exv10w1






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




 









 







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








-15-









 








     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%);



-19-









 





     (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.




-20-











 





     “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



-21-









 




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;



-22-









 





     (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



-23-









 





     “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.]




-24-









 





     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]













 








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.




1











 





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









 










	 	 	 
	Authorized Signature:                                         

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

	 	Print Name/Title:                                                                
	Telephone #:                                                        

	 	Telephone #:                                                                      











2










 





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











 





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









 










     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









 






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