Exhibit 10.1
LOAN AND SECURITY AGREEMENT
     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of November 2,
2009 (the “Effective Date”) between SILICON VALLEY BANK, a California
corporation with a loan production office located at One Newton Executive Park,
Suite 200, 2221 Washington Street, Newton, Massachusetts 02462 (“Bank”), and
SOUNDBITE COMMUNICATIONS, INC., a Delaware corporation (“Borrower”), provides
the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:
     1 ACCOUNTING AND OTHER TERMS
     Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.
     2 LOAN AND TERMS OF PAYMENT
     2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank
the outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.
     2.1.1 Revolving Advances.
          (a) Availability. Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.
Amounts borrowed under the Revolving Line may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable terms and
conditions precedent herein.
          (b) Termination; Repayment. The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable. The Revolving Line may be terminated
at any time without penalty or premium.
     2.1.2 Letters of Credit Sublimit.
          (a) As part of the Revolving Line, Bank shall issue or have issued
Letters of Credit for Borrower’s account. The face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed One Million Five Hundred Dollars ($1,500,000.00).
Such aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. If, on the Revolving
Line Maturity Date, there are any outstanding Letters of Credit, then on such
date Borrower shall provide to 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 Bank in its
good faith business judgment), to secure all of the Obligations relating to said
Letters of Credit. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank’s standard Application and Letter of Credit Agreement (the
“Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that 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.
          (b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, such Letters of Credit, and the Letter of Credit Application.
          (c) Borrower may request that Bank issue a Letter of Credit payable in
a Foreign Currency. If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to

 

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Borrower of the equivalent of the amount thereof (plus fees and charges in
connection therewith such as wire, cable, SWIFT or similar charges) in Dollars
at the then-prevailing rate of exchange in San Francisco, California, for sales
of the Foreign Currency for transfer to the country issuing such Foreign
Currency.
          (d) To guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of Credit.
The amount of the Letter of Credit Reserve may be adjusted by Bank from time to
time, with prior notice to Borrower, to account for fluctuations in the exchange
rate. The availability of funds under the Revolving Line shall be reduced by the
amount of such Letter of Credit Reserve for as long as such Letter of Credit
remains outstanding.
     2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower
may enter into foreign exchange contracts with Bank under which Borrower commits
to purchase from or sell to Bank a specific amount of Foreign Currency (each, a
“FX Forward Contract”) on a specified date (the “Settlement Date”). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to One
Million Five Hundred Dollars ($1,500,000.00) (such maximum shall be the “FX
Reserve”). The aggregate amount of FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve. The amount otherwise
available for Credit Extensions under the Revolving Line shall be reduced by an
amount equal to ten percent (10%) of each outstanding FX Forward Contract (the
“FX Reduction Amount”). Any amounts needed to fully reimburse Bank for amounts
outstanding under FX Forward Contracts will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to
Advances.
     2.1.4 Cash Management Services Sublimit. Borrower may use up to One Million
Five Hundred Thousand Dollars ($1,500,000.00) of the Revolving Line for Bank’s
cash management services which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in Bank’s
various cash management services agreements (collectively, the “Cash Management
Services”). Any amounts Bank pays on behalf of Borrower or any amounts that are
not paid by Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.
     2.2 Overadvances. If, at any time, the Credit Extensions under
Sections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (a) the
Revolving Line or (b) the Borrowing Base, Borrower shall immediately pay to Bank
in cash such excess (the “Overadvance”). To the extent that the Overadvance
exists as a result of Bank decreasing the percentages of the Borrowing Base, or
adjustment of the criteria for Eligible Accounts, Borrower shall have two
(2) Business Days to pay such portion of the Overadvance.
     2.3 Payment of Interest on the Credit Extensions.
          (a) Interest Rate. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to one-half of one percent (0.50%) above the Prime Rate.
Interest hereunder shall be payable monthly in accordance with Section 2.3(f)
below.
          (b) Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is four percentage points (4.0%) above the rate effective
immediately before the Event of Default (the “Default Rate”). Payment or
acceptance of the increased interest rate provided in this Section 2.3(b) is not
a permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Bank.
          (c) Adjustment to Interest Rate. Changes to the interest rate of any
Credit Extension based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of any such
change.
          (d) 360-Day Year. Interest shall be computed on the basis of a 360-day
year for the actual number of days elapsed.

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          (e) Debit of Accounts. Bank may debit any of Borrower’s deposit
accounts, including the Designated Deposit Account, for principal and interest
payments or any other amounts Borrower owes Bank when due. These debits shall
not constitute a set-off.
          (f) Payments. Unless otherwise provided, interest is payable monthly
on the first (1st) Business Day of each month. Payments of principal and/or
interest received after 2:00 p.m. Eastern time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue.
     2.4 Fees. Borrower shall pay to Bank:
          (a) Commitment Fee. A fully earned, non-refundable commitment fee of
Ten Thousand Dollars ($10,000.00) on the Effective Date;
          (b) Due Diligence Fee. A fully-earned, non-refundable due diligence
fee of Five Thousand Dollars ($5,000.00) has previously been paid by Borrower.
Any portion of the due diligence fee not utilized to pay Bank Expenses shall be
applied towards any other fees due and payable hereunder;
          (c) Letter of Credit Fee. Bank’s customary fees and expenses for the
issuance or renewal of Letters of Credit, upon the issuance, each anniversary of
the issuance, and the renewal of such Letter of Credit; and
          (d) Bank Expenses. All Bank Expenses (including reasonable attorneys’
fees and expenses, plus expenses, for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.
     3 CONDITIONS OF LOANS
     3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
          (a) Duly executed original signatures to the Loan Documents to which
it is a party;
          (b) Duly executed original signatures to the Control Agreements;
          (c) Borrower shall have delivered its Operating Documents and a good
standing certificate of Borrower certified by the Secretary of State of the
State of Delaware as of a date no earlier than thirty (30) days prior to the
Effective Date;
          (d) Duly executed original signatures to the completed Borrowing
Resolutions for Borrower;
          (e) Borrower shall have delivered the Perfection Certificates executed
by Borrower and Guarantor, together with the duly executed original signatures
thereto;
          (f) Duly executed original signatures to the Unconditional Guaranty
and Security Agreement, together with the completed Borrowing Resolutions for
Guarantor;
          (g) landlord’s consents with respect to each of Borrower’s leased
locations;
          (h) Borrower shall have delivered evidence satisfactory to Bank that
the insurance policies required by Section 6.5 hereof are in full force and
effect, together with appropriate evidence showing lender loss payable and/or
additional insured clauses or endorsements in favor of Bank; and
          (i) Borrower shall have paid the fees and Bank Expenses then due as
specified in Section 2.4 hereof.

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     3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:
          (a) except as otherwise provided in Section 3.4, timely receipt of an
executed Payment/Advance Form;
          (b) the representations and warranties in Section 5 shall be true in
all material respects on the date of the Payment/Advance Form and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
          (c) in Bank’s reasonable discretion, there has not been any material
impairment in the general affairs, management, results of operation, financial
condition or the prospect of repayment of the Obligations, nor has there been
any material adverse deviation by Borrower from the most recent business plan of
Borrower presented to and accepted by Bank.
     3.3 Covenant to Deliver.
     Borrower agrees to deliver to Bank each item required to be delivered to
Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt
by Bank of any such item shall not constitute a waiver by Bank of Borrower’s
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank’s sole discretion.
     3.4 Procedures for Borrowing. Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance (other than Advances under Sections 2.1.2 or
2.1.4), Borrower shall notify Bank (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 noon Eastern time on the
Funding Date of the Advance. Together with any such electronic or facsimile
notification, Borrower shall deliver to Bank by electronic mail or facsimile a
completed Payment/Advance Form executed by a Responsible Officer or his or her
designee. Bank may rely on any telephone notice given by a person whom Bank
believes is a Responsible Officer or designee. Bank shall credit Advances to the
Designated Deposit Account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due.
     4 CREATION OF SECURITY INTEREST
     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security interest granted
herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may
have superior priority to Bank’s Lien under this Agreement). If Borrower shall
acquire a commercial tort claim in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00), Borrower shall promptly notify Bank in a writing
signed by Borrower of the general details thereof and, upon request by Bank,
grant to Bank in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to Bank.
     If this Agreement is terminated, Bank’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank’s obligation to make Credit Extensions has terminated, Bank
shall, at Borrower’s sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.

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     4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Bank to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Bank’s interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
     5 REPRESENTATIONS AND WARRANTIES
          Borrower represents and warrants as follows:
     5.1 Due Organization and Authorization. Borrower and each of its
Subsidiaries, if any, are duly existing and in good standing, as Registered
Organizations in their respective jurisdictions of formation and are qualified
and licensed to do business and are in good standing in any jurisdiction in
which the conduct of their business or their ownership of property requires that
they be qualified except where the failure to do so could not reasonably be
expected to have a material adverse effect on Borrower’s business. In connection
with this Agreement, Borrower has delivered to Bank completed certificates
signed by Borrower and Guarantor, respectively (each, a Perfection Certificate,
and, collectively, the “Perfection Certificates”). Borrower represents and
warrants to Bank that (a) Borrower’s exact legal name is that indicated on
Borrower’s Perfection Certificate and on the signature page hereof; (b) Borrower
is an organization of the type and is organized in the jurisdiction set forth in
Borrower’s Perfection Certificate; (c) Borrower’s Perfection Certificate
accurately sets forth Borrower’s organizational identification number or
accurately states that Borrower has none; (d)Borrower’s Perfection Certificate
accurately sets forth Borrower’s place of business, or, if more than one, its
chief executive office as well as Borrower’s mailing address (if different than
its chief executive office); (e) Borrower (and each of its predecessors) has
not, in the past five (5) years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete in all material respects. If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification
number.
     The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower’s organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could have a material
adverse effect on Borrower’s business.
     5.2 Collateral. Borrower has good title to, and has rights in or the power
to transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. As of the
Effective Date, Borrower has no deposit accounts other than the deposit accounts
with Bank, the deposit accounts, if any, described in the Perfection Certificate
delivered to Bank in connection herewith, or of which Borrower has given Bank
notice and taken such actions as are necessary to give Bank a perfected security
interest therein. The Accounts are bona fide, existing obligations of the
Account Debtors.
     The Collateral is not in the possession of any third party bailee (such as
a warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as Borrower has given Bank notice
pursuant to Section 7.2. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must execute and deliver a bailee agreement in form and substance satisfactory
to Bank in its sole discretion.
     All Inventory is in all material respects of good and marketable quality,
free from material defects.
     Except as noted on Borrower’s Perfection Certificate, Borrower is not, as
of the date hereof, a party to, nor is bound by, any license or other agreement
with respect to which Borrower is the licensee that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property. Borrower shall provide written
notice to Bank within ten (10) days of entering or becoming bound by any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition (other than over-the-counter software
that is commercially available to the public). Borrower shall take such steps as
Bank requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for all such licenses or contract rights to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement

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(such consent or authorization may include a licensor’s agreement to a
contingent assignment of the license to Bank if Bank determines that is
necessary in its good faith judgment), whether now existing or entered into in
the future.
     5.3 Accounts Receivable. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are an Eligible Account in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.
     5.4 Litigation. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than Two Hundred Fifty
Thousand Dollars ($250,000.00).
     5.5 No Material Deterioration in Financial Statements. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations. There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
     5.6 Solvency. The fair salable value of Borrower’s assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
     5.7 Regulatory Compliance. Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act
of 1940, as amended. Borrower is not engaged as one of its important activities
in extending credit for margin stock (under Regulations T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to have
a material adverse effect on its business. None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
their respective businesses as currently conducted, except where the failure to
do so would not reasonably be expected to have a material adverse effect on
Borrower’s business or operations.
     5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.
     5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all required tax returns and reports, and Borrower and its Subsidiaries
have timely paid all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower, except where the amount of
associated tax liability does not exceed Seventy-Five Thousand Dollars
($75,000.00). Borrower may defer payment of any contested taxes, provided that
Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien”. 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 all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted 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.

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     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and not for personal, family, household or
agricultural purposes
     5.11 Assets of Canadian Subsidiary. Borrower’s Canadian Subsidiary,
SoundBite Communications Canada, Inc., does not and will not own or possess
assets with an aggregate value in excess of One Million Dollars ($1,000,000.00).
     5.12 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
     6 AFFIRMATIVE COVENANTS
     Borrower shall do all of the following:
     6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on Borrower’s
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, the
noncompliance with which could reasonably be expected to have a material adverse
effect on Borrower’s business.
     6.2 Financial Statements, Reports, Certificates.
          (a) Deliver to Bank: (i) within five (5) days of filing with the
Securities and Exchange Commission, but in any event no later than forty-five
(45) days after the last day of its fiscal year, audited consolidated financial
statements prepared under GAAP on Form 10-K as filed with the Securities and
Exchange Commission, consistently applied, together with an unqualified opinion
on the financial statements from an independent certified public accounting firm
acceptable to Bank in its reasonable discretion; (ii) within five (5) days of
delivery, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt; (iii) within
five (5) days of filing with the Securities and Exchange Commission, all reports
on Form 8-K as filed with the Securities and Exchange Commission or a link
thereto on Borrower’s or another website on the internet; (iv) within five
(5) days of filing with the Securities and Exchange Commission, but in any event
no later than forty-five (45) days after the last day of each quarter, a company
prepared consolidating balance sheet and income statement covering Borrower’s
consolidated operations for such quarter on Form 10-Q; (v) a prompt report of
any legal actions pending or, to Borrower’s knowledge, threatened against
Borrower or any of its Subsidiaries that could reasonably be expected to result
in damages or costs to Borrower or any of its Subsidiaries of Two Hundred Fifty
Thousand Dollars ($250,000.00) or more; (vi) as soon as available and no later
than forty-five (45) days after approval by Borrower’s board of directors, but
at least annually, Borrower’s financial projections for current fiscal year as
approved by Borrower’s board of directors; and (vii) budgets, sales projections,
operating plans and other financial information reasonably requested by Bank.
          (b) Within thirty (30) days after the last day of each month in which
Credit Extensions made pursuant to Section 2.1.1 are outstanding or in which any
such Credit Extensions have been requested, deliver to Bank a duly completed
Borrowing Base Certificate signed by a Responsible Officer, with aged listings
of accounts receivable and accounts payable (by invoice date).
          (c) Within five (5) days of filing its 10-Q or 10-K with the
Securities and Exchange Commission, but in any event no later than forty-five
(45) days after the last day of each quarter (including the final quarter of
each fiscal year), a duly completed Compliance Certificate signed by a
Responsible Officer setting forth calculations showing compliance with the
financial covenants set forth in this Agreement.
          (d) Upon the occurrence of the first request for an Advance pursuant
to Section 2.1.1, allow Bank to audit Borrower’s Collateral at Borrower’s
expense. Such audits shall be conducted no more often than once

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every twelve (12) months unless a Default or an Event of Default has occurred
and is continuing. Borrower hereby acknowledges that the first such audit will
be conducted within sixty (60) days after the date on which Borrower requests
the first Advance pursuant to Section 2.1.1. The charge for each audit shall not
exceed Eight Hundred Fifty Dollars ($850.00) (or such higher amount as shall
represent Bank’s then-current standard charge for the same), per person per day,
plus out of pocket expenses.
     6.3 Inventory; Returns. Keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its Account Debtors shall follow Borrower’s customary practices as they
exist at the Effective Date. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than Two Hundred Fifty
Thousand Dollars ($250,000.00).
     6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms of Section 5.9 hereof) and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.
     6.5 Insurance. Keep its business and the Collateral insured for risks and
in amounts standard for companies in Borrower’s industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a loss payable endorsement showing Bank as loss payee and waive
subrogation against Bank, and all liability policies shall show, or have
endorsements showing, Bank as an additional insured. All policies (or the loss
payable and additional insured endorsements) shall provide that the insurer must
give Bank at least twenty (20) days notice before canceling, amending, or
declining to renew its policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Bank’s option, be payable to Bank on account
of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds of any casualty policy up to Five Hundred Thousand Dollars
($500,000.00), in the aggregate, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property
(i) shall be of equal or like value as the replaced or repaired Collateral and
(ii) shall be deemed Collateral in which Bank has been granted a first priority
security interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the
option of Bank, be payable to Bank on account of the Obligations. If Borrower
fails to obtain insurance as required under this Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons and Bank, Bank
may make all or part of such payment or obtain such insurance policies required
in this Section 6.5, and take any action under the policies Bank deems prudent.
     6.6 Accounts.
          (a) Maintain its and its Subsidiaries’ primary operating accounts with
Bank and Bank’s affiliates. In addition, Borrower shall maintain cash or
securities with Bank and Bank’s affiliates in an amount equal to at least the
lesser of: (i) a majority Borrower’s cash or securities in excess of that amount
used for Borrower’s current operations, and (ii) the aggregate amount of
outstanding Obligations. If at any time Borrower fails to comply with this
Section 6.6(a) in any respect, then at such time and thereafter, each Guarantor
shall maintain funds in an operating account with Bank in an amount equal to at
least the aggregate amount of outstanding Obligations.
          (b) Provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or its Affiliates. In addition, for each Collateral Account that
Borrower or Guarantor at any time maintains, Borrower shall cause the applicable
bank or financial institution (other than Bank) at or with which any Collateral
Account is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to perfect Bank’s
Lien in such Collateral Account in accordance with the terms hereunder. The
provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees and identified to Bank by
Borrower as such.
     6.7 Financial Covenants.
          Borrower shall maintain at all times, to be tested as of the last day
of each quarter, to be tested on a consolidated basis with respect to Borrower
and its Subsidiaries:

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          (a) Adjusted Quick Ratio. To be maintained at all times and tested as
of the last day of each quarter, a ratio of (i) Quick Assets to (ii) Total
Liabilities minus Deferred Revenue, of at least 2.0 to 1.0.
          (b) Minimum Quarterly Net Revenue. For the quarter ended June 30,
2009, and as of the last day of each quarter thereafter, Borrower shall have
quarterly net revenue of at least the greater of (i) Nine Million Dollars
($9,000,000.00), and (ii) seventy-five percent (75.0%) of Borrower’s
board-approved operating plan.
     6.8 Protection of Intellectual Property Rights. Except as shall be
consistent with sound business practices, Borrower shall protect, defend and
maintain the validity and enforceability of its intellectual property.
     6.9 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
     6.10 Further Assurances. Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement.
     6.11 Change in Management. Notify Bank of any material change in
management, within thirty (30) days of such change.
     7 NEGATIVE COVENANTS
     Borrower shall not do any of the following without Bank’s prior written
consent:
     7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for:
     (a) Transfers in the ordinary course of business (or with respect to assets
or property which is obsolete or no longer useful in the business) for
reasonably equivalent consideration;
     (b) Transfers of property in connection with sale-leaseback transactions;
     (c) Transfers of property to the extent such property is exchanged for
credit against, or proceeds are promptly applied to, the purchase price of other
property used or useful in the business of Borrower or its Subsidiaries;
     (d) Transfers constituting non-exclusive licenses and similar arrangements
for the use of the property of Borrower or its Subsidiaries in the ordinary
course of business and other non-perpetual licenses that may be exclusive in
some respects other than territory (and/or that may be exclusive as to territory
only in discreet geographical areas outside of the United States), but that
could not result in a legal transfer of Borrower’s title in the licensed
property;
     (e) Transfers otherwise permitted by the Loan Documents;
     (f) sales or discounting of delinquent accounts in the ordinary course of
business;
     (g) Transfers associated with the making or disposition of a Permitted
Investment;
     (h) Transfers in connection with a permitted acquisition of a portion of
the assets or rights acquired;
     (i) Transfers (i) from any Subsidiary to Borrower, and (ii) from Borrower
to its Subsidiaries in an amount up to One Million Dollars ($1,000,000.00) in
the aggregate per year; and
     (j) Transfers of assets (other than Accounts and Inventory (unless such
Transfer is in the ordinary course of Borrower’s business)) not otherwise
permitted in this Section 7.1, provided, that the aggregate book value of all
such Transfers by Borrower and its Subsidiaries, together, shall not exceed in
any fiscal year, five percent

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(5.0%) of Borrower’s consolidated total assets as of the last day of the fiscal
year immediately preceding the date of determination.
     7.2 Changes in Business, Ownership, or Business Locations. (a) Engage in or
permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as applicable,
or reasonably related thereto; or (b) liquidate or dissolve. Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (1) add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Two Hundred Fifty Thousand Dollars
($250,000.00) in Borrower’s assets or property), (2) change its jurisdiction of
organization, (3) change its organizational structure or type, (4) change its
legal name, or (5) change any organizational number (if any) assigned by its
jurisdiction of organization.
     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any Person other than with Borrower
or any Subsidiary, or acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the capital stock or property of a Person other than
Borrower or any Subsidiary, except where no Event of Default has occurred and is
continuing or would result from such action during the term of this Agreement,
and (a) Borrower is a surviving entity or (b) such merger or consolidation is a
Transfer otherwise permitted pursuant to Section 7.1 hereof.
     7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.
     7.5 Encumbrance. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s
intellectual property, except as is otherwise permitted in Section 7.1 hereof
and the definition of “Permitted Liens” herein.
     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6(b) hereof.
     7.7 Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock other
than Permitted Distributions; or (b) directly or indirectly acquire or own any
Person, or make any Investment in any Person, other than Permitted Investments,
or permit any of its Subsidiaries to do so.
     7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for (a) transactions that are in the ordinary course of Borrower’s business
(except that such transactions do not need to be in the ordinary course of
Borrower’s business if the Affiliate is a Subsidiary), upon fair and reasonable
terms (when viewed in the context of any series of transactions of which it may
be a part, if applicable) that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person; or
(b) transactions among Borrower and its Subsidiaries and among Borrower’s
Subsidiaries so long as no Event of Default exists or could reasonably be
expected to result therefrom.
     7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or (b) amend any
provision in any document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof to Obligations
owed to Bank.
     7.10 Compliance. Become an “investment company” or a company controlled by
an “investment company”, under the Investment Company Act of 1940, as amended,
or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business, or permit any of its

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Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation 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.
     8 EVENTS OF DEFAULT
     Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:
     8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day grace period will not apply to payments
due on the Revolving Line Maturity Date). During the cure period, the failure to
cure the payment default is not an Event of Default (but no Credit Extension
will be made during the cure period);
     8.2 Covenant Default.
          (a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.5, 6.6, 6.7, or violates any covenant in Section 7; or
          (b) Borrower fails or neglects to perform, keep, or observe any other
term, provision, condition, covenant or agreement contained in this Agreement,
any Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period). Grace periods provided under this Section shall not
apply, among other things, to financial covenants or any other covenants set
forth in subsection (a) above;
     8.3 Material Adverse Change. A Material Adverse Change occurs;
     8.4 Attachment. (a) Any material portion of Borrower’s assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (b) the service of
process seeking to attach, by trustee or similar process, any funds of Borrower,
or of any entity under control of Borrower (including a Subsidiary), on deposit
with Bank or Bank’s Affiliate; (c) Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business; (d) a
judgment or other claim in excess of Two Hundred Fifty Thousand Dollars
($250,000) becomes a Lien on any of Borrower’s assets; or (e) a notice of lien,
levy, or assessment is filed against any of Borrower’s assets by any government
agency and not paid within ten (10) days after Borrower receives notice. These
are not Events of Default if stayed or if a bond is posted pending contest by
Borrower (but no Credit Extensions shall be made during the cure period);
     8.5 Insolvency (a) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made while of any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);
     8.6 Other Agreements. If Borrower or Guarantor fails to (a) make any
payment that is due and payable with respect to any Material Indebtedness and
such failure continues after the applicable grace or notice period, if any,
specified in the agreement or instrument relating thereto (unless waived), or
(b) perform or observe any other condition or covenant, or any other event shall
occur or condition exist under any agreement or instrument relating to any
Material Indebtedness, and such failure continues after the applicable grace or
notice period, if any, specified in the agreement or instrument relating thereto
and the effect of such failure, event or condition is to cause

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the holder or holders of such Material Indebtedness to accelerate the maturity
of such Material Indebtedness or cause the mandatory repurchase of any Material
Indebtedness;
     8.7 Judgments. A judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand
Dollars ($250,000) (not covered by independent third-party insurance) shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a period
of ten (10) days after the entry thereof (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment);
     8.8 Misrepresentations. Borrower or any Person acting for Borrower makes
any representation, warranty, or other statement now or later in this Agreement,
any Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;
     8.9 Subordinated Debt. Any creditor of Borrower that signed a
subordination, intercreditor, or other similar agreement with Bank, breaches any
terms of such agreement; or
     8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for
any reason to be in full force and effect; (b) any Guarantor does not perform
any obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with
respect to any Guarantor, (d) the liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection
or priority of Bank’s Lien in the collateral provided by Guarantor or in the
value of such collateral or (ii) a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise) or
the prospect of repayment of the Obligations occurs with respect to any
Guarantor.
     9 BANK’S RIGHTS AND REMEDIES
     9.1 Rights and Remedies. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
          (a) declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
          (b) stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;
          (c) demand that Borrower (i) deposits cash with Bank in an amount
equal to the aggregate amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and
(ii) pay in advance all Letter of Credit fees scheduled to be paid or payable
over the remaining term of any Letters of Credit;
          (d) terminate any FX Forward Contracts;
          (e) settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;
          (f) make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank’s rights or remedies;
          (g) apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;

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          (h) ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;
          (i) deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
          (j) demand and receive possession of Borrower’s Books; and
          (k) exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).
     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with
Account Debtors, for amounts and on terms Bank determines reasonable; (d) make,
settle, and adjust all claims under Borrower’s insurance policies; (e) pay,
contest or settle any Lien, charge, encumbrance, security interest, and adverse
claim in or to the Collateral, or any judgment based thereon, or otherwise take
any action to terminate or discharge the same; and (f) transfer the Collateral
into the name of Bank or a third party as the Code permits. Borrower hereby
appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any
documents necessary to perfect or continue the perfection of Bank’s security
interest in the Collateral regardless of whether an Event of Default has
occurred until all Obligations have been satisfied in full and Bank is under no
further obligation to make Credit Extensions hereunder. Bank’s foregoing
appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank’s obligation to provide Credit Extensions
terminates.
     9.3 Accounts Verification; Collection. Whether or not an Event of Default
has occurred and is continuing, Bank may notify any Person owing Borrower money
of Bank’s security interest in such funds and verify the amount of such account.
After the occurrence of an Event of Default, any amounts received by Borrower
shall be held in trust by Borrower for Bank, and, if requested by Bank, Borrower
shall immediately deliver such receipts to Bank in the form received from the
Account Debtor, with proper endorsements for deposit.
     9.4 Protective Payments. If Borrower fails to obtain the insurance called
for by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate charged by Bank, and secured by the
Collateral. Bank will make reasonable efforts to provide Borrower with notice of
Bank obtaining such insurance at the time it is obtained or within a reasonable
time thereafter. No payments by Bank are deemed an agreement to make similar
payments in the future or Bank’s waiver of any Event of Default.
     9.5 Application of Payments and Proceeds. Unless an Event of Default has
occurred and is continuing, Bank shall apply any funds in its possession,
whether from Borrower account balances, payments, or proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral,
first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by 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 and any
applicable fees and other charges, in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, in its

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good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of
Collateral, Bank shall have the option, exercisable at any time, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.
     9.6 Bank’s Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
     9.7 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times,
to require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given. Bank’s
rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver. Bank’s delay in
exercising any remedy is not a waiver, election, or acquiescence.
     9.8 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
     10 NOTICES
     All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by electronic mail or facsimile transmission; (c) one
(1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Bank or Borrower may change
its address or facsimile number by giving the other party written notice thereof
in accordance with the terms of this Section 10.

If to Borrower:   SoundBite Communications, Inc.
22 Crosby Drive
Bedford, Massachusetts 01730
Attn: Chief Financial Officer
Fax: (781) 897-2502
Email: rleahy@soundbite.com

with a copy to:   Cooley Godward Kronish LLP
The Prudential Tower
800 Boylston Street, 46th Floor
Boston, Massachusetts 02199
Attn: Mark Johnson, Esquire
Fax: (617) 937-2400 Email: mark.johnson@cooley.com   If to Bank:   Silicon
Valley Bank
One Newton Executive Park, Suite 200
2221 Washington Street

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  Newton, Massachusetts 02462
Attn: Mr. Philip Silvia
Fax: (617) 969-5962
Email: PSilvia@svb.com

with a copy to:   Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
Fax: (617) 880-3456
Email: DEphraim@riemerlaw.com

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     11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER AND JUDICIAL REFERENCE
     Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST
BORROWER OR ITS PROPERTY.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
     12 GENERAL PROVISIONS
     12.1 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
right, without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents.
     12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by Bank’s gross negligence or willful misconduct.
     12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.
     12.4 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
     12.5 Amendments in Writing; Integration. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.
     12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.
     12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.

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     12.8 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (provided, however, Bank shall use commercially
reasonable efforts in obtaining such Subsidiary’s or Affiliate’s agreement to
the terms of this provision); (b) to prospective transferees or purchasers of
any interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise
required in connection with Bank’s examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
     12.9 Right of Set Off. Borrower hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
     13 DEFINITIONS
     13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:
     “Account” is any “account” as defined in the Code with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
     “Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.
     “Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) Total
Liabilities minus Deferred Revenue.
     “Advance” or “Advances” means an advance (or advances) under the Revolving
Line.
     “Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.
     “Agreement” is defined in the preamble hereof.
     “Availability Amount” is (a) the lesser of (i) the Revolving Line or
(ii) the Borrowing Base minus (b) the amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal
to the Letter of Credit Reserves, minus (c) the FX Reduction Amount, and minus
(d) the outstanding principal balance of any Advances (including any amounts
used for Cash Management Services).
     “Bank” is defined in the preamble hereof.
     “Bank Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower or any Guarantor.
     “Borrower” is defined in the preamble hereof

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     “Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
     “Borrowing Base” is eighty percent (80.0%) of Eligible Accounts, as
determined by Bank from Borrower’s most recent Borrowing Base Certificate;
provided, however, that Bank, upon notice to Borrower, may decrease the
foregoing percentage in its good faith business judgment based on events,
conditions, contingencies, or risks which, as determined by Bank may adversely
affect Collateral.
     “Borrowing Base Certificate” is that certain certificate in the form
attached hereto as Exhibit C.
     “Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.
     “Business Day” is any day that is not a Saturday, Sunday or a day on which
Bank is closed.
     “Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
     “Cash Management Services” is defined in Section 2.1.4.
     “Cash Management Services Sublimit” is defined in Section 2.1.4.
     “Claims” are defined in Section 12.2.
     “Code” is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the Commonwealth of Massachusetts; provided, that,
to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank’s Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth
of Massachusetts, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies and for purposes of definitions relating to such provisions.
     “Collateral” is any and all properties, rights and assets of Borrower
described on Exhibit A.
     “Collateral Account” is any Deposit Account, Securities Account, or
Commodity Account.
     “Commodity Account” is any “commodity account” as defined in the Code with
such additions to such term as may hereafter be made.
     “Communication” is defined in Section 10.
     “Compliance Certificate” is that certain certificate in the form attached
hereto as Exhibit D.

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     “Contingent Obligation” is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
     “Control Agreement” is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity Account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
     “Credit Extension” is any Advance, Letter of Credit, the aggregate FX
Reduction Amount, amount utilized for Cash Management Services, or any other
extension of credit by Bank for Borrower’s benefit.
     “Default” is any event which with notice or passage of time or both, would
constitute an Event of Default.
     “Default Rate” is defined in Section 2.3(b).
     “Deferred Revenue” is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
     “Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.
     “Designated Deposit Account” is Borrower’s deposit account, account number
___, maintained with Bank.
     “Dollars,” “dollars” and “$” each mean lawful money of the United States.
     “Effective Date” is defined in the preamble of this Agreement.
     “Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right, at any time and from time to time after
the Effective Date, and upon notice to Borrower, to adjust any of the criteria
set forth below and to establish new criteria in its good faith business
judgment. Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:
     (a) Accounts for which the Account Debtor has not been invoiced;
     (b) Accounts that the Account Debtor has not paid within ninety (90) days
of invoice date;
     (c) Accounts owing from an Account Debtor, fifty percent (50%) or more of
whose Accounts have not been paid within one hundred twenty days (120) days of
invoice date;
     (d) Accounts with credit balances over one hundred twenty (120) days from
invoice date;
     (e) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed twenty-five percent (25%) of all Accounts,
for the amounts that exceed that percentage, unless Bank approves in writing;
provided that with respect to the Accounts of NCO, such percentage shall be
thirty-five percent (35%);

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     (f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States;
     (g) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof;
     (i) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise — sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;
     (j) Accounts for demonstration or promotional equipment, or in which goods
are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, “bill and hold”, or other terms if Account Debtor’s payment may be
conditional;
     (k) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;
     (l) Accounts in which the Account Debtor disputes liability or makes any
claim (but only up to the disputed or claimed amount), or if the Account Debtor
is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;
     (m) Accounts owing from an Account Debtor with respect to which Borrower
has received Deferred Revenue (but only to the extent of such deferred revenue);
     (n) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and
     (o) other Accounts Bank deems ineligible, after consultation with Borrower,
in the exercise of its good faith business judgment.
     “Equipment” is all “equipment” as defined in the Code with such additions
to such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
     “ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.
     “Event of Default” is defined in Section 8.
     “Event of Loss” is defined in Section 2.1.5(c).
     “Foreign Currency” means lawful money of a country other than the United
States.
     “Funding Date” is any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.
     “FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.
     “FX Forward Contract” is defined in Section 2.1.3.
     “FX Reserve” is defined in Section 2.1.3.
     “GAAP” is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

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     “General Intangibles” is all “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 copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
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.
     “Guarantor” is any present or future guarantor of the Obligations,
including, without limitation, SoundBite Communications Securities Corporation.
     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.
     “Insolvency Proceeding” is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
     “Inventory” is all “inventory” 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 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 custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
     “Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.
     “Letter of Credit” means a standby letter of credit issued by Bank or
another institution based upon an application, guarantee, indemnity or similar
agreement on the part of Bank as set forth in Section 2.1.2.
     “Letter of Credit Application” is defined in Section 2.1.2(a).
     “Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).
     “Lien” is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
     “Loan Documents” are, collectively, this Agreement, the Perfection
Certificate, any subordination agreements, any note, or notes or guaranties
executed by Borrower or any Guarantor, and any other present or future agreement
between Borrower any Guarantor and/or for the benefit of Bank in connection with
this Agreement, all as amended, restated, or otherwise modified.
     “Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; (c) a material impairment of the prospect
of repayment of any portion of the Obligations; or (d) Bank determines, based
upon information available to it and in its reasonable judgment, that there is a
substantial likelihood that Borrower shall fail to comply with one or more of
the financial covenants in Section 6 during the next succeeding financial
reporting period.
     “Material Indebtedness” is any Indebtedness the principal amount of which
is equal to or greater than One Million Dollars ($1,000,000.00).
     “Obligations” are Borrower’s obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, including, without
limitation, all obligations relating to letters of credit (including
reimbursement obligations for

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drawn and undrawn letters of credit), cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and the performance of Borrower’s duties under the Loan
Documents.
     “Operating Documents” are, for any Person, such Person’s formation
documents, as certified with the Secretary of State of such Person’s state of
formation on a date that is no earlier than thirty (30) days prior to the
Effective Date, and, its bylaws in current form, each of the foregoing with all
current amendments or modifications thereto.
     “Payment/Advance Form” is that certain form attached hereto as Exhibit B.
     “Perfection Certificate” is defined in Section 5.1.
     “Permitted Distributions” means:
     (a) purchases of capital stock from former employees, consultants and
directors pursuant to repurchase agreements or other similar agreements in an
aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00)
in any fiscal year provided that at the time of such purchase no Default or
Event of Default has occurred and is continuing;
     (b) distributions or dividends consisting solely of Borrower’s capital
stock;
     (c) purchases for value of any rights distributed in connection with any
stockholder rights plan;
     (d) purchases of capital stock or options to acquire such capital stock
with the proceeds received from a substantially concurrent issuance of capital
stock or convertible securities;
     (e) purchases of capital stock pledged as collateral for loans to
employees;
     (f) purchases of capital stock in connection with the exercise of stock
options or stock appreciation rights by way of cashless exercise or in
connection with the satisfaction of withholding tax obligations;
     (g) purchases of fractional shares of capital stock arising out of stock
dividends, splits or combinations or business combinations; and
     (h) the settlement or performance of such Person’s obligations under any
equity derivative transaction, option contract or similar transaction or
combination of transactions.
     “Permitted Indebtedness” is:
     (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;
     (b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;
     (c) Subordinated Debt;
     (d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
     (e) Indebtedness secured by Liens permitted under clause (c) of the
definition of Permitted Liens; and
     (f) extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness (a) through (e) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.
     “Permitted Investments” are:
     (a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

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     (b) Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; and
     (c) Cash Equivalents.
     “Permitted Liens” are:
     (a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
     (b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on Borrower’s Books, if they have no
priority over any of Bank’s Liens;
     (c) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
One Million Dollars ($1,000,000.00) in the aggregate amount outstanding, or
(ii) existing on Equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the Equipment; and
     (d) Leases or subleases and non-exclusive licenses or sublicenses granted
in the ordinary course of Borrower’s business, if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest;
     (e) Mechanic’s Liens arising in the ordinary course of business and which
are not delinquent for more than thirty (30) days or are being contested in good
faith by appropriate proceedings, provided they have no priority over any of
Bank’s Liens and the aggregate amount of the Indebtedness secured by such Liens
does not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate;
     (f) Liens in favor of other financial institutions arising in connection
with Borrower’s deposit and/or securities accounts held at such institutions,
provided that Bank has a perfected security interest in the amounts held in such
deposit and/or securities accounts;
     (g) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default;
     (h) Security deposits with Borrower’s or Borrower’s Subsidiary’s landlord;
     (i) Deposits or pledges to secure the performance of bids, tenders,
contracts, public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds or similar obligations arising in the
ordinary course of business; and
     (j) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (i), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
     “Person” is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is
not Bank’s lowest rate.
     “Quick Assets” is, on any date, Borrower’s unrestricted cash, Eligible
Accounts, and investments with maturities of fewer than twelve (12) months
determined according to GAAP.
     “Registered Organization” is any “registered organization” as defined in
the Code with such additions to such term as may hereafter be made

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     “Responsible Officer” is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
     “Revolving Line” is an Advance or Advances in an aggregate amount of up to
One Million Five Hundred Thousand Dollars ($1,500,000.00) outstanding at any
time.
     “Revolving Line Maturity Date” is November 1, 2010.
     “Securities Account” is any “securities account” as defined in the Code
with such additions to such term as may hereafter be made.
     “Security Agreement” is that certain Security Agreement entered into
between Bank and SoundBite Communications Securities Corporation dated as of the
Effective Date.
     “Settlement Date” is defined in Section 2.1.3.
     “Subordinated Debt” is indebtedness incurred by Borrower subordinated to
all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
     “Subsidiary” is, with respect to any Person, any Person of which more than
50% of the voting stock or other equity interests (in the case of Persons other
than corporations) is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
     “Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.
     “Transfer” is defined in Section 7.1.
     “Unconditional Guaranty” is that certain Unconditional Guaranty entered
into by SoundBite Communications Securities Corporation in favor of Bank dated
as of the Effective Date.
[Signature page follows.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the Effective Date.

          BORROWER:

SOUNDBITE COMMUNICATIONS, INC.
      By:   /s/ Robert C. Leahy         Name:   Robert C. Leahy        Title:  
Chief Operating Officer and Chief Financial Officer        BANK:

SILICON VALLEY BANK
      By:   /s/ Philip Silvia         Name:   Philip Silvia        Title:   Vice
President       

[Signature page to Loan and Security Agreement]

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EXHIBIT A
The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:
     All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided
below), commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
certificates of deposit, fixtures, letters of credit rights (whether or not the
letter of credit is evidenced by a writing), securities, and all other
investment property, supporting obligations, and financial assets, whether now
owned or hereafter acquired, wherever located; and
     all Borrower’s Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
     Notwithstanding the foregoing, the Collateral does not include any of the
following, whether now owned or hereafter acquired: (a) any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing, and (b) Equipment
financed by Oracle prior to the Effective Date (provided, however, such
Equipment shall be part of the Collateral if at any time Oracle no longer has a
security interest in such Equipment).
     Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, without Bank’s prior written consent.

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EXHIBIT B
Loan Payment/Advance Request Form
Deadline for same day processing is Noon E.S.T.*

Fax To:   Date:                     

LOAN PAYMENT:
SoundBite Communications, Inc.

     
From Account #                                                    
  To Account #                                                                
                 
                                       (Deposit Account #)
 
(Loan Account #)
Principal $                                                             
  and/or Interest
$                                                                               
Authorized Signature:                                       
          Phone Number:
                                                                       
Print Name/Title:                                                   
   

Loan Advance:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

     
From Account #                                                    
  To Account
#                                                                       
           
(Loan Account #)
 
(Deposit Account #)

Amount of Advance $                                          
All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:

     
Authorized Signature:                                         
  Phone Number:
                                                                               
Print Name/Title:                                                  
   

Outgoing Wire Request:
Complete only if all or a portion of funds from the loan advance above is to be
wired.
Deadline for same day processing is noon, E.S.T.

     
Beneficiary Name:                                               
  Amount of Wire:
$                                                                      
Beneficiary Bank:                                               
  Account Number:
                                                                      
City and State:                                                     
     
Beneficiary Bank Transit (ABA) #:                     
  Beneficiary Bank Code (Swift, Sort, Chip, etc.):                     
 
 
(For International Wire Only)
 
Intermediary Bank:                                                 
  Transit (ABA) #:
                                                                       For
Further Credit to:
                                                                     
                                                                                     
             Special Instruction:
                                                                     
                  
                                                                                

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
 

     

1

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Authorized Signature:                                         
  2nd Signature (if required):                                               
Print Name/Title:                                                  
  Print Name/Title:
                                                               
Telephone #:                                                        
  Telephone #:
                                                                     

2

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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: SoundBite Communications, Inc.
Lender: Silicon Valley Bank
Commitment Amount: $1,500,000.00

              ACCOUNTS RECEIVABLE         1.  
Accounts Receivable Book Value as of ____________________
  $        
 
        2.  
Additions (please explain on reverse)
  $        
 
        3.  
TOTAL ACCOUNTS RECEIVABLE
  $        
 
           
 
        ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)         4.  
Amounts over 90 days due
  $        
 
        5.  
Balance of 50% over 120 day accounts
  $        
 
        6.  
Credit balances over 90 days
  $        
 
        7.  
Concentration Limits
  $        
 
        8.  
Foreign Accounts
  $        
 
        9.  
Governmental Accounts
  $        
 
        10.  
Contra Accounts
  $        
 
        11.  
Promotion or Demo Accounts
  $        
 
        12.  
Intercompany/Employee Accounts
  $        
 
        13.  
Disputed Accounts
  $        
 
        14.  
Deferred Revenue
  $        
 
        15.  
Other (please explain on reverse)
  $        
 
        16.  
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
  $        
 
        17.  
Eligible Accounts (#3 minus #16)
  $        
 
        18.  
ELIGIBLE AMOUNT OF ACCOUNTS (80.0% of #17)
  $        
 
           
 
        BALANCES         19.  
Maximum Loan Amount
  $        
 
        20.  
Total Funds Available (Lesser of #19 or #18)
  $        
 
        21.  
Present balance owing on Line of Credit
  $        
 
        22.  
Outstanding under Sublimits
        23.  
RESERVE POSITION (#20 minus #21 and #22)
  $        
 
       

The undersigned represents and warrants for and on behalf of the Borrower that
this is true, complete and correct, and that the information in this Borrowing
Base Certificate complies with the representations and warranties in the Loan
and Security Agreement between the undersigned and Silicon Valley Bank.

                          BANK USE ONLY

    COMMENTS:       Received by: __________________________    
 
          AUTHORIZED SIGNER             Date: ________________________________  
  By: ________________________________       Verified:
______________________________    
       Authorized Signer
          AUTHORIZED SIGNER     Date: ____________________________       Date:
_______________________________             Compliance
Status:          Yes          No    

1

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EXHIBIT D
COMPLIANCE CERTIFICATE

      TO:           SILICON VALLEY BANK
FROM:     SOUNDBITE COMMUNICATIONS, INC.   Date:
                                        

     The undersigned authorized officer of SoundBite Communications, Inc.
(“Borrower”) certifies in such capacity that under the terms and conditions of
the Loan and Security Agreement between Borrower and Bank (as amended, the
“Agreement”), (1) Borrower is in complete compliance for the period ending
                             with all required covenants except as noted below,
(2) there are no Events of Default, (3) all representations and warranties in
the Agreement are true and correct in all material respects on this date except
as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date,
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies that
these are prepared in accordance with GAAP consistently applied from one period
to the next except as explained in an accompanying letter or footnotes. The
undersigned acknowledges that no borrowings may be requested at any time or date
of determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.

          Reporting Covenant   Required   Complies
 
       
Compliance Certificate
  Within five (5) days of filing 10-Q with SEC, but no later than 45 days after
quarter end   Yes    No
Borrowing Base Certificate with A/R and A/P agings
  Monthly within 30 days, when Advances are outstanding or have been requested
under Section 2.1.1   Yes    No
Board Projections
  Annually and within 45 days of approval   Yes    No
10-Q
  Within five (5) days of filing with SEC, but no later than 45 days after
quarter end   Yes    No
8-K
  Within five (5) days of filing with SEC   Yes    No
10-K, together with an unqualified opinion
  Within five (5) days of filing with SEC, but no later than 45 days after year
end   Yes    No

              Financial Covenant   Required   Actual   Complies
Maintain on a Quarterly Basis:
           
Adjusted Quick Ratio
      2.0:1.0      ______:1.0   Yes    No
Minimum Quarterly Net Revenue
  $                    *   $                       Yes    No

 

*   As set forth in Section 6.7(b) of the Agreement.

1

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     The following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
     The following are the exceptions with respect to the certification above:
(If no exceptions exist, state “No exceptions to note.”)
     
 
     
 
     
 

          SoundBite Communications, Inc.   BANK USE ONLY
 
       
By:
      Received by:                                                  
 
       
Name:
   
AUTHORIZED SIGNER
 
         
Title:
    Date:                                                               
 
         
 
      Verified:                                                         
 
     
AUTHORIZED SIGNER
 
      Date:                                                              
 
       
 
      Compliance Status:     Yes     No

2

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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated:                                         
In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall control.
I.      Adjusted Quick Ratio (Section 6.7(a))
Required:        2.0:1.0
Actual:            ___:1.0

                                   No, not in compliance                       
Yes, in compliance

II.     Minimum Quarterly Net Revenue (Section 6.7(b))
Required:       Greater of $9,000,000.00, and 75% of Board-approved operating
plan
Actual:           $                    

                                   No, not in compliance                       
Yes, in compliance

1114184-7

3