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[SILICON VALLEY BANK LOGO]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWERS: EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
INTERCONNECTIONS, INC.
14711 NE 29TH PLACE
BELLEVUE, WASHINGTON 98007
EMULEX EUROPE LIMITED
MULBERRY BUSINESS PARK, FISHPONDS ROAD
WOKINGHAM, BERKSHIRE
UNITED KINGDOM RG11 2QY
DATE: APRIL 18, 1996
CREDIT LIMIT
(Section 1.1): An amount not to exceed * the lesser of:
(i) $5,000,000 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,
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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 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 PRIOR TO OCCURRENCE OF THE
SECTION 2.2A CONDITION, FOREIGN ACCOUNTS 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
(REFERRED TO AS THE "EXPANDED FOREIGN ACCOUNTS
ELIGIBILITY"), WITH THE UNDERSTANDING AND
AGREEMENT THAT AFTER THE OCCURRENCE OF THE SECTION
2.2A CONDITION, THE EXPANDED FOREIGN ACCOUNTS
ELIGIBILITY SHALL IMMEDIATELY CEASE TO BE
EFFECTIVE)
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
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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)
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.
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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.
* (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): See Amendment to Loan Agreement of even date
herewith. (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, 1996.
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): See Exhibit A to the Schedule to the Loan and
Security Agreement dated March 31, 1994.
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
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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:
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
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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:
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 when
any Obligations are outstanding, 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.
Borrower shall also supply such a Borrowing Base
Certificate and an aged listing of Borrower's
accounts receivable five days prior to such time
that Borrower requests a Loan under this Agreement
if no Obligations had been outstanding prior to
the request for any such Loan.
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. UCC-1S TO BE FILED; DOCUMENTS REGARDING PUERTO
RICO COLLATERAL. Silicon shall now the UCC-1
Financing Statements that were provided to Silicon
with the execution of the original Loan Agreement,
and Borrower agrees to execute
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and deliver to Silicon all such additional UCC
financing statements and other instruments and
documentation relating thereto as Silicon
determines is necessary or desirable . 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 execute and
deliver to Silicon three originals of Silicon's
standard form of security agreement relating to
Collateral consisting of intellectual property
items, which form is entitled "Collateral
Assignment, Patent Mortgage and Security
Agreement" (the "Copyright Assignment") for
recording by Silicon as appropriate. In connection
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
BY /s/ Paul F. Folino
--------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Walter J. McBride
--------------------------------
SECRETARY OR ASS'T SECRETARY
BORROWER:
INTERCONNECTIONS, INC.
BY /s/ Paul F. Folino
--------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Walter J. McBride
--------------------------------
SECRETARY OR ASS'T SECRETARY
BORROWER:
EMULEX EUROPE LIMITED
BY /s/ Paul F. Folino
--------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Walter J. McBride
--------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ Michael P. Quain
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TITLE VP
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