Loan and Security Agreement - Silicon Valley Bank and Critical Path Inc.
SILICON VALLEY BANK
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: CRITICAL PATH, INC.
ADDRESS: 350 The Embarcadero,
San Francisco, California 94105
DATE: July 18, 2003
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement") is
entered into on the above date between SILICON VALLEY BANK (the "Bank"), whose
address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s)
named above ("Borrower"), whose chief executive office is located at the above
address ("Borrower's Address"). The Schedule 1 to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. Definitions of certain
capitalized terms used in this Agreement are set forth in Section 8 below or in
the Schedule.
1. LOANS.
1.1 LOANS. The Bank will make loans to Borrower (the "Loans") up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing, and subject to deduction of Reserves
for accrued interest and such other Reserves as the Bank deems proper from time
to time in its Permitted Discretion.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate(s) shown on the Schedule, except where expressly set forth
to the contrary in this Agreement. Interest shall be payable monthly on the last
day of the month. Interest may, in the Bank's discretion, be charged to
Borrower's account as a Loan, and the same shall thereafter bear interest at the
same rate as the other Loans. The Bank may, in its discretion, debit Borrower's
Deposit Accounts maintained with the Bank for interest due and owing.
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an "Overadvance"), Borrower shall immediately pay the amount of the excess to
the Bank, without notice or demand. Without limiting Borrower's obligation to
repay to the Bank the amount of any Overadvance, Borrower agrees to pay the Bank
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.
1.4 FEES. Borrower shall pay the Bank the fees shown on the Schedule,
which are in addition to all interest and other sums payable to the Bank and are
not refundable.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
1.5 LOAN REQUESTS. To obtain a Loan, Borrower shall make a request to the
Bank by facsimile or telephone. Loan requests received after 12:00 Noon, Pacific
Time, will not be considered by the Bank until the next Business Day. The Bank
may rely on any telephone request for a Loan given by a person whom the Bank
believes is an authorized representative of Borrower, and Borrower will
indemnify the Bank for any loss the Bank suffers as a result of that reliance.
1.6 LETTERS OF CREDIT. At the request of Borrower, the Bank may, in its
good faith business judgment, issue or arrange for the issuance of letters of
credit for the account of Borrower, in each case in form and substance
satisfactory to the Bank in its sole discretion (collectively, "Letters of
Credit"). The aggregate face amount of all Letters of Credit from time to time
outstanding shall not exceed the amount shown on the Schedule (the "Letter of
Credit Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there is insufficient
availability under the Credit Limit for such reserve, Borrower shall deposit and
maintain with the Bank cash in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of the Bank) for the issuance of
Letters of Credit, together with such additional fees as the Bank's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by the Bank under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than 30 days prior to the Maturity
Date. Borrower hereby agrees to indemnify and hold the Bank harmless from any
loss, cost, expense or liability, including payments made by the Bank, expenses
and reasonable attorneys' fees incurred by the Bank, arising out of or in
connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by the Bank and opened for Borrower's account or by the Bank's
interpretations of any Letter of Credit issued by the Bank for Borrower's
account, and Borrower understands and agrees that the Bank shall not be liable
for any error, negligence or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments or supplements thereto, except to the extent
arising from the Bank's gross negligence or willful misconduct. Borrower
understands that Letters of Credit may require the Bank to indemnify the issuing
bank for certain costs or liabilities arising out of claims by Borrower against
such issuing bank. Borrower hereby agrees to indemnify and hold the Bank
harmless with respect to any loss, cost, expense or liability incurred by the
Bank under any Letter of Credit as a result of the Bank's indemnification of any
such issuing bank. The provisions of this Agreement, as it pertains to Letters
of Credit, and any other Loan Documents relating to Letters of Credit are
cumulative.
2. GRANT OF SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to the Bank a security interest
in all right, title and interest of Borrower in and to all of the following,
whether now owned or hereafter arising or acquired and wherever located
(collectively, the "Collateral"): all Accounts; all Inventory; all Equipment;
all Deposit Accounts; all General Intangibles (including without limitation all
Intellectual Property); all Investment Property; all Other Property; and any and
all claims, rights and interests in any of the above, and all guaranties and
security for any of the above, and all substitutions and replacements for,
additions, accessions, attachments, accessories and improvements to, and
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties) of, any and all of the above, and all of
Borrower's books relating to any and all of the above.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. In order to induce the
Bank to enter into this Agreement and to make Loans, Borrower represents and
warrants to the Bank as follows, and Borrower covenants that the following
representations will continue to be true,
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and that Borrower will at all times comply with all of the following covenants,
throughout the term of this Agreement and until all Obligations have been paid
and performed in full:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be duly
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), (iii) do not violate
Borrower's articles of incorporation or by-laws, or any law, or any material
agreement or instrument which is binding upon Borrower or its property, and (iv)
do not constitute grounds for acceleration of any material indebtedness or
obligation under any agreement or instrument which is binding upon Borrower or
its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give the Bank 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, in all material respects with all laws relating to the
conduct of business under a fictitious business name, except where the failure
to so comply would not reasonably be expected to result in a Material Adverse
Change.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business, and Collateral is located, only at the
locations set forth in the Representations. Borrower will give the Bank at least
30 days' prior written notice before opening any additional place of business,
changing its chief executive office or moving any of the Collateral to a
location other than Borrower's chief executive office or one of the locations
set forth in the Representations, except that Borrower may maintain sales
offices in the ordinary course of business at which not more than a total of
$100,000 fair market value of Equipment is located.
3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.
(a) Borrower is now, and will at all times in the future be, the sole
owner of all of the Collateral, except for items of Equipment which are leased
to Borrower. The Collateral is now and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. The Bank now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to Permitted Liens, and Borrower will at all times defend the Bank and the
Collateral against all claims of others.
(b) Borrower has set forth in the Representations all of Borrower's
domestic Deposit Accounts and Investment Property, and Borrower will give the
Bank five Business Days' advance written notice before establishing any new
domestic Deposit Accounts or acquiring additional Investment Property. Borrower
will cause the institution where any such domestic Deposit Account or Investment
Property is maintained to execute and deliver to the Bank a control agreement in
form sufficient to perfect the Bank's security interest in the Deposit Account
or Investment Property and otherwise satisfactory to the Bank in its good faith
business judgment. Nothing herein limits any requirements which may be set forth
in the Schedule as to where Deposit Accounts and/or Investment Property will be
maintained.
(c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or intends
to assert and in which the potential recovery exceeds $100,000.00, Borrower
shall promptly notify the Bank thereof in writing and provide the Bank
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with such information regarding the same as the Bank shall request (unless
providing such information would waive Borrower's attorney-client privilege).
Such notification to the Bank shall constitute a grant of a security interest in
the commercial tort claim and all proceeds thereof to the Bank, and Borrower
shall execute and deliver all such documents and take all such actions as the
Bank shall request in connection therewith.
(d) None of the Collateral is now or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
now and will not become a lessee under any real property lease pursuant to which
the lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains or impairs, or will prohibit, restrain or impair,
Borrower's right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrower shall, whenever requested by the Bank, use its best efforts to cause
such third party to execute and deliver to the Bank, in form acceptable to the
Bank, such waivers and subordinations as the Bank shall specify in its good
faith business judgment. Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
the Bank in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to the Bank have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated. Between the last date covered by
any such statement provided to the Bank and the date hereof, there has been no
Material Adverse Change.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all required tax returns and reports, and 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
Borrower. Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies the Bank 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. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. 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 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 reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. Borrower has, to the best of its knowledge,
complied and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including those relating to Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business and all environmental matters.
3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any
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governmental agency (or any basis therefor known to Borrower) which could
reasonably be expected to result, either separately or in the aggregate, in any
Material Adverse Change. Borrower will promptly inform the Bank in writing of
any claim, proceeding, litigation or investigation in the future threatened or
instituted against Borrower involving any single claim of $50,000 or more, or
involving $100,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. ACCOUNTS.
4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and
warrants to the Bank that each Account with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made: (i) represent an
undisputed, bona fide, existing, unconditional obligation of the Account Debtor
created by the sale, delivery and acceptance of goods or the rendition of
services, or the non-exclusive licensing of Intellectual Property, in the
ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility
Requirements set forth in Section 8 below and in the Schedule.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to the Bank as follows:
(a) All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Accounts are and shall
be true and correct, and all such invoices, instruments and other documents and
all of Borrower's books and records are and shall be genuine and in all respects
what they purport to be.
(b) All sales and other transactions underlying or giving rise to each
Account shall comply in all material respects with all applicable laws and
governmental rules and regulations.
(c) To the best of Borrower's knowledge, all signatures and endorsements
on all documents, instruments and agreements relating to all Accounts are and
shall be genuine, and all such documents, instruments and agreements are and
shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall deliver
to the Bank transaction reports and schedules of collections, as provided in the
Schedule, on the Bank's standard forms; provided that Borrower's failure to
execute and deliver the same shall not affect or limit the Bank's security
interest and other rights in all of Borrower's Accounts, nor shall the Bank's
failure to advance or lend against a specific Account affect or limit the Bank's
security interest and other rights therein. If requested by the Bank, Borrower
shall furnish the Bank with copies (or, at the Bank's request, originals) of all
contracts, orders, invoices and other similar documents, and all shipping
instructions, delivery receipts, bills of lading and other evidence of delivery,
for any goods the sale or disposition of which gave rise to such Accounts, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to the Bank an aged accounts receivable trial balance as provided in the
Schedule. In addition, Borrower shall deliver to the Bank, on its request, the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same
form as received with all necessary indorsements, and copies of all credit
memos.
4.4 COLLECTION OF ACCOUNTS. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts
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in trust for the Bank, and Borrower shall immediately deliver all such payments
and proceeds to the Bank in their original form, duly endorsed, to be applied to
the Obligations in such order as the Bank shall determine. The Bank may, in its
good faith business judgment, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
the Bank may specify, pursuant to a blocked account agreement in such form as
the Bank may specify in its good faith business judgment.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to the Bank in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as the Bank shall determine; provided that if no Default or Event of
Default has occurred and is continuing Borrower shall not be obligated to remit
to the Bank the proceeds of the sale of worn-out or obsolete Equipment disposed
of by Borrower in good faith in an arm's length transaction for an aggregate
purchase price of $25,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral with
any of Borrower's other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for the
Bank. Nothing in this Section 4.5 limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify the Bank promptly of all disputes or
claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to the Bank on the regular reports provided to the Bank; (ii) no
Default or Event of Default has occurred and is continuing; and (iii) taking
into account all such discounts, settlements and forgiveness, the total
outstanding Loans will not exceed the Credit Limit.
4.7 RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event that
any attempted return occurs after the occurrence and during the continuance of
any Event of Default, Borrower shall hold the returned Inventory in trust for
the Bank and immediately notify the Bank of the return of the Inventory.
4.8 VERIFICATION. The Bank may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts by means of mail, telephone or otherwise, either in the name of
Borrower or the Bank or such other name as the Bank may choose.
4.9 NO LIABILITY. The Bank shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall the Bank
be deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to an Account. Nothing herein shall relieve the Bank,
however, from liability for its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth herein and in the Schedule.
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5.2 INSURANCE. Borrower shall at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to the Bank, in such form and amounts as the Bank
may reasonably require and that are customary and in accordance with standard
practices for Borrower's industry and locations, and Borrower shall provide
evidence of such insurance to the Bank. All such insurance policies shall name
the Bank as an additional loss payee and shall contain a lender's loss payee
endorsement in form and substance reasonably acceptable to the Bank. Upon
receipt of the proceeds of any such insurance, the Bank shall apply such
proceeds in reduction of the Obligations as the Bank shall determine in its good
faith business judgment except that, provided no Default or Event of Default has
occurred and is continuing, the Bank shall release to Borrower insurance
proceeds with respect to Equipment totaling less than $100,000 which shall be
utilized by Borrower for the replacement of the Equipment with respect to which
the insurance proceeds were paid. The Bank may require reasonable assurances
that the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance the Bank may, but is not obligated to, obtain
the same at Borrower's expense. Borrower shall promptly deliver to the Bank
copies of all material reports made to insurance companies.
5.3 REPORTS. Borrower shall, at its expense, provide the Bank with the
written reports set forth in the Schedule and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation) as the Bank shall from time to time specify in
its good faith business judgment.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times and on
one Business Day's notice, the Bank or its agents shall have the right to
inspect the Collateral and to audit and copy Borrower's books and records at
least twice a year (or more frequently at the Bank's discretion). The Bank shall
take reasonable steps to keep confidential all information obtained in any such
inspection or audit, but the Bank shall have the right to disclose any such
information to its auditors, regulatory agencies and attorneys, and to any other
entity pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent the
Bank's then-current standard charge for the same), plus reasonable out of pocket
expenses. Notwithstanding anything herein to the contrary and except as
reasonably necessary to comply with any applicable federal and state securities
laws, the Bank (and each employee, representative, or other agent of the Bank)
may disclose to any and all persons, without limitation of any kind, the U.S.
federal tax treatment and tax structure of the transaction and all materials of
any kind (including opinions or other tax analyses) that are provided to the
Bank relating to such U.S. federal tax treatment and tax structure. For this
purpose, "tax structure" is any fact that may be relevant to understanding the
U.S. federal tax treatment of the transaction.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without the Bank's prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i) merge
or consolidate with another corporation or entity; (ii) acquire any assets,
except in the ordinary course of Borrower's business; (iii) enter into any other
transaction outside of the ordinary course of business; (iv) sell or transfer
any Collateral, except for the sale of finished Inventory in the ordinary course
of Borrower's business and the sale of obsolete or unneeded Equipment in the
ordinary course of Borrower's business; (v) store any Inventory or other
Collateral with any warehouseman or other third party; (vi) sell any Inventory
on a sale-or-return, guaranteed sale, consignment or other contingent basis;
(vii) make any loans of any money or other assets; (viii) incur any debts
outside the ordinary course of Borrower's business which could result in a
Material Adverse Change; (ix) guarantee or otherwise become liable with respect
to the obligations of another party or entity; (x) pay or declare any dividends
on Borrower's stock (except for dividends payable solely in the stock of
Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of
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Borrower's stock; (xii) make any change in Borrower's capital structure which
could result in a Material Adverse Change; (xiii) engage, directly or
indirectly, in any business other than the businesses currently engaged in by
Borrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section 5.5 are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against the Bank with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to the Bank, make Borrower's officers,
employees and agents, and Borrower's books and records, available to the Bank to
the extent that the Bank may deem them reasonably necessary in order to
prosecute or defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense and on request by
the Bank, to execute all documents and take all actions as the Bank may in its
good faith business judgment deem necessary or useful in order to perfect and
maintain the Bank's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.2 below, and all Obligations have been paid or performed in full.
6.2 EARLY TERMINATION. Bank may terminate this Agreement prior to the
Maturity Date at any time after the occurrence and during the continuance of an
Event of Default, without notice, effective immediately. Borrower may terminate
this Agreement at any time prior to the Maturity Date, but in the event that
Borrower so terminates this Agreement, Borrower shall forthwith pay to the Bank
all amounts outstanding hereunder plus the Termination Fee.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, 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 the Bank or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of the Bank,
then on such date Borrower shall provide to the Bank cash collateral in an
amount equal to 105% of the face amount of all such Letters of Credit, plus all
interest, fees and costs due or to become due in connection therewith (as
estimated by the Bank in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to the Bank's
then-standard form of cash pledge agreement. Notwithstanding any termination of
this Agreement, all of the Bank'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 the Bank 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 the Bank, nor shall any such termination relieve Borrower of
any Obligation to the Bank, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all of the
Obligations and termination of this Agreement, the Bank shall promptly terminate
its financing statements with respect to Borrower and deliver to Borrower such
other documents as may be required to fully terminate the Bank's security
interests.
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7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give the Bank immediate written notice thereof.
(a) Any warranty, representation, statement, report or certificate made
or delivered to the Bank by Borrower or any of Borrower's officers, employees or
agents, now or in the future, shall be untrue or misleading in a material
respect when made or deemed to be made.
(b) Borrower shall fail to pay when due any Loan, any interest thereon or
any other monetary Obligation.
(c) The total Loans and other Obligations outstanding at any time shall
exceed the Credit Limit.
(d) 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 shall fail to permit the Bank
to conduct an inspection or audit as specified in Section 5.4 hereof.
(e) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five Business Days after the date due.
(f) Any levy, assessment, attachment, seizure, lien or encumbrance (other
than a Permitted Lien) is made on all or any part of the Collateral which is not
cured within ten days after the occurrence of the same.
(g) Any default or event of default occurs under any obligation secured
by a Permitted Lien which is not cured within any applicable cure period or
waived in writing by the holder of the Permitted Lien.
(h) Borrower breaches any material contract or obligation which has
resulted in, or may reasonably be expected to result in, a Material Adverse
Change.
(i) Borrower dissolves, terminates its existence or becomes insolvent, or
Borrower's business fails; or a receiver, trustee or custodian is appointed for
all or any part of Borrower's property; or Borrower makes an assignment for the
benefit of its creditors or commences any proceeding 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.
(j) Any proceeding is commenced against 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.
(k) Any guaranty of the Obligations is revoked, terminated, limited or
repudiated, or any attempt to do any of the foregoing occurs, or any guarantor
of any of the Obligations commences proceedings under any bankruptcy or
insolvency law, now or in the future in effect.
(l) 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 is revoked, terminated, limited or repudiated, or any attempt to
do any of the foregoing occurs, or proceedings by or against any such third
party are commenced under any bankruptcy or insolvency law, now or in the future
in effect.
(m) 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 any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
(n) There is a change, in one or more transactions, in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of, or other equity interests in, Borrower compared to the ownership of
outstanding shares of stock of, or other equity interests in, Borrower in effect
on the date hereof, without the prior written consent of the Bank.
(o) Borrower generally does not pay its debts as they become due, or
Borrower conceals, removes or transfers any part of its property with intent to
hinder, delay or defraud its creditors, or makes or suffers any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law, now or in the future in effect.
(p) A Material Adverse Change occurs.
(q) The Bank, acting in good faith and in a commercially reasonable
manner, deems itself insecure because of the occurrence of an event prior to the
effective date hereof of which the Bank had no knowledge on the effective date
hereof or because of the occurrence of an event on or subsequent to the
effective date hereof.
The Bank may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred and is continuing.
7.2 REMEDIES. Upon the occurrence and during the continuance of any Event
of Default, and at any time thereafter, the Bank may, at its option and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower), do any one or more of the following: (i) cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other Loan
Document; (ii) 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 (provided, however, that upon the occurrence of an Event of Default
described in paragraphs (i) or (j) of Section 7.1 of this Agreement, all
Obligations shall automatically accelerate and become immediately due and
payable without any action on the part of the Bank whatsoever); (iii) take
possession of any or all of the Collateral wherever it may be found, and for
that purpose Borrower hereby authorizes the Bank without judicial process to
enter onto any of 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 the Bank deems it necessary, in its good
faith business judgment, in order to complete the enforcement of its rights
under this Agreement or any other agreement, provided that should the Bank seek
to take possession of any of the Collateral by court process, Borrower hereby
irrevocably waives any bond and any surety or security relating thereto required
by any statute, court rule or otherwise as an incident to such possession, any
demand for possession prior to the commencement of any suit or action to recover
possession thereof, and any requirement that the Bank retain possession of, and
not dispose of, any such Collateral until after trial or final judgment; (iv)
require Borrower to assemble any or all of the Collateral and make it available
to the Bank at places designated by the Bank which are reasonably convenient to
the Bank and Borrower, and to remove the Collateral to such locations as the
Bank may deem advisable; (v) complete the processing, manufacturing or repair of
any Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, the Bank shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes and other Equipment and all other property
without charge; (vi) demand payment of and collect any Accounts and General
Intangibles comprising Collateral, and in connection therewith Borrower
irrevocably authorizes the Bank to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof and, in the Bank's
good faith business judgment, to grant extensions of time to pay, compromise
claims and settle Accounts and the like for less than face value; (vii) offset
any sums in any of Borrower's general,
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
special or other Deposit Accounts with the Bank against any or all of the
Obligations; (viii) demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto; and (ix) sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time the Bank obtains
possession of it or after further manufacturing, processing or repair, at 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. The
Bank shall have the right to conduct such disposition on Borrower's premises
without charge, for such time or times as the Bank deems reasonable, or on the
Bank's premises or elsewhere, and the Collateral need not be located at the
place of disposition. The Bank 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 Borrower of any liability that
Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by the Bank 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 the Bank's
rights and remedies, from and after the occurrence and during the continuance of
any Event of Default the interest rate applicable to the Obligations shall be
increased by an additional four percent (4.00%) per annum (the "Default Rate").
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and the
Bank 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
Borrower at least ten days prior to the Sale, and in the case of a public Sale
notice of the Sale is published at least five 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 the
Bank, with or without the Collateral being present; (iv) the Sale commences at
any time between 8:00 a.m. and 6:00 p.m., local time; (v) the purchase price is
paid in cash or by cashier's check or wire transfer; and (vi) with respect to
any Sale of any of the Collateral, the Bank may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. The Bank shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Borrower grants to the Bank an irrevocable power
of attorney, coupled with an interest, authorizing and permitting the Bank
(acting through any of its employees, attorneys or agents) at any time upon the
occurrence and during the continuance of any Event of Default, without limiting
the Bank's other rights and remedies, at the Bank's option but without
obligation, with or without notice to Borrower and at Borrower's expense to do
any or all of the following, in Borrower's name or otherwise (but the Bank
agrees that if it exercises any right hereunder, it will do so in good faith and
in a commercially reasonable manner): (i) execute on behalf of Borrower any
documents that the Bank may, in its good faith business judgment, deem advisable
in order to perfect and maintain the Bank's security interest in the Collateral,
or in order to exercise a right of Borrower or the Bank, or in order to fully
consummate all the transactions contemplated under this Agreement and all other
Loan Documents; (ii) execute on behalf of 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; (iii) take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, documents, evidence of payment or Collateral that
may come into the Bank's possession; (iv) endorse all checks and other forms of
remittances received by the Bank; (v) pay, contest or settle any lien, charge,
encumbrance, security
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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; (vi)
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; (vii) pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (viii)
settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (ix) instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give the Bank the same rights of access and other rights with
respect thereto as the Bank has under this Agreement; and (x) take any action or
pay any sum required of Borrower pursuant to this Agreement and any other Loan
Documents. Any and all reasonable sums paid, and any and all reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred, by the Bank
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 the Bank's rights under the foregoing power of attorney or any of the
Bank's other rights under this Agreement be deemed to indicate that the Bank is
in control of the business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
Sale of the Collateral shall be applied by the Bank first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by the
Bank 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 the Bank shall determine in its sole discretion. Any surplus
shall be paid to Borrower or other persons legally entitled thereto, but
Borrower shall remain liable to the Bank for any deficiency. If the Bank in its
good faith business judgment directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale of
Collateral, the Bank shall have the option, exercisable at any time in its good
faith business judgment, of either reducing the Obligations by the principal
amount of purchase price or deferring the reduction of the Obligations until the
actual receipt by the Bank of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, the Bank shall have all the other rights and remedies
accorded a secured party under the Code and under all other applicable laws, and
under any other instrument or agreement now or in the future entered into
between the Bank and Borrower, and all of such rights and remedies are
cumulative and none is exclusive. Exercise or partial exercise by the Bank of
one or more of its rights or remedies shall not be deemed an election of, nor
bar the Bank from subsequent exercise or partial exercise of any other, rights
or remedies. The failure or delay of the Bank to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms shall have the
corresponding meanings:
"Account Debtor" means the obligor on an Account.
"Accounts" means all present and future "accounts" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all accounts receivable and other sums
owing to Borrower.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which the Bank is open for business.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2 above.
"continuing" and "during the continuance of" when used with reference to
a Default or an Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by the Bank or cured within
any applicable cure period.
"Default" means any event which with notice or passage of time, or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 7.2 above.
"Deposit Accounts" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.
"Eligible Accounts" means Accounts and General Intangibles arising in
the ordinary course of Borrower's business from the sale of goods or the
rendering of services, or the non-exclusive licensing of Intellectual Property,
which the Bank in its good faith business judgment shall deem eligible for
borrowing. Without limiting the fact that the determination of which Accounts
are eligible for borrowing is a matter of the Bank's good faith business
judgment, the following are the minimum requirements (the "Minimum Eligibility
Requirements") for an Account to be an Eligible Account:
(a) The Account must not be outstanding for more than 90 days from its
invoice date (the "Eligibility Period").
(b) The Account must not represent progress billings, or be due under a
fulfillment or requirements contract with the Account Debtor.
(c) The Account must not be subject to any contingencies (including
Accounts arising from sales on consignment, guaranteed sale or other terms
pursuant to which payment by the Account Debtor may be conditional, or which
constitute or evidence deferred revenue).
(d) The Account must not be owing from an Account Debtor with whom
Borrower has any dispute (whether or not relating to the particular Account).
(e) The Account must not be owing from an Affiliate of Borrower.
(f) The Account must not be owing from an Account Debtor which is subject
to any insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to the Bank, or which fails, or which exits a material portion of its
business.
(g) The Account must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to the Bank's satisfaction, with the United States Assignment of Claims Act).
(h) The Account must not be owing from an Account Debtor located outside
the United States (unless approved by the Bank in its discretion in writing, or
backed by a letter of credit satisfactory to the Bank, or FCIA-insured in a
manner satisfactory to the Bank).
(i) The Account must not be owing from an Account Debtor to whom Borrower
is or may be liable for goods purchased from such Account Debtor or otherwise
(but, in such case, the Account will be deemed not eligible only to the extent
of any amounts owed by Borrower to such Account Debtor).
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
(j) Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25% of the total Accounts outstanding, unless
approved by the Bank in writing in its discretion.
(k) If more than 50% of the Accounts owing from an Account Debtor are
outstanding for a period longer than their Eligibility Period (without regard to
unapplied credits) or are otherwise not Eligible Accounts, then all Accounts
owing from that Account Debtor will be deemed not to be Eligible Accounts.
The Bank may, from time to time in its Permitted Discretion, revise the Minimum
Eligibility Requirements upon written notice to Borrower.
"Equipment" means all present and future "equipment" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods and vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means all present and future "general intangibles"
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all Intellectual
Property, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options
to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage and
business interruption insurance), payments of insurance and rights to payment of
any kind.
"good faith business judgment" means the exercise by the Bank of its
business judgment in good faith (as defined in Section 1201 of the Code).
"including" means including (but not limited to).
"Intellectual Property" means all present and future: (i) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (ii) trade secret rights, including all rights to
unpatented inventions and knowhow, and confidential information; (iii) mask work
or similar rights available for the protection of semiconductor chips; (iv)
patents, patent applications and like protections, including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (v) trademarks, servicemarks, trade styles
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (vi) computer software and computer software products;
(vii) designs and design rights; (viii) technology; (ix) all claims for damages
by way of past, present and future infringement of any of the rights included
above; and (x) all licenses or other rights to use any property or rights of a
type described above.
"Inventory" means all present and future "inventory," as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and including without limitation all merchandise, raw
materials, parts, supplies, packing and shipping materials, work-in-process and
finished products, including without limitation such inventory as is temporarily
out of Borrower's
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
custody or possession or in transit and including any returned goods and any
documents of title representing any of the above.
"Investment Property" means all present and future "investment property,"
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation securities,
stocks, bonds, debentures, debt securities, partnership interests, limited
liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"Loan Documents" means, collectively, this Agreement, the Representations
and all other present and future documents, instruments and agreements between
the Bank and Borrower, including those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor.
"Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations or financial or other condition of
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value of, or
the priority of the Bank's security interests in, the Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to the Bank, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including
without limitation those acquired by assignment and any participation by the
Bank in Borrower's debts owing to others), absolute or contingent, due or to
become due, including without limitation all interest, charges, expenses, fees,
attorney's fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other Loan Documents.
"Other Property" means all of the following, as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future "commercial tort
claims" (including without limitation any commercial tort claims identified in
the Representations), "documents", "instruments", "promissory notes", "chattel
paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm
products" and "money", and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the Code.
"Permitted Discretion" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"Permitted Liens" means the following: (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 the Bank, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen or carriers, or other similar liens,
arising in the ordinary course of business and securing obligations which are
not delinquent; (vii) liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by liens of the type described in
clauses (i) or (ii) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; and (viii) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
The Bank will have the right to require, as a condition to its consent under
clause (iv) above, that
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
the holder of the additional security interest or lien sign an intercreditor
agreement on the Bank's then-standard form, acknowledge that the security
interest is subordinate to the security interest in favor of the Bank, and agree
not to take any action to enforce its subordinate security interest so long as
any Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinated security interest shall
also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Representations" means the written Representations and Warranties
provided by Borrower to the Bank referred to in the Schedule.
"Reserves" means, as of any date of determination, such amounts as the
Bank may from time to time establish and revise, in its good faith business
judgment, reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (i) to reflect events, conditions,
contingencies or risks which, as determined by the Bank in its good faith
business judgment, do or may adversely affect (A) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (B) the assets, business
or prospects of Borrower or any guarantor or (C) the security interests and
other rights of the Bank in the Collateral (including the enforceability,
perfection and priority thereof); or (ii) to reflect the Bank's good faith
belief that any collateral report or financial information furnished by or on
behalf of Borrower or any guarantor to the Bank is or may have been incomplete,
inaccurate or misleading in any material respect; or (iii) in respect of any
state of facts which the Bank determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of
Default.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks and other items of payment received by the Bank (including proceeds of
Accounts and payment of the Obligations in full) shall be deemed applied by the
Bank on account of the Obligations three Business Days after receipt by the Bank
of immediately available funds, provided that wire transfers shall be applied on
the day of receipt by the Bank. For purposes of the foregoing, any such funds
received after 12:00 Noon, Pacific Time, on any day shall be deemed received on
the next Business Day. The Bank shall not, however, be required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to the Bank in its good faith business judgment, and the Bank may debit
Borrower's account for the amount of any item of payment which is returned to
the Bank unpaid, along with all fees and charges customarily assessed in
connection with such returned items.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in the Bank's good faith business judgment reversed and
re-applied, to the Obligations in such order and manner as the Bank shall
determine in its good faith business judgment.
9.3 CHARGES TO ACCOUNTS. The Bank may, in its discretion, require that
Borrower pay monetary Obligations in cash to the Bank or may charge them to
Borrower's account as a Loan, in which event
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
they will bear interest at the same rate applicable to the other Loans. The Bank
may also, in its discretion, debit Borrower's Deposit Accounts maintained with
the Bank for any monetary Obligations.
9.4 MONTHLY ACCOUNTINGS. The Bank shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by the Bank), unless Borrower
notifies the Bank in writing to the contrary within 60 days after such account
is rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to the Bank or 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. Notices to the Bank shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 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.
9.7 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 Borrower and the Bank and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
including but not limited to that certain Loan and Security Agreement dated
September 30, 2002 (as subsequently amended). 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.
9.8 WAIVERS; INDEMNITY. The failure of the Bank at any time or times to
require Borrower to comply strictly with any of the provisions of this Agreement
or any other Loan Document shall not waive or diminish any right of the Bank
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, and whether or not similar. None of the provisions of this Agreement
or any other Loan Document shall be deemed to have been waived by any act or
knowledge of the Bank or its agents or employees, but only by a specific written
waiver signed by an authorized officer of the Bank and delivered to Borrower.
Borrower waives the benefit of all statutes of limitations relating to any of
the Obligations or this Agreement or any other Loan Document, and 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 the Bank on which Borrower is or may in
any way be liable, and notice of any action taken by the Bank, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify the Bank and its
affiliates, subsidiaries, parent, directors, officers, employees, agents and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys' fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between the Bank and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately
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<PAGE>
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
caused by the indemnitee's own gross negligence or willful misconduct.
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section 9.8 shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither the Bank nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing the Bank shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of the Bank or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing the Bank, but nothing herein shall relieve the Bank from
liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
amended except in a writing executed by Borrower and a duly authorized officer
of the Bank.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse the Bank for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit and other reasonable costs incurred by the Bank pursuant to, or
in connection with or relating to, this Agreement (whether or not a lawsuit is
filed), including any reasonable attorneys' fees and costs the Bank incurs in
order to do the following: (i) prepare and negotiate this Agreement and all
present and future documents relating to this Agreement; (ii) obtain legal
advice in connection with this Agreement or Borrower; (iii) enforce, or seek to
enforce, any of its rights; (iv) prosecute actions against, or defend actions
by, Account Debtors; (v) commence, intervene in or defend any action or
proceeding; (vi) initiate any complaint to be relieved of the automatic stay in
bankruptcy; (vii) file or prosecute any probate claim, bankruptcy claim,
third-party claim or other claim; (viii) examine, audit, copy and inspect any of
the Collateral or any of Borrower's books and records; (ix) protect, obtain
possession of, lease, dispose of or otherwise enforce the Bank's security
interest in the Collateral; and (x) otherwise represent the Bank in any
litigation relating to Borrower. In satisfying Borrower's obligation hereunder
to reimburse the Bank for attorneys fees, Borrower may, for convenience, issue
checks directly to the Bank's attorneys, LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
but Borrower acknowledges and agrees that LeBoeuf, Lamb, Greene & MacRae, L.L.P.
is representing only the Bank and not Borrower in connection with this
Agreement. If either the Bank or 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 the Bank may be entitled
pursuant to this Section 9.12 shall immediately become part of 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.
9.13 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 Borrower and the Bank; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of the Bank, and any prohibited
assignment shall be void. No consent by the Bank to any assignment shall release
Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If 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.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against the Bank or its directors, officers, employees, agents, accountants or
attorneys that is based upon, arising from, or
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<PAGE>
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
relating to this Loan Agreement or any other Loan Document, or any other
transaction contemplated hereby or thereby or relating hereto or thereto, or any
other matter, cause or thing whatsoever occurred, done, omitted or suffered to
be done by the Bank or its directors, officers, employees, agents, accountants
or attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of the Bank, or on any other person
authorized to accept service on behalf of the Bank, within 30 days thereafter.
Borrower agrees that such one-year period is a reasonable and sufficient time
for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled or extended except
by the written consent of the Bank in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other Loan Document.
9.16 HEADINGS; CONSTRUCTION. Headings are used in this Agreement for
convenience only. Borrower and the Bank acknowledge that the headings may not
describe completely the subject matter of the applicable Section, 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 the Bank or
Borrower under any rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder, and all rights and obligations of the Bank and Borrower
hereunder, shall be governed by the laws of the State of California. As a
material part of the consideration to the Bank to enter into this Agreement,
Borrower: (i) agrees that all actions and proceedings relating directly or
indirectly to this Agreement shall, at the Bank's option, be litigated in courts
located within California, and that the exclusive venue therefor shall be Santa
Clara 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 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.
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<PAGE>
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
9.18 MUTUAL WAIVER OF JURY TRIAL. EACH OF BORROWER AND THE BANK HEREBY
WAIVES 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 THE BANK AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF THE BANK OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH THE BANK OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and delivered by its duly authorized representative as of the
date first set forth above.
Borrower: Bank:
CRITICAL PATH, INC., SILICON VALLEY BANK,
a California corporation a California-chartered bank
By: /s/ Paul Bartlett By: /s/ Jo Ellen Ademski
______________________________ _______________________________
Name: Paul Bartlett Name: Jo Ellen Ademski
____________________________ _____________________________
Its: President or Vice President Title: SVP
____________________________
20
<PAGE>
SILICON VALLEY BANK
SCHEDULE 1 TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: CRITICAL PATH, INC.
ADDRESS: 350 The Embarcadero
San Francisco, California 94105
DATE: July 18, 2003
This Schedule 1 forms an integral part of the Amended and Restated Loan and
Security Agreement between Silicon Valley Bank (the "Bank") and the
above-referenced borrower ("Borrower") of even date herewith (the "Agreement").
Each capitalized term used in this Schedule 1 shall have the meaning accorded to
it in the Agreement unless it is otherwise defined herein.
1. CREDIT LIMIT. The Credit Limit shall be in an amount not to exceed the
amount set forth in Section 1.1.
1.1 Loans. The Bank will make Loans to Borrower in the
aggregate amount not to exceed at any one time outstanding
(the "Credit Limit") the lesser of (i) $15,000,000 or (ii) the
Borrowing Base (as defined below).
1.2 Borrowing Base. "Borrowing Base" means:
(i) with respect to Loans existing as of the date of
the Agreement in an aggregate amount equal to or lesser than
$4,900,000 ("Existing Loans"), the sum of: (A) eighty percent
(80%) of the amount of Eligible Accounts, plus (B) one hundred
percent (100%) of Investment Cash (as defined below), plus (C)
one hundred percent (100%) of the face amount of all letters
of credit issued to the Bank for the account of Borrower or
any Affiliate of Borrower by banks and in form and substance
acceptable to the Bank in its sole discretion.
(ii) with respect to Sublimit Loans (as defined
below) equal to or lesser of $3,000,000, the sum of: (A)
eighty percent (80%) of the amount of Eligible Accounts, plus
(B) one hundred percent (100%) of the Investment
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<PAGE>
Cash, plus (C) one hundred percent (100%) of the face amount
of all letters of credit issued to the Bank for the account of
Borrower or any Affiliate of Borrower by banks and in form and
substance acceptable to the Bank in its sole discretion.
(iii) with respect to Loans in excess of $4,900,000
("Incremental Loans"), the sum of: (A) eighty percent (80%) of
the amount of Eligible Accounts, plus (B) fifty percent (50%)
of the Investment Cash, plus (C) one hundred percent (100%) of
the face amount of all letters of credit issued to the Bank
for the account of Borrower or any Affiliate of Borrower by
banks and in form and substance acceptable to the Bank in its
sole discretion.
(iv) with respect to Sublimit Loans greater than
$3,000,000 ("Incremental Sublimit Loans"), the sum of: (A)
eighty percent (80%) of the amount of Eligible Accounts, plus
(B) seventy-five percent (75%) of the Investment Cash, plus
(C) one hundred percent (100%) of the face amount of all
letters of credit issued to the Bank for the account of
Borrower or any Affiliate of Borrower by banks and in form and
substance acceptable to the Bank in its sole discretion.
For the purposes of the Agreement, the term
"Investment Cash" shall mean that amount of cash deposited by
Borrower in Account No. 88602595 at SVB Securities, an
Affiliate of the Bank, and Borrower shall maintain a balance
in such account equal to the greater of (i) $3,000,000 or (ii)
that amount of the Investment Cash that has been utilized by
the Bank to calculate the Borrowing Base.
1.3 Cash Management Services Sublimit. Borrower may
utilize up to $500,000 of Loans available hereunder (the "Cash
Management Services Sublimit") for the Bank's cash management
services, which include merchant services, business credit
cards, ACH and other services identified in the cash
management services agreement related to such service (the
"Cash Management Services"). The Bank may, in its sole
discretion, reserve against Loans which would otherwise be
available hereunder such sums as the Bank shall determine in
its good faith business judgment have been utilized in
connection with the Cash Management Services, and the Cash
Management Services Sublimit shall be reduced on a
dollar-for-dollar basis by the aggregate amount from time to
time utilized by Borrower for the purchase and sale of FX
Forward Contracts (as defined below). The Bank may advance as
Loans for the Borrower's account any amounts that may become
due or owing to the Bank in connection with the Cash
Management Services. Borrower agrees to execute and deliver to
the Bank all standard form applications and agreements of the
Bank in connection with the Cash Management Services and,
without limiting any of the terms of such application and
agreements, Borrower will pay all standard fees and charges of
the Bank in connection with the Cash Management Services. The
Cash Management Services, and
2
<PAGE>
Borrower's right to obtain Loans with respect thereto, shall
terminate on the Maturity Date.
1.4 Foreign Exchange Sublimit. Borrower may utilize up to
$500,000 of Loans available hereunder (the "Foreign Exchange
Sublimit") for the purchase of foreign exchange forward
contracts with the Bank ("FX Forward Contracts"). Borrower
shall enter into FX Forward Contracts with the Bank on its
standard forms, under which Borrower commits to purchase from
or sell to the Bank a set amount of foreign currency more than
one Business Day after the contract date; provided that (i) at
the time Borrower enters into the FX Forward Contract Borrower
has Loans available to it under the Foreign Exchange Sublimit
in an amount at least equal to ten percent (10%) of the amount
of the FX Forward Contract; (ii) the total FX Forward
Contracts at any one time outstanding may not exceed ten times
the amount of the Foreign Exchange Sublimit set forth above;
and (iii) the Foreign Exchange Sublimit shall be reduced on a
dollar-for-dollar basis by the aggregate amount from time to
time utilized by Borrower for Cash Management Services. Bank
shall have the right to reserve against the Loans otherwise
available to Borrower under this Agreement such sums as the
Bank shall determine in its good faith business judgment are
utilized in connection with FX Forward Contracts, and in the
event at any time there are insufficient Loans available to
Borrower for such Reserve, Borrower shall deposit and maintain
with the Bank cash in an amount at all times equal to such
deficiency, which shall be held as Collateral for all purposes
of this Agreement. The Bank may, in its discretion, terminate
the FX Forward Contracts at any time that an Event of Default
occurs and is continuing. Borrower shall execute all standard
form applications and agreements of the Bank in connection
with the FX Forward Contracts and, without limiting any of the
terms of such applications and agreements, Borrower shall pay
all standard fees and charges of the Bank in connection with
the FX Forward Contracts.
1.5 Letter of Credit Sublimit: Borrower may use up to
$6,000,000 of Loans available hereunder (the "Letter of Credit
Sublimit") for documentary Letters of Credit and standby
Letters of Credit offered by the Bank (each a "Letter of
Credit" and, collectively, the "Letters of Credit").
For purposes of this Agreement, the term "Sublimit
Loans" shall mean Loans advanced by the Bank to, or for the
account of, Borrower and amounts reserved by the Bank, all in
connection with Cash Management Services, FX Forward Contracts
or Letters of Credit.
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<PAGE>
2. INTEREST. Borrower shall pay interest with respect to all Loans at a
rate equal to the sum of (i) the Prime Rate in effect from
time to time, plus (ii) 2.00 percent 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 the Bank as its "prime rate" and is a
base rate upon which other rates charged by the Bank are based
and not necessarily the best rate available at the Bank
(provided, however, that in no event shall the Prime Rate at
any time be less than 4.25% per annum for purposes of this
Agreement). The interest rate applicable to the Obligations
shall change on each date there is a change in the Prime Rate.
Upon the occurrence and continuance of an Event of Default,
the interest rate shall increase by an additional four percent
per annum (4.00% p.a.).
3. FEES. 3.1 Commitment Fee. Borrower shall pay to the Bank a
Commitment Fee in the amount of $35,000.00, payable in full
upon Borrower's execution and delivery of the Agreement. The
Commitment Fee is fully earned upon payment and is
non-refundable.
3.2 Collateral Monitoring Fee. Borrower shall pay to the
Bank a Collateral Monitoring Fee in the amount of $1,000 per
month, payable on the first day of each month in arrears
(prorated for any partial month at the beginning and at the
termination of this Agreement).
3.3 Unused Facility Fee. Borrower shall pay the Bank,
payable on the first day of each calendar quarter in arrears
during the term hereof, an Unused Facility Fee equal to the
product of (i) 0.45% multiplied by (ii) an amount equal to the
undrawn portion of the Credit Limit over the immediately prior
calendar quarter, calculated on the basis of 360-day calendar
year. For purposes of calculating the Unused Facility Fee, the
Credit Limit shall be deemed to be $15,000,000 and the
aggregate face amount of all outstanding Letters of Credit
shall not be included in the undrawn portion of the Credit
Limit.
3.4 Letter of Credit Fees. With respect to each Letter of
Credit, Borrower shall pay the Bank an annual fee in an amount
equal to one and one-half percent (1.50%) of the face amount
of such Letter of Credit, payable on the issuance date of such
Letter of Credit and on each anniversary of the date of
issuance of the Letter of Credit, for each calendar year (or
portion thereof) that such Letter of Credit is outstanding.
3.5 Cancellation Fee. If the Agreement is terminated
prior to the Maturity Date due to an Event of Default or as a
result of Borrower's termination under Section 6.2 of the
Agreement, Borrower shall pay the Bank within two
4
<PAGE>
Business Days a cancellation fee of $150,000.00.
4. MATURITY The Maturity Date for all Loans shall be January 30, 2004.
DATE.
5. FINANCIAL 5.1 Minimum Operating Cash Flow for Borrower's U.S.
COVENANTS. Operations. Borrower shall maintain a minimum Operating Cash
Flow for Borrower's U.S. operations as follows:
<TABLE>
<CAPTION>
Required Minimum Operating
--------------------------
Month End Projected Cash Flow
--------- --------- ---------
<S> <C> <C>
06/30/03 ($ 3,459,600) ($ 3,700,000)
07/31/03 ($ 5,968,600) ($ 6,400,000)
08/31/03 ($ 7,800,800) ($ 8,400,000)
09/30/03 ($10,219,800) ($11,000,000)
10/31/03 ($13,168,200) ($13,800,000)
11/31/03 ($12,517,400) ($13,800,000)
12/30/03 ($14,018,800) ($15,050,000)
Maturity Date
and thereafter To be determined To be determined
</TABLE>
5.2 Definitions. For purposes of the foregoing financial
covenant, the following terms shall have the corresponding
meanings:
a. "Operating Cash Flow" shall mean Customer Receipts
of Borrower minus (i) cash operating expenses, (ii) interest,
(iii) insurance payments, and (iv) Unfunded Capital
Expenditures (as defined below).
b. "Customer Receipts" shall mean payments of
Accounts received by Borrower or for Borrower's account.
c. "Unfunded Capital Expenditures" shall mean
expenditures related to the purchase of capital equipment that
are not financed by purchase money loans.
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<PAGE>
6. REPORTING. Borrower shall provide the Bank with the following reports:
(i) Daily transaction reports and schedules of
collections, on the Bank's standard form or such other form as
is acceptable to the Bank;
(ii) Monthly accounts receivable aging, aged by invoice
date, within 20 days after the end of each month;
(iii) Monthly accounts payable aging, aged by invoice date,
and outstanding or held check registers, if any, within 20
days after the end of each month;
(iv) Monthly reconciliation of accounts receivable aging
(aged by invoice date), transaction reports and general
ledger, within 20 days after the end of each month;
(v) Monthly unaudited financial statements, as soon as
available and in any event within 30 days after the end of
each month;
(vi) Monthly Compliance Certificates within 30 days after
the end of each month, in such form as the Bank shall
reasonably specify, signed by the Chief Financial Officer of
Borrower, certifying that as of the end of such month Borrower
was 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 in this
Agreement and such other information as the Bank shall
reasonably request, including without limitation a statement
that at the end of such month there were no held checks;
(vii) A field examination by October 15, 2003 and
thereafter as frequently as the Bank may request at its
discretion;
(viii) Annual projections and operating budgets (including
income statement, balance sheets and cash flow statements, by
month) for Borrower upon request of the Bank; and
(ix) Annual financial statements as soon as available and
in any event within 120 days following the end of each of
Borrower's fiscal years, certified by, and with an unqualified
opinion of, independent certified public accountants
acceptable to the Bank.
6
<PAGE>
7. BORROWER Borrower represents and warrants that the information set
INFORMATION. forth in the Representations and Warranties of the Borrower
dated July 11, 2003 and submitted to the Bank (the
"Representations") is true and correct as of the date hereof.
8. ADDITIONAL 8.1 Banking Relationship. Borrower shall at all times
PROVISIONS. maintain its primary banking relationship with the Bank.
Without limiting the generality of the foregoing, Borrower
shall at all times maintain not less than $3,000,000 of
unrestricted cash or cash equivalents on deposit with the
Bank. Borrower agrees to close all Deposit Accounts and
Investment Property accounts maintained with other institution
and transfer such assets to accounts with the Bank by July 31,
2003.
8.2 Guaranties. The Bank may, in its discretion, require
Borrower to cause all or any of its subsidiaries to execute
and deliver continuing guaranties of Borrower's Obligations to
the Bank, in form and substance acceptable to the Bank in its
sole discretion. Borrower agrees to deliver such guaranties to
the Bank within 30 days of the Bank's demand for same.
8.3 Pledge of Stock. The Bank may, in its discretion,
require Borrower to pledge to the Bank as Collateral
Borrower's equity interests in all or any of its subsidiaries
or other Affiliates, all in such form and substance as is
acceptable to the Bank in its sole discretion. Borrower
aggress to deliver such Collateral to the Bank within ten days
of the Bank's demand for same.
8.4 Subordinated Debt. If Borrower obtains debt from any
third party, such debt shall be subordinated to Borrower's
Obligations to the Bank, all in form and substance acceptable
to the Bank in its sole discretion.
[Signature Page Follows Immediately]
7
<PAGE>
IN WITNESS WHEREOF, Borrower and the Bank have each caused its duly
authorized representative to execute this Schedule 1 as of the date first set
forth above.
BORROWER: SILICON:
CRITICAL PATH, INC., a California SILICON VALLEY BANK, a California-
corporation chartered bank
By: /s/ Paul Bartlett /s/ Jo Ellen Ademski
___________________________________ By: __________________________________
Name: Paul Bartlett Name: Jo Ellen Ademski
_________________________________ ________________________________
Its: President or Vice President Title: SVP
________________________________
8