTER PENDING FOR ANY CAUSE OR CLAIM
(WHETHER IN CONTRACT, TORT OR OTHERWISE), AND ALL JUDGMENTS NOW OR HEREAFTER
ARISING THEREFROM, ALL CLAIMS OF BORROWER AGAINST SILICON, ALL RIGHTS TO
PURCHASE OR SELL REAL OR PERSONAL PROPERTY, ALL RIGHTS AS A LICENSOR OR LICENSEE
OF ANY KIND, ALL ROYALTIES, LICENSES, PROCESSES, TELEPHONE NUMBERS, PROPRIETARY
INFORMATION, PURCHASE ORDERS, AND ALL INSURANCE POLICIES AND CLAIMS (INCLUDING
WITHOUT LIMITATION CREDIT, LIABILITY, PROPERTY AND OTHER INSURANCE), AND ALL
OTHER RIGHTS, PRIVILEGES AND FRANCHISES OF EVERY KIND; (E) ALL BOOKS AND
RECORDS, WHETHER STORED ON COMPUTERS OR OTHERWISE MAINTAINED; AND (F) ALL
SUBSTITUTIONS, ADDITIONS AND ACCESSIONS TO ANY OF THE FOREGOING, AND ALL
PRODUCTS, PROCEEDS AND INSURANCE PROCEEDS OF THE FOREGOING, AND ALL GUARANTIES
OF AND SECURITY FOR THE FOREGOING; AND ALL BOOKS AND RECORDS RELATING TO ANY OF
THE FOREGOING. SILICON'S SECURITY INTEREST IN ANY PRESENT OR FUTURE TECHNOLOGY
(INCLUDING PATENTS, TRADE SECRETS, AND OTHER TECHNOLOGY) SHALL BE SUBJECT TO ANY
LICENSES OR RIGHTS NOW OR IN THE FUTURE GRANTED BY THE BORROWER TO ANY THIRD
PARTIES IN THE ORDINARY COURSE OF BORROWER'S BUSINESS; PROVIDED THAT IF THE
BORROWER PROPOSES TO SELL, LICENSE OR GRANT ANY OTHER RIGHTS WITH RESPECT TO ANY
TECHNOLOGY IN A TRANSACTION THAT, IN SUBSTANCE, CONVEYS A MAJOR PART OF THE
ECONOMIC VALUE OF THAT TECHNOLOGY, SILICON SHALL FIRST BE REQUESTED TO RELEASE
ITS SECURITY INTEREST IN THE SAME, AND SILICON MAY WITHHOLD SUCH RELEASE IN ITS
REASONABLE DISCRETION.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower
covenants that the following representations will continue to be true, and that
the Borrower will comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Borrower is and
will continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would have a material adverse effect on the
Borrower. The execution, delivery and performance by the Borrower of this
Agreement, and all other documents contemplated hereby have been duly and
validly authorized, are enforceable against the Borrower in accordance with
their terms, and do not violate any law or any provision of, and are not grounds
for acceleration under, any agreement or instrument which is binding upon the
Borrower.
3.2 NAME; TRADE NAMES AND STYLES. The name of the Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule hereto are
all prior names of the Borrower and all of Borrower's present and prior trade
names*. The Borrower shall give Silicon 15 days' prior written notice before
changing its name or doing business under any other name. The Borrower has
complied, and will in the future comply, with all laws relating to the conduct
of business under a fictitious business name.
* FOR THE PAST FIVE YEARS
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is the Borrower's chief executive office. In addition,
the Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule to this Agreement. The Borrower will give
Silicon at least 15 days prior written notice before changing its chief
executive office or locating the Collateral at any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of equipment which are leased by the Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(i) purchase money security interests in specific items of equipment; (ii)
leases of specific items of equipment; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by Silicon
in its reasonable discretion, which consent shall not be unreasonably withheld;
and (v) security interests being terminated substantially concurrently with this
Agreement. Silicon will have the right to require, as a condition to its consent
under subparagraph (iv) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on Silicon's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that the Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement. Silicon now has, and will continue to have, a perfected
and enforceable security interest in all of the Collateral, subject only to the
Permitted Liens, and the Borrower will at all times defend Silicon and the
Collateral against all claims of others. None of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the Collateral in
good working condition, and the Borrower will not use the Collateral for any
unlawful purpose. The Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. The Borrower has maintained and will maintain at the
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
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3.7 FINANCIAL CONDITION AND STATEMENTS. ALL FINANCIAL STATEMENTS NOW OR IN THE
FUTURE DELIVERED TO SILICON HAVE BEEN, AND WILL BE, PREPARED IN CONFORMITY WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND NOW AND IN THE FUTURE WILL
COMPLETELY AND ACCURATELY REFLECT THE FINANCIAL CONDITION OF THE BORROWER AND
EMULEX CORPORATION, A DELAWARE CORPORATION (THE "PARENT"), AT THE TIMES AND FOR
THE PERIODS THEREIN STATED. SINCE THE LAST DATE COVERED BY ANY SUCH STATEMENT,
THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN THE FINANCIAL CONDITION OR BUSINESS
OF THE BORROWER OR THE PARENT. THE BORROWER IS NOW AND WILL CONTINUE TO BE
SOLVENT. THE BORROWER WILL PROVIDE SILICON: (I) WITHIN 5 DAYS AFTER THE EARLIER
OF THE DATE THE REPORT 10Q REGARDING THE PARENT IS FILED OR IS REQUIRED TO BE
FILED WITH THE SECURITIES EXCHANGE COMMISSION, SUCH 10-Q REPORT, A QUARTERLY
FINANCIAL STATEMENT PREPARED BY THE BORROWER REGARDING THE PARENT, AND A
COMPLIANCE CERTIFICATE IN SUCH FORM AS SILICON SHALL REASONABLY SPECIFY, SIGNED
BY THE CHIEF FINANCIAL OFFICER OF THE BORROWER AND THE PARENT, CERTIFYING THAT
THROUGHOUT SUCH QUARTER THE BORROWER AND THE PARENT WERE IN FULL COMPLIANCE WITH
ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT, AND SETTING FORTH
CALCULATIONS SHOWING COMPLIANCE WITH THE FINANCIAL COVENANTS SET FORTH ON THE
SCHEDULE AND SUCH OTHER INFORMATION AS SILICON SHALL REASONABLY REQUEST (THE
"COMPLIANCE CERTIFICATE"); AND (II) WITHIN 5 DAYS AFTER THE EARLIER OF THE DATE
THE REPORT 10-K REGARDING THE PARENT IS FILED OR IS REQUIRED TO BE FILED WITH
THE SECURITIES EXCHANGE COMMISSION, SUCH 10-K REPORT, COMPLETE ANNUAL FINANCIAL
STATEMENTS, CERTIFIED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ACCEPTABLE TO
SILICON, AND A COMPLIANCE CERTIFICATE FOR THE QUARTER THEN ENDED.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and the Borrower has timely paid, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by the Borrower. The Borrower may,
however, defer payment of any contested taxes, provided that the Borrower (i) in
good faith contests the Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Silicon in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. The Borrower is
unaware of any claims or adjustments proposed for any of the Borrower's prior
tax years which could result in additional taxes becoming due and payable by the
Borrower*. The Borrower has paid, and shall continue to pay all amounts
necessary to fund all present and future pension, profit sharing and deferred
compensation plans in accordance with their terms, and the Borrower has not and
will not withdraw from participation in, permit partial or complete termination
of, or permit the occurrence of any other event with respect to, any such plan
which could result in any liability of the Borrower, including, without
limitation, any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
* OTHER THAN ANY ARISING PURSUANT TO THE TAX SHARING AGREEMENT DATED FEBRUARY
24, 1994 BETWEEN THE PARENT AND QLOGIC CORPORATION
3.9 COMPLIANCE WITH LAW. The Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to the Borrower, including, but not limited to,
those relating to the Borrower's ownership of real or personal property, conduct
and licensing of the Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of the Borrower's
knowledge) threatened by or against or affecting the Borrower in any court or
before any governmental agency (or any basis therefor known to the Borrower)
which may result, either separately or in the aggregate, in any material adverse
change in the financial condition or business of the Borrower, or in any
material impairment in the ability of the Borrower to carry on its business in
substantially the same manner as it is now being conducted. The Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against the Borrower
involving amounts in excess of $350,000.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule to this Agreement.
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4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit, without
limiting Silicon's other remedies, and whether or not Silicon declares an Event
of Default, Borrower shall remit to Silicon all checks and other proceeds of
Borrower's accounts and general intangibles, in the same form as received by
Borrower, within one day after Borrower's receipt of the same, to be applied to
the Obligations in such order as Silicon shall determine in its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole and absolute discretion, except that,
provided no Event of Default has occurred, Silicon shall release to the Borrower
insurance proceeds with respect to equipment totaling less than $350,000, which
shall be utilized by the Borrower for the replacement of the equipment with
respect to which the insurance proceeds were paid. Silicon may require
reasonable assurance that the insurance proceeds so released will be so used. If
the Borrower fails to provide or pay for any insurance, Silicon may, but is not
obligated to, obtain the same at the Borrower's expense. The Borrower shall
promptly deliver to Silicon copies of all reports made to insurance companies.
4.4 REPORTS. The Borrower shall provide Silicon with such written reports with
respect to the Borrower (including without limitation budgets, sales
projections, operating plans and other financial documentation), as Silicon
shall from time to time reasonably specify.
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times, and upon
one business day notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy the Borrower's accounting books
and records and Borrower's books and records relating to the Collateral. Silicon
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing audits shall be at Silicon's
expense, except that the Borrower shall reimburse Silicon for its reasonable
costs for semi-annual accounts receivable audits, and Silicon may debit
Borrower's deposit accounts with Silicon for the cost of such semi-annual
accounts receivable audits (in which event Silicon shall send notification
thereof to the Borrower)*. Notwithstanding the foregoing, after the occurrence
of an Event of Default all audits shall be at the Borrower's expense.
* PROVIDED THAT IT IS AGREED THAT THE PER AUDIT CHARGE OF ANY SUCH AUDIT TO BE
CHARGED TO THE BORROWER SHALL NOT EXCEED $2,000, PROVIDED, FURTHER, THAT SILICON
AGREES TO SEND SUCH NOTIFICATION TO THE BORROWER SUBSTANTIALLY CONCURRENTLY WITH
ANY SUCH DEBIT OF BORROWER'S DEPOSIT ACCOUNTS
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule hereto, the
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation, except that the
Borrower may merge or consolidate with another corporation if the Borrower is
the surviving corporation in the merger and the aggregate value of the assets
acquired in the merger do not exceed 25% of Borrower's Tangible Net Worth (as
defined in the Schedule) as of the end of the month prior to the effective date
of the merger, and the assets of the corporation acquired in the merger are not
subject to any liens or encumbrances, except Permitted Liens; (ii) acquire any
assets outside the ordinary course of business for an aggregate purchase price
exceeding 25% of Borrower's Tangible Net Worth (as defined in the Schedule) as
of the end of the month prior to the effective date of the acquisition; (iii)
enter into any other transaction outside the ordinary course of business (except
as permitted by the other provisions of this Section); (iv) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business, and except for the sale of obsolete or unneeded
equipment * in the ordinary course of business; (v) make any loans of any money
or any other assets; (vi) incur any debts, outside the ordinary course of
business, which would have a material, adverse effect on the Borrower or on the
prospect of repayment of the Obligations; (vii) guarantee or otherwise become
liable with respect to the obligations of another party or entity; (viii) pay or
declare any dividends on the Borrower's stock (except for dividends payable
solely in stock of the Borrower); (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of the Borrower's stock; (x) make any
change in the Borrower's capital structure which has a material adverse effect
on the Borrower or on the prospect of repayment of the Obligations; or (xi)
dissolve or elect to dissolve. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Event of Default and no
event which (with notice or passage of time or both) would constitute an Event
of Default would occur as a result of such transaction.
* OR OBSOLETE INVENTORY
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to the Borrower, the Borrower shall, without expense to Silicon, make
available the Borrower and its officers, employees and agents and the Borrower's
books and records to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior notification
to Borrower, verify directly
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with the respective account debtors the validity, amount and other matters
relating to the Borrower's accounts, by means of mail, telephone or otherwise,
either in the name of the Borrower or Silicon or such other name as Silicon may
reasonably choose, provided that no prior notification to Borrower shall be
required following an Event of Default.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its expense, on
request by Silicon, to execute all documents in form satisfactory to Silicon, as
Silicon, may deem reasonably necessary or useful in order to perfect and
maintain Silicon's perfected security interest in the Collateral, and in order
to fully consummate all of the transactions contemplated by this Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule hereto (the "Maturity Date").
5.2 EARLY TERMINATION. This Agreement may be terminated, without penalty,
prior to the Maturity Date as follows: (i) by the Borrower, effective three
business days after written notice of termination is given to Silicon; or (ii)
by Silicon at any time after the occurrence of an Event of Default, without
notice, effective immediately.
5.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, the Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding letters of
credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such letters of credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the reasonable
discretion of Silicon, Silicon may, in its sole discretion, refuse to make any
further Loans after termination. No termination shall in any way affect or
impair any right or remedy of Silicon, nor shall any such termination relieve
the Borrower of any Obligation to Silicon, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of all the
Obligations, Silicon shall promptly deliver to the Borrower termination
statements, requests for reconveyances and such other documents as may be
required to fully terminate any of Silicon's security interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and the Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by the Borrower or
any of the Borrower's officers, employees or agents, now or in the future, shall
be untrue or misleading in any material respect; or (b) the Borrower shall fail
to pay when due any Loan or any interest thereon or any other monetary
Obligation; or (c) the total Loans and other Obligations outstanding at any time
exceed the Credit Limit; or (d) the Borrower shall fail to comply with any of
the financial covenants set forth in the Schedule or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured; or (e) the
Borrower shall fail to pay or perform any other non-monetary Obligation, which
failure is not cured within 5 business days after the date due; or (f) Any levy,
assessment, attachment, seizure, lien or encumbrance is made on all or any part
of the Collateral which is not cured within 10 * days after the occurrence of
the same; or (g) Dissolution, termination of existence, insolvency or business
failure of the Borrower; or appointment of a receiver, trustee or custodian, for
all or any part of the property of, assignment for the benefit of creditors by,
or the commencement of any proceeding by the Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (h) the commencement of any proceeding against the Borrower or any guarantor
of any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 ** days after the date commenced; (i) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing; or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (j) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing; or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law ***; or (k) the Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement or if any person who
has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (l) there shall be a change in the record
or beneficial ownership of an aggregate of more than **** of the outstanding
shares of stock of the
-6-
7
Borrower, in one or more transactions, compared to the ownership of outstanding
shares of stock of the Borrower in effect on the date hereof, without the prior
written consent of Silicon; or (m) the Borrower shall generally not pay its
debts as they become due; or the Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or
make or suffer any transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law. Silicon may cease making
any Loans hereunder during any of the above cure periods, and thereafter if an
Event of Default has occurred.
* 20
** 45
*** PROVIDED THAT WITH RESPECT TO THE COMMENCEMENT OF ANY PROCEEDING AGAINST
ANY SUCH THIRD PARTY UNDER ANY REORGANIZATION, BANKRUPTCY, INSOLVENCY,
ARRANGEMENT, READJUSTMENT OF DEBT, DISSOLUTION OR LIQUIDATION LAW OR STATUTE OF
ANY JURISDICTION, NOW OR IN THE FUTURE IN EFFECT, ANY SUCH PROCEEDING SHALL NOT
BE CURED BY THE DISMISSAL THEREOF WITHIN 45 DAYS AFTER THE DATE COMMENCED
**** A CONTROLLING INTEREST
6.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
the Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately due,
payable, and performable, notwithstanding any deferred or installment payments
allowed by any instrument evidencing or relating to any Obligation; (c) Take
possession of any or all of the Collateral wherever it may be found, and for
that purpose the Borrower hereby authorizes Silicon without judicial process to
enter onto any of the Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive control
thereof without charge for so long as Silicon deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Silicon seek to take possession
of any or all of the Collateral by Court process, the Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) and (iii) any requirement that Silicon retain possession of and
not dispose of any such Collateral until after trial or final judgment; (d)
Require the Borrower to assemble any or all of the Collateral and make it
available to Silicon at places designated by Silicon which are reasonably
convenient to Silicon and the Borrower, and to remove the Collateral to such
locations as Silicon may deem advisable; (e) Require Borrower to deliver to
Silicon, in kind, all checks and other payments received with respect to all
accounts and general intangibles, together with any necessary indorsements,
within one day after the date received by the Borrower; (f) Complete the
processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, Silicon shall have
the right to use the Borrower's premises, vehicles, hoists, lifts, cranes,
equipment and all other property without charge; (g) Sell, lease or otherwise
dispose of any of the Collateral in its condition at the time Silicon obtains
possession of it or after further manufacturing, processing or repair, at any
one or more public and/or private sales, in lots or in bulk, for cash, exchange
or other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale.
Silicon shall have the right to conduct such disposition on the Borrower's
premises without charge, for such time or times as Silicon deems reasonable, or
on Silicon's premises, or elsewhere and the Collateral need not be located at
the place of disposition. Silicon may directly or through any affiliated company
purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve the Borrower of any liability the
Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale; (h) Demand payment of, and collect
any accounts and general intangibles comprising Collateral and, in connection
therewith, the Borrower irrevocably authorizes Silicon to endorse or sign the
Borrower's name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to the Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's sole discretion, to grant extensions of time to pay,
compromise claims and settle accounts and the like for less than face value; (i)
Offset against any sums in any of Borrower's general, special or other deposit
accounts with Silicon; and (j) Demand and receive possession of any of the
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Silicon's rights and remedies, from and after the occurrence of any Event
of Default, the interest rate applicable to the Obligations shall be increased
by an additional four percent per annum.
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8
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least * days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least * days before the sale in a newspaper
of general circulation in the county where the sale is to be conducted; (ii)
Notice of the sale describes the collateral in general, non-specific terms;
(iii) The sale is conducted at a place designated by Silicon, with or without
the Collateral being present; (iv) The sale commences at any time between 8:00
a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's
check or wire transfer is required; (vi) With respect to any sale of any of the
Collateral, Silicon may (but is not obligated to) direct any prospective
purchaser to ascertain directly from the Borrower any and all information
concerning the same. Silicon may employ other methods of noticing and selling
the Collateral, in its discretion, if they are commercially reasonable.
* TEN
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, the Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to the
Borrower, and at the Borrower's expense, to do any or all of the following, in
the Borrower's name or otherwise: (a) Execute on behalf of the Borrower any
documents that Silicon may, in its sole and absolute discretion, deem advisable
in order to perfect and maintain Silicon's security interest in the Collateral,
or in order to exercise a right of the Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of the Borrower any
document exercising, transferring or assigning any option to purchase, sell or
otherwise dispose of or to lease (as lessor or lessee) any real or personal
property which is part of Silicon's Collateral or in which Silicon has an
interest; (c) Execute on behalf of the Borrower, any invoices relating to any
account, any draft against any account debtor and any notice to any account
debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
the Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon's possession; (e) Endorse all checks and
other forms of remittances received by Silicon; (f) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle accounts and general intangibles for less than face value and
execute all releases and other documents in connection therewith; (h) Pay any
sums required on account of the Borrower's taxes or to secure the release of any
liens therefor, or both; (i) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, the Borrower to give Silicon the same
rights of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of the Borrower
pursuant to this Agreement and any other present or future agreements. Silicon
shall exercise the foregoing powers in a commercially reasonable manner. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Silicon's
rights under the foregoing power of attorney or any of Silicon's other rights
under this Agreement be deemed to indicate that Silicon is in control of the
business, management or properties of the Borrower.
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to the
Borrower or other persons legally entitled thereto; the Borrower shall remain
liable to Silicon for any deficiency. If, Silicon, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale or other disposition of Collateral,
Silicon shall have the option, exercisable at any time, in its sole discretion,
of either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and the Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue
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9
in full force and effect until all of the Obligations have been fully paid and
performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or the Borrower at
the addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered to the Borrower or to Silicon, or at the expiration of two business
days following the deposit thereof in the United States mail, with postage
prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
7.3 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between the Borrower and Silicon and supersede all prior
and contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
7.4 WAIVERS. The failure of Silicon at any time or times to require the
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.5 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by the
Borrower or any other party through the ordinary negligence of Silicon, or any
of its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Silicon *.
* WITH RESPECT TO THE TRANSACTIONS AND ACTIONS OF SILICON ASSOCIATED WITH THE
LETTERS OF CREDIT AND THE EXCHANGE CONTRACTS (AS SUCH TERMS ARE DEFINED IN THE
SCHEDULE TO LOAN AGREEMENT ATTACHED HERETO).
7.6 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by the Borrower and a duly authorized
officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the Borrower
of each and every obligation under this Agreement.
7.8 ATTORNEYS FEES AND COSTS. The Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, account debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of the Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to the Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Xxxxxx,
but Borrower acknowledges and agrees that Levy, Small & Xxxxxx is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or the Borrower files any lawsuit against the other predicated on a
breach of this Agreement, the prevailing party in such action shall be entitled
to recover its reasonable costs and attorneys' fees, including (but not limited
to) reasonable attorneys' fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Silicon may be entitled pursuant to this
Paragraph shall immediately become part of the Borrower's Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.
-9-
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7.9 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of the parties hereto; provided, however, that
the Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release the
Borrower from its liability for the Obligations.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more than one
person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. The Borrower acknowledges that the headings may
not describe completely the subject matter of the applicable paragraph, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. This Agreement has been fully reviewed
and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against Silicon or
the Borrower under any rule of construction or otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY CONDUCT, ACTS
OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR THE
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and in accordance with, the laws of the State of
California. Any undefined term used in this Agreement that is defined in the
California Uniform Commercial Code shall have the meaning assigned to that term
in the California Uniform Commercial Code. As a material part of the
consideration to Silicon to enter into this Agreement, the Borrower (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Silicon's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be Orange County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights the Borrower may have to object to
the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
BORROWER:
EMULEX CORPORATION, A CALIFORNIA CORPORATION
BY /S/XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
INTERCONNNECTIONS, INC.
BY /S/ XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
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BORROWER:
EMULEX EUROPE LIMITED
BY /S/ XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /S/ XXXXXXX X. XXXXX
TITLE: VICE PRESIDENT
GUARANTORS' CONSENT
The undersigned, guarantors, acknowledge that their consent to the foregoing
Amended and Restated Loan and Security Agreement is not required, but the
undersigned nevertheless do hereby consent thereto and to the documents and
agreements referred to therein and to all future modifications and amendments
thereto, and to any and all other present and future documents and agreements
between or among the foregoing parties. Nothing herein shall in any way limit
any of the terms or provisions of the Continuing Guaranty or Security Agreement
executed by the undersigned in favor of Silicon, which is hereby ratified and
affirmed and shall continue in full force and effect.
Guarantor Signature: Emulex Corporation, a Delaware corporation
By /s/ Xxxx X. Xxxxxx
Title: President
Guarantor Signature: Emulex Caribe, Inc.
By /s/ Xxxx X. Xxxxxx
Title: President
Guarantor Signature: Computer Array Development, Inc.
By /s/ Xxxx X. Xxxxxx
Title: President
Guarantor Signature: Highspeed Communications, Inc.
By /s/ Xxxx X. Xxxxxx
Title: President
Guarantor Signature: Digital House, Ltd.
By /s/ Xxxx X. Xxxxxx
Title: President
Guarantor Signature: Emulex Foreign Sales Corporation
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SILICON LOAN DOCUMENTS
--------------------------------------------------------------------------------
SCHEDULE TO LOAN AND SECURITY AGREEMENT -.S.
-1-
13
[GRAPHIC OMITTED] SILICON VALLEY BANK
SCHEDULE TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWERS: EMULEX CORPORATION, A CALIFORNIA CORPORATION
0000 XXXXXX XXXXXXXXX
XXXXX XXXX, XXXXXXXXXX 00000
INTERCONNECTIONS, INC.
00000 XX 00XX XXXXX
XXXXXXXX, XXXXXXXXXX 00000
EMULEX EUROPE LIMITED
MULBERRY BUSINESS PARK, XXXXXXXXX XXXX
XXXXXXXXX, XXXXXXXXX
XXXXXX XXXXXXX XX00 0XX
DATE: SEPTEMBER 18, 1996
CREDIT LIMIT
(Section 1.1): An amount not to exceed * the lesser of:
(i) $7,000,000 at any one time outstanding; OR
(ii) 75% of the Net Amount of Borrower's
accounts, which Silicon in its ** discretion
deems eligible for borrowing, provided,
however, that the minimum amount of a Loan
shall be $100,000.
* (ON AN AGGREGATE AND CONSOLIDATED BASIS FOR
EMULEX CORPORATION, A CALIFORNIA CORPORATION
("EMULEX"), INTERCONNECTIONS, INC. AND EMULEX
EUROPE LIMITED)
** REASONABLE
"Net Amount" of an account means the gross
amount of the account, minus all applicable
sales, use, excise and other similar taxes and
minus all discounts, credits and allowances of
any nature granted or claimed.
Without limiting the fact that the
determination of which accounts are eligible
for borrowing is a matter of Silicon's
discretion, the following will not be deemed
eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date,
accounts subject to any contingencies, accounts
owing from an account debtor outside the United
States (the "Foreign Accounts") (unless
pre-approved by Silicon in its discretion, or
backed by a letter of credit satisfactory to
Silicon, or FCIA insured satisfactory to
Silicon)*, accounts owing
-1-
14
from one account debtor to the extent they
exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate
of Borrower, and accounts owing from an account
debtor to whom Borrower is or may be liable for
goods purchased from such account debtor or
otherwise. In addition, if more than 50% of the
accounts owing from an account debtor are
outstanding more than 90 days from the invoice
date or are otherwise not eligible accounts,
then all accounts owing from that account
debtor will be deemed ineligible for borrowing.
* (PROVIDED THAT FOREIGN ACCOUNTS OF EMULEX
BILLED IN THE UNITED STATES SHALL NOT BE DEEMED
INELIGIBLE BY VIRTUE OF THE LOCATION OF THE
ACCOUNT DEBTORS RELATING THERETO OUTSIDE OF THE
UNITED STATES)
LETTER OF CREDIT SUBLIMIT Silicon, in its reasonable discretion, will
from time to time during the term of this
Agreement issue letters of credit for the
account of the Borrower ("Letters of Credit"),
in an aggregate amount at any one time
outstanding * not to exceed $1,000,000, upon
the request of the Borrower, provided that, on
the date the Letters of Credit are to be
issued, Borrower has available to it Loans in
an amount equal to or greater than the face
amount of the Letters of Credit to be issued.
Prior to the issuance of any Letters of Credit,
Borrower shall execute and deliver to Silicon
Applications for Letters of Credit and such
other documentation as Silicon shall specify
(the "Letter of Credit Documentation"). Fees
for the Letters of Credit shall be as provided
in the Letter of Credit Documentation.
* (ON AN AGGREGATE AND CONSOLIDATED BASIS FOR
EMULEX, INTERCONNECTIONS, INC. AND EMULEX
EUROPE LIMITED)
The Credit Limit set forth above and the Loans
available under this Agreement at any time
shall be reduced by the face amount of Letters
of Credit from time to time outstanding.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT Up to $1,000,000 of the Credit Limit * may be
utilized for spot and future foreign exchange
contracts (the "Exchange Contracts"). The
Credit Limit available at any time shall be
reduced by the following amounts (the "Foreign
Exchange Reserve") on each day (the
"Determination Date"): (i) on all outstanding
Exchange Contracts on which delivery is to be
effected or settlement allowed more than two
business days from the Determination Date, 20%
of the gross amount of the Exchange Contracts;
plus (ii) on all outstanding Exchange Contracts
on which delivery is to be effected or
settlement allowed within two business days
after the Determination Date, 100% of the gross
amount of the Exchange Contracts. In lieu of
the Foreign Exchange Reserve for 100% of the
gross amount of any Exchange Contract, the
Borrower may request that Silicon debit the
Borrower's bank account with Silicon for such
amount, provided Borrower has immediately
available funds in such amount in its bank
account.
* (ON AN AGGREGATE AND CONSOLIDATED BASIS FOR
EMULEX, INTERCONNECTIONS, INC. AND EMULEX
EUROPE LIMITED)
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15
Borrower may provide, by written notification
to Silicon, instructions to terminate any of
the Exchange Contracts, except that Borrower
may not terminate an Exchange Contract within
two business days of the date delivery is to be
effected or settlement allowed. Further,
Silicon may, in its discretion, terminate the
Exchange Contracts at any time (a) that an
Event of Default occurs or (b) that there is
not sufficient availability under the Credit
Limit and Borrower does not have available
funds in its bank account to satisfy the
Foreign Exchange Reserve. If either Silicon or
Borrower terminates the Exchange Contracts, and
without limitation of the FX Indemnity
Provisions (as referred to below), Borrower
agrees to reimburse Silicon for any and all
fees, costs and expenses relating thereto or
arising in connection therewith.
Borrower shall not permit the total gross
amount of all Exchange Contracts on which
delivery is to be effected and settlement
allowed in any two business day period to be
more than $500,000, nor shall Borrower permit
the total gross amount of all Exchange
Contracts to which Borrower is a party,
outstanding at any one time, to exceed
$1,000,000.
The Borrower shall execute all standard form
applications and agreements of Silicon in
connection with the Exchange Contracts, and
without limiting any of the terms of such
applications and agreements, the Borrower will
pay all standard fees and charges of Silicon in
connection with the Exchange Contracts.
Without limiting any of the other terms of this
Loan Agreement or any such standard form
applications and agreements of Silicon,
Borrower agrees to indemnify Silicon and hold
it harmless, from and against any and all
claims, debts, liabilities, demands,
obligations, actions, costs and expenses
(including, without limitation, attorneys' fees
of counsel of Silicon's choice), of every
nature and description, which it may sustain or
incur, based upon, arising out of, or in any
way relating to any of the Exchange Contracts
or any transactions relating thereto or
contemplated thereby (collectively referred to
as the "FX Indemnity Provisions").
The Exchange Contracts shall have maturity
dates no later than the Maturity Date.
CORPORATE CREDIT
CARD SUBLIMIT Up to $10,000 of the Credit Limit * may be
utilized for advances under corporate credit
cards to be issued by Silicon for Borrower,
provided that at the time of the issuance of
any such credit cards Borrower has available to
it Loans in an amount equal to or greater than
$10,000. Further, after the issuance of any
such credit cards, the Credit Limit shall be
permanently reduced by $10,000 while any of
such credit cards remain available for use or
there remain any outstanding Obligations
thereunder.
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* (ON AN AGGREGATE AND CONSOLIDATED BASIS FOR
EMULEX, INTERCONNECTIONS, INC. AND EMULEX
EUROPE LIMITED)"
INTEREST RATE (Section 1.2): A rate equal to the "Prime Rate" in effect
from time to time, plus 2.00% per annum.
Interest shall be calculated on the basis of a
360-day year for the actual number of days
elapsed. "Prime Rate" means the rate announced
from time to time by Silicon as its "prime
rate;" it is a base rate upon which other rates
charged by Silicon are based, and it is not
necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations
shall change on each date there is a change in
the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): $52,500. (Any Commitment Fee previously
paid by the Borrower in connection with this
loan shall be credited against this Fee.)
MATURITY DATE
(Section 5.1): SEPTEMBER 17, 1997.
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): NONE
MATERIAL ADVERSE LITIGATION
(Section 3.10): None
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent,
Emulex, InterConnections, Inc. and Emulex
Europe Limited, on a consolidated basis, may do
the following, provided that, after giving
effect thereto, no Event of Default has
occurred and no event has occurred which, with
notice or passage of time or both, would
constitute an Event of Default, and provided
that the following are done in compliance with
all applicable laws, rules and regulations: (i)
repurchase shares of Borrower's stock pursuant
to any employee stock purchase or benefit plan,
provided that the total amount paid by Borrower
for such stock does not exceed $1,000,000 in
any fiscal year, (ii) make employee loans in an
aggregate amount outstanding at any time not to
exceed $200,000 and (iii) make loans to
subsidiary corporations of Borrower and/or any
Obligor (as defined in the Security Agreement
of even date herewith) in an aggregate amount
per subsidiary or Obligor not to exceed
$500,000 and in a total aggregate amount not to
exceed $2,000,000.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall cause Parent to comply
with all of the following covenants on a
consolidated basis. Compliance shall be
determined as of the end of each quarter,
except as otherwise specifically provided
below:
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QUICK ASSET RATIO: Parent shall maintain a ratio of "Quick
Assets" to current liabilities of not less than
.80 to 1.
TANGIBLE NET WORTH: Parent shall maintain a tangible net
worth of not less than $18,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Parent shall maintain a ratio of total
liabilities to tangible net worth of not more
than 1.00 to 1.
PROFITABILITY Parent shall not incur a loss (after taxes) for
the Parent's 1996 fiscal year in excess of
$11,000,000. Thereafter, during the Parent's
1997 fiscal year, the quarterly losses (after
taxes) that the Parent may incur shall not
exceed $2,500,000, in the aggregate, in such
fiscal year, and Parent shall not incur an
annual loss (after taxes) for the 1997 fiscal
year.
DEFINITIONS: "Current assets," and "current liabilities"
shall have the meanings ascribed to them in
accordance with generally accepted accounting
principles. "Tangible net worth" means the
excess of total assets over total liabilities,
determined in accordance with generally
accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted
accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights,
capitalized software and organizational costs,
licenses and franchises. "Quick Assets" means
cash on hand or on deposit in banks, readily
marketable securities issued by the United
States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation
(or a similar rating by a similar rating
organization), certificates of deposit and
banker's acceptances, and accounts receivable
(net of allowance for doubtful accounts).
DEFERRED REVENUES: For purposes of the above quick asset ratio
deferred revenues shall not be counted as
current liabilities. For purposes of the above
debt to tangible net worth ratio, deferred
revenues shall not be counted in determining
total liabilities but shall be counted in
determining tangible net worth for purposes of
such ratio. For all other purposes deferred
revenues shall be counted as liabilities in
accordance with generally accepted accounting
principles.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing
covenants do not include indebtedness which is
subordinated to the indebtedness to Silicon
under a subordination agreement in form
specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all
of the following additional covenants:
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1. BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking relationship
with Silicon.
2. MONTHLY BORROWING BASE CERTIFICATE AND
LISTING. Within 20 days after the end of each
month, Borrower shall provide Silicon with a
Borrowing Base Certificate in such form as
Silicon shall specify, and an aged listing of
Borrower's accounts receivable.
3. INDEBTEDNESS. Without limiting any of the
foregoing terms or provisions of this
Agreement, Borrower shall not in the future
incur indebtedness for borrowed money, except
for (i) indebtedness to Silicon, (ii)
indebtedness incurred in the future for the
purchase price of or lease of equipment in an
aggregate amount not exceeding $2,500,000
annually, on a joint basis for Emulex,
InterConnections, Inc. and Emulex Europe
Limited (the "Joint Borrower"), (iii) the
creation of trade payable obligations in the
ordinary course of business and (iv) the making
of loans by the Joint Borrower to its
subsidiaries and/or any Obligor (as defined in
the Security Agreement of even date herewith)
in an amount not to exceed $500,000 per
subsidiary or Obligor at any time outstanding
and not to exceed $2,000,000 in the aggregate
at any time outstanding.
4. [INTENTIONALLY LEFT BLANK]
5. SEC FILINGS AND COMMUNICATIONS. Without
limitation of the provisions of Section 3.7
hereof, Borrower agrees to provide to Silicon
all filings made with the Securities and
Exchange Commission (the "SEC") regarding
Borrower or Parent or any affiliate of Borrower
or Parent, and copies of all notices or other
communication from the SEC relating thereto,
within 5 days of such filing or receipt of such
notice or other communication.
6. DOCUMENTS REGARDING PUERTO RICO COLLATERAL.
Borrower agrees to execute and deliver to
Silicon, or to cause the appropriate affiliate
of Borrower or Parent, including, without
limitation, Emulex Caribe, Inc., to execute and
deliver to Silicon, the Puerto Rico
Documentation (as referred to below) in a
prompt manner after delivery thereof to any
such party for execution. As used herein the
term "Puerto Rico Documentation" shall mean any
and all documents, agreements and instruments
that Silicon determines are necessary or
desirable, in its discretion, in connection
with the granting and perfecting of the
security interest of Silicon in the Collateral
of Borrower, or in any property of any
affiliate of Borrower or Parent, including,
without limitation, Emulex Caribe, Inc.,
located in or relating to Puerto Rico. Without
limiting any other term or provision hereof,
Borrower agrees to reimburse Silicon for all
costs and expenses in connection with the
preparation of the Puerto Rico Documentation.
7. COLLATERAL ASSIGNMENT REGARDING INTELLECTUAL
PROPERTY Collateral. Borrower shall maintain in
effect the security agreement relating to
Collateral consisting of intellectual property
items, which form is entitled "Collateral
Assignment, Patent Mortgage and Security
Agreement" (the "Copyright Assignment") and
perform all of the terms and conditions thereof
in accordance therewith. In connection
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therewith, Borrower agrees to effect
registration with the United States Copyright
office of Collateral consisting of
copyrightable subject matter in accordance with
the provisions set forth in the Copyright
Assignment, and, without limitation of the
other obligations of Borrower herein and
therein, to take all other actions in order to
assist Silicon in the perfection of its
security interest in such items of Collateral.
8. NEGATIVE PLEDGE. Except as otherwise
permitted hereunder, Borrower shall not
hereafter grant a security interest in any of
its present or future Collateral, other than
for liens on capital equipment relating to
obligations incurred pursuant to paragraph 3
above.
9. SHAREHOLDER DEBT TO BE SUBORDINATED. All
indebtedness of Borrower owing to any and all
of its shareholders or related
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parties shall be subordinated in favor of
Silicon pursuant to written subordination
agreements in Silicon's standard form.
BORROWER:
EMULEX CORPORATION, A CALIFORNIA CORPORATION
BY /S/ XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
INTERCONNECTIONS, INC.
BY /S/ XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
EMULEX EUROPE LIMITED
BY /S/ XXXX X. XXXXXX
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXXX X. XXXXXXX
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /S/ XXXXXXX X. XXXXX
TITLE: VICE PRESIDENT
