Exhibit 10.1
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of May 31,
2002, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at One Newton Executive Park, Suite
200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and SWITCHBOARD INCORPORATED, a Delaware
corporation with its chief executive office located at 000 Xxxxxxxx Xxxx,
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000 ("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
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Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document. Capitalized terms in this Agreement shall have the
meanings set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
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2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank
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the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.
2.1.1 Revolving Advances.
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(a) Availability. Bank shall make Advances not exceeding (i) the
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Committed Revolving Line or the Borrowing Base, whichever is less, minus
(ii) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), minus (iii) the FX Reserve, and minus (iv)
the aggregate outstanding Advances hereunder (including any Cash Management
Services). Amounts borrowed under this Section may be repaid and reborrowed
during the term of this Agreement.
(b) Borrowing Procedure. To obtain an Advance, Borrower must notify
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Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business
Day the Advance is to be made. If such notification is by telephone,
Borrower must promptly confirm the notification by delivering to Bank a
completed Payment/Advance Form in the form attached as Exhibit B. Bank
shall credit Advances to Borrower's 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. Bank may rely on any telephone
notice given by a person whom Bank believes is a Responsible Officer or
designee. Borrower shall indemnify Bank for any loss Bank suffers due to
such reliance.
(c) Termination; Repayment. The Committed Revolving Line terminates on
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the Revolving Maturity Date, when the principal amount of all Advances and
the unpaid interest thereon, shall be immediately due and payable.
2.1.2 Letters of Credit Sublimit.
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(a) If there is availability for Credit Extensions under Section
2.1.1(a), Bank shall issue or have issued Letters of Credit for Borrower's
account not exceeding (i) the lesser of the Committed Revolving Line or the
Borrowing Base, minus (ii) the outstanding principal balance of any
Advances (including any Cash Management Services), minus (iii) the amount
of all Letters of Credit (including drawn but unreimbursed Letters of
Credit), plus an amount equal to any Letter of Credit Reserves. The face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed
$1,000,000.00. Each Letter of Credit shall have an expiry date no later
than 180 days after the Revolving Maturity Date provided Borrower's Letter
of Credit reimbursement obligation shall be secured by cash on terms
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acceptable to Bank on and after (i) the Revolving Maturity Date if the term
of the Committed Revolving Line is not extended by Bank, or (ii) the
occurrence of an Event of Default hereunder. 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 form of standard
Application and Letter of Credit Agreement. Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request.
(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 and such Letters of Credit, under all circumstances
whatsoever. Borrower shall indemnify, defend, protect, and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection
with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of Credit payable in
a currency other than United States Dollars. 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 cable
charges) in United States currency at the then prevailing rate of exchange
in San Francisco, California, for sales of that other currency for cable
transfer to the country of which it is the currency.
(d) Upon the issuance of any letter of credit payable in a currency
other than United States Dollars, Bank shall create a reserve (the "Letter
of Credit Reserve") under the Committed Revolving Line for letters of
credit against fluctuations in currency exchange rates, in an amount equal
to ten percent (10%) of the face amount of such letter of credit. The
amount of such reserve may be amended by Bank from time to time to account
for fluctuations in the exchange rate. The availability of funds under the
Committed Revolving Line shall be reduced by the amount of such reserve for
so long as such letter of credit remains outstanding.
2.1.3 Foreign Exchange Sublimit. If there is availability for Credit
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Extensions under Section 2.1.1(a), then Borrower may enter in foreign exchange
forward contracts with the Bank under which Borrower commits to purchase from or
sell to Bank a set amount of foreign currency more than one business day after
the contract date (the "FX Forward Contract"). Bank shall subtract 10% of each
outstanding FX Forward Contract from the foreign exchange sublimit, which
sublimit is a maximum of $1,000,000.00 (the "FX Reserve"). The total FX Forward
Contracts at any one time may not exceed 10 times the amount of the FX Reserve.
Bank may terminate the FX Forward Contracts if an Event of Default occurs.
2.1.4 Cash Management Services Sublimit. If there is availability for
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Credit Extensions under Section 2.1.1(a), Borrower may use up to $1,000,000.00
for the Bank's Cash Management Services, which may include merchant services,
direct deposit of payroll, business credit card, and check cashing services
identified in the various cash management services agreements related to such
services (the "Cash Management Services"). Such aggregate amounts utilized under
the Cash Management Services sublimit shall at all times reduce the amount
otherwise available for Credit Extensions under the Committed Revolving Line.
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
Committed Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.1.5 Equipment Advances.
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(a) Availability. Through March 31, 2003 (the "Equipment Availability
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End Date"), Bank shall make advances ("Equipment Advance" and,
collectively, "Equipment Advances") to Borrower in an aggregate amount not
exceeding the Committed Equipment Line. Except as provided below, the
Equipment Advances (except for the Initial Equipment Advance) may only be
used to finance Eligible Equipment purchased within ninety (90) days
(determined based upon the applicable invoice date of such Eligible
Equipment) of each Equipment Advance request. Notwithstanding the
foregoing, one Equipment Advance may be used to finance Eligible Equipment
purchased between January 1, 2001 and December 31, 2001 (determined based
upon the applicable invoice dates of such Eligible Equipment) in an amount
not greater than One Million Seven Hundred Fifty Dollars ($1,750,000.00) in
the aggregate provided that such Equipment Advance occurs within one (1)
month of the Closing Date. Equipment Advances shall not exceed one hundred
percent (100%) of the invoice amount of such Eligible Equipment, including
taxes, shipping, warranty charges, freight discounts and installation
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expense relating to such Equipment. The initial Equipment Advance (the
"Initial Equipment Advance") under the Committed Equipment Line shall be
made on the Closing Date and shall be used to payoff all of Borrower's
existing obligations to, and terminate Borrower's loan arrangement with,
Fleet National Bank. Equipment Advances when repaid may not be reborrowed.
(b) Interest Rate. Interest accrues from the date of each Equipment
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Advance at the per annum rate described in Section 2.3(a) and is payable
monthly.
(c) Repayment. Each Equipment Advance shall be payable in (i) thirty
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(30) equal monthly installments of principal, plus (ii) monthly payments of
accrued interest, beginning on the first Payment Date following such
Equipment Advance and continuing on each Payment Date thereafter through
the Equipment Maturity Date applicable to such Equipment Advance.
(d) To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern time
one (1) Business Day before the day on which the Equipment Advance is to be
made. The notice in the form of Exhibit B (Payment/Advance Form) must be
signed by a Responsible Officer or designee and include a copy of the
invoice for the Equipment being financed.
2.1.5 Undisbursed Credit Extensions. The Bank's obligation to lend the
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undisbursed portion of the Credit Extensions shall terminate if there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospects of Borrower,
whether or not arising from transactions in the ordinary course of business, or
there has been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.
2.2 Overadvances. If Borrower's Obligations under Sections 2.1.1, 2.1.2,
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2.1.3, and 2.1.4 exceed the lesser of either (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrower must immediately pay in cash to Bank the
excess.
2.3 Interest Rate; Payments.
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(a) Interest Rate. The principal amounts outstanding under the
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Committed Revolving Line shall accrue interest at a per annum rate equal to
the Bank's Prime Rate. The principal amounts outstanding under the
Committed Equipment Line shall accrue interest at a per annum rate equal to
the aggregate of the Bank's Prime Rate, and one-quarter of one percent
(0.25%). After an Event of Default, Obligations shall bear interest at five
percent (5.0%) above the rate effective immediately before the Event of
Default. The applicable interest rate hereunder shall increase or decrease
when the Prime Rate changes. Interest is computed on the basis of a 360 day
year for the actual number of days elapsed.
(b) Payments. Interest is payable on the Payment Date of each month.
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Bank may debit any of Borrower's deposit accounts including Account Number
[__________] for principal and interest payments or any amounts Borrower
owes Bank. Bank shall promptly notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00
noon 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:
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(a) Committed Revolving Line Facility Fee. A fully earned,
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non-refundable facility fee for the Committed Revolving Line of Five
Thousand Dollars ($5,000.00) due and payable on the Closing Date; and
(b) Committed Equipment Line Facility Fee. A fully earned,
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non-refundable facility fee for the Committed Equipment Line of Twenty
Thousand Dollars ($20,000.00) due and payable on the Closing Date; and
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(c) Letter of Credit Fee. The Borrower shall pay the Bank's customary
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fees and expenses for the issuance or the renewal of Letters of Credit,
including, without limitation, a Letter of Credit fee of one and one
quarter percent (1.25%) per annum of the face amount of each Letter of
Credit issued or renewed, upon the issuance or renewal of such Letter of
Credit by the Bank; and
(d) Bank Expenses. All Bank Expenses (including reasonable attorneys'
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fees and expenses incurred through and after the Closing Date) when due.
3 CONDITIONS OF LOANS
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3.1 Conditions Precedent to Initial Credit Extension. The obligation of
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Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) copy of Borrower's Certificate of Incorporation (certified by
Secretary of State);
(c) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(d) Negative Pledge Agreement covering Intellectual Property;
(e) landlord's waiver;
(f) a legal opinion of Borrower's counsel, in form and substance
acceptable to Bank;
(g) Guaranties and Security Agreements by the Guarantor(s);
(h) financing statements (Forms UCC-1);
(i) Perfection Certificate;
(j) Account Control Agreement/ Investment Account Control Agreement;
(k) insurance certificate;
(l) results satisfactory to Bank in its sole discretion from the
Initial Audit described in Section 6.2 prior to the initial Credit
Extension under the Committed Revolving Line;
(m) payment of the fees and Bank Expenses then due specified in
Section 2.4 hereof;
(n) Certificate of Foreign Qualification (if applicable);
(o) Certificate of Good Standing/Legal Existence; and
(p) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. Bank's obligations to
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make each Credit Extension, including the initial Credit Extension, is subject
to the following:
(a) timely receipt of any Payment/Advance Form; and
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(b) the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the
effective date of each Credit Extension and no 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.
4 CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
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payment and performance in full of all of the Obligations and the performance of
each of Borrower's duties under the Loan Documents, a continuing security
interest in, and pledges and assigns to the Bank, the Collateral, wherever
located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof. Borrower warrants and represents that the security
interest granted herein shall be a first priority security interest in the
Collateral. Upon the occurrence and during the continuance of an Event of
Default, Bank may place a "hold" on any deposit account pledged as Collateral.
Except as disclosed on the Schedule, Borrower is not a party to, nor is bound
by, any license or other agreement with respect to which the 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. Without prior consent from Bank, Borrower shall not enter into, or
become bound by, any such license or agreement which is reasonably likely to
have a material impact on Borrower's business or financial condition. 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, whether now existing or entered into in
the future.
Borrower agrees that any disposition of the Collateral in violation of this
Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire
a commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the brief details thereof and 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 satisfactory to
Bank.
5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each Subsidiary is
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duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. In connection with this Agreement, the Borrower
delivered to the Bank a certificate signed by the Borrower and entitled
"Perfection Certificate". The Borrower represents and warrants to the Bank that:
(a) the Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; and (b) the Borrower is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate; and (c) the Perfection Certificate accurately sets forth
the Borrower's organizational identification number or accurately states that
the Borrower has none; and (d) the Perfection Certificate accurately sets forth
the Borrower's place of business, or, if more than one, its chief executive
office as well as the Borrower's mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to the Borrower
is accurate and complete. If the Borrower does not now have an organizational
identification number, but later obtains one, Borrower shall forthwith notify
the Bank of such 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 or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
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5.2 Collateral. Borrower has good title to the Collateral, free of Liens
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except Permitted Liens. Borrower has no deposit account, other than the deposit
accounts with Bank and deposit accounts described in the Perfection Certificate
delivered to the Bank in connection herewith. The Accounts are bona fide,
existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as a warehouse). 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 acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. 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.
5.3 Litigation. Except as shown in the Schedule, there are no actions or
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proceedings pending or, to the knowledge of Borrower's Responsible Officers,
threatened by or against Borrower or any Subsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.
5.4 No Material Deviation in Financial Statements. All consolidated
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financial statements for Borrower and any Subsidiary 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.
5.5 Solvency. Borrower is able to pay its debts (including trade debts) as
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they mature.
5.6 Regulatory Compliance. Borrower is not an "investment company" or a
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company "controlled" by an "investment company" under the Investment Company
Act. 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 cause a Material
Adverse Change. None of Borrower's or any Subsidiary's 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 Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has 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 its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.
5.7 Subsidiaries. Borrower does not own any stock, partnership interest or
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other equity securities except for Permitted Investments.
5.8 Full Disclosure. No written representation, warranty or other statement
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of Borrower in any certificate or written statement given to Bank 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
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Borrower shall do all of the following:
6.1 Government Compliance. Borrower shall maintain its and all
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Subsidiaries' legal existence (except that a Subsidiary of Borrower may be
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merged with or into Borrower or another Subsidiary of Borrower to the extent
that such transaction is expressly permitted under Section 7.3) and good
standing in its jurisdiction 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, noncompliance with which could have a
material adverse effect on Borrower's business or operations or be expected to
cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
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(a) Borrower shall deliver to Bank: (i) as soon as available, but no
later than one hundred twenty (120) days after the last day of Borrower's
fiscal year, audited, consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Bank; (ii) within five (5) days of filing, copies
of all statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000.00) or
more; and (iv) other financial information reasonably requested by Bank.
(b) Within thirty (30) days after the last day of each month during
which Obligations (including undrawn Letters of Credit, Cash Management
Services and the FX Reserve) were outstanding or Credit Extensions were
requested, Borrower shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer in the form of Exhibit C, with aged
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listings of accounts receivable (by invoice date).
(c) Within five (5) days of filing its 10-Q with the Securities and
Exchange Commission, Borrower shall deliver to Bank, on a quarterly basis,
together with a copy of such 10-Q, a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D.
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(d) Allow Bank to audit Borrower's Collateral at Borrower's expense.
Such audits shall be conducted prior to the initial Credit Extension under
the Committed Revolving Line and no more often than once every twelve (12)
months thereafter, unless an Event of Default has occurred and is
continuing. The Borrower shall provide the Bank with access to all its
records and financial information so that the initial audit (the "Initial
Audit") of Borrower's Collateral shall be completed by Bank prior to the
initial Credit Extension under the Committed Revolving Line.
6.3 Returns. Returns and allowances between Borrower and its account
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debtors shall follow Borrower's customary practices as they exist at the Closing
Date. Borrower must promptly notify Bank of all returns, recoveries, disputes
and claims that involve more than Fifty Thousand Dollars ($50,000.00).
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, timely
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payment of all material federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting in good faith, with
adequate reserves maintained in accordance with GAAP) and will deliver to Bank,
on demand, appropriate certificates attesting to such payments.
6.5 Insurance. Borrower shall keep its business and the Collateral insured
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for risks and in amounts, standard for Borrower's industry, and as Bank may
reasonably request in Bank's reasonable discretion. Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender's loss payable endorsement showing Bank as
an additional loss payee and all liability policies shall show the Bank as an
additional insured and all policies shall provide that the insurer must give
Bank at least twenty (20) days notice before canceling 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, 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 $250,000.00, in
the aggregate, toward the replacement or repair of destroyed or damaged
property; provided that (i) any such replaced or repaired property (a) shall be
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of equal or like value as the replaced or repaired Collateral and (b) shall be
deemed Collateral in which Bank has been granted a first priority security
interest and (ii) after the occurrence and during the continuation of an Event
of Default all proceeds payable under such casualty policy shall, at the option
of the Bank, be payable to Bank on account of the Obligations. If Borrower fails
to obtain insurance as required under Section 6.5 or to pay any amount or
furnish any required proof of payment to third persons and the Bank, Bank may
make all or part of such payment or obtain such insurance policies required in
Section 6.5, and take any action under the policies Bank deems prudent.
6.6 Primary Accounts. Without limiting any provision in Section 6.7, in
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order to permit the Bank to monitor the Borrower's financial performance and
condition, Borrower, and all Borrower's Subsidiaries, shall maintain Borrower's,
and such Subsidiaries', primary depository accounts, operating accounts and
securities accounts with Bank. Any Guarantor shall maintain all depository,
operating and securities accounts with Bank. Borrower shall identify to Bank, in
writing, any bank or securities account opened by Borrower with any institution
other than Bank. In addition, for each such account that the Borrower at any
time opens or maintains, Borrower shall, at the Bank's request and option,
pursuant to an agreement in form and substance acceptable to the Bank, cause the
depository bank or securities intermediary to agree that such account is the
collateral of the Bank pursuant to the terms hereunder. The provisions of this
paragraph 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 the Borrower's employees. Borrower shall at all times maintain in deposit or
investment accounts at the Bank (or, if such accounts are transferred by Bank at
its discretion, at Bank's direct subsidiaries) not less than ninety-five percent
(95%) of Borrower's cash, cash equivalents and securities.
6.7 Financial Covenants.
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Minimum Cash at Bank. Borrower acknowledges, confirms and agrees that:
Borrower shall at all times maintain in deposit or investment accounts at
the Bank not less Twenty Million Dollars ($20,000,000.00) in unrestricted
cash.
6.8 Further Assurances. Borrower shall execute any further instruments and
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take further action as Bank reasonably requests to perfect or continue Bank's
security interest in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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Borrower shall not do any of the following without the Bank's prior written
consent.
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
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(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of business; (ii) of licenses (as between Borrower and
licensee) and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business; or (iii) of worn-out or
obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations. (i)
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Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower, or (ii) have a material change
in its ownership (other than by the sale of Borrower's equity securities in a
public offering or to venture capital investors so long as Borrower identifies
to Bank the venture capital investors prior to the closing of the investment),
or (iii) remove, either by termination or voluntary departure or otherwise, any
one of the following: (A) Xxxxxxx X. Xxxxxxxx, from his position as Chief
Executive Officer of Borrower, or (B) Xxxx Xxxxxxxx, from his position as
President of Borrower, or (C) Xxxxxx Xxxxxxx, from his position as Chief
Financial Officer of Borrower. Borrower shall not, without at least thirty (30)
days prior written notice to Bank: (i) relocate its chief executive office, or
8
add any new offices or business locations (unless such new offices or business
locations contain less than Five Thousand Dollars ($5,000.00) in Borrower's
assets or property), or (ii) change its jurisdiction of organization, or (iii)
change its organizational structure or type, or (iv) change its legal name, or
(v) 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 other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, unless all Obligations of Borrower
hereunder have been repaid in full and this Agreement has been terminated at or
prior to the closing of such merger or acquisition. Notwithstanding the
foregoing, a Subsidiary of Borrower may merge with and into the Borrower
(provided the Borrower is the surviving legal entity) and a Subsidiary of
Borrower may merge with and into another Subsidiary of Borrower.
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. The Collateral may also be subject to Permitted Liens.
7.6 Distributions; Investments. (i) Directly or indirectly acquire or own
--------------------------
any Person (unless all Obligations of Borrower hereunder have been repaid in
full and this Agreement has been terminated at or prior to the closing of such
acquisition), or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.
7.7 Transactions with Affiliates. Directly or indirectly enter or permit
----------------------------
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.
7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
-----------------
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 Compliance. Become an "investment company" or a company controlled by
----------
an "investment company", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock, 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 operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
-----------------
Any one of the following is an Event of Default:
8.1 Payment Default. Borrower fails to pay any of the Obligations within
---------------
three (3) Business Days after their due date. During the additional period
described in the foregoing sentence the failure to cure the default is not an
Event of Default (but no Credit Extension shall be made during the cure period);
8.2 Covenant Default. Borrower does not perform any obligation in Section 6
----------------
or violates any covenant in Section 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
9
condition or covenant that can be cured, has not cured the default within ten
(10) days after it occurs, or if the default cannot be cured within ten (10)
days or cannot be cured after Borrower's attempts in the ten (10) day period,
and the default may be cured within a reasonable time, then Borrower shall have
additional time (of not more than thirty (30) days) to attempt to cure the
default. Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain. During the additional period
the failure to cure the default is not an Event of Default (but no Credit
Extensions shall be made during the cure period);
8.3 Material Adverse Change. A Material Adverse Change occurs;
-----------------------
8.4 Attachment. (i) 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; (ii) the service of
process upon the Borrower seeking to attach, by trustee or similar process any
funds of the Borrower on deposit with the Bank; (iii) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (iv) a judgment or other claim becomes a Lien on a material portion of
Borrower's assets; or (v) 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. (i) Borrower becomes insolvent; (ii) Borrower begins an
----------
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within sixty (60) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could result in a Material Adverse Change;
8.7 Judgments. If a judgment or judgments for the payment of money in an
---------
amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment);
8.8 Misrepresentations. If Borrower or any Person acting for Borrower makes
------------------
any material misrepresentation or material misstatement now or later in any
warranty or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document.
8.9 Guaranty. (i) Any guaranty of any Obligations terminates or ceases for
--------
any reason to be in full force; or (ii) any Guarantor does not perform any
obligation under any guaranty of the Obligations; or (iii) any material
misrepresentation or material misstatement exists now or later in any warranty
or representation in any guaranty of the Obligations or in any certificate
delivered to Bank in connection with the guaranty; or (iv) any circumstance
described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any Guarantor, or
(v) the death, liquidation, winding up, termination of existence, or insolvency
of any Guarantor.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. When 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;
10
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect 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;
(e) 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;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is 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; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
-----------------
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or xxxx of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
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 any security interest 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 Collection. In the event that an Event of Default occurs and
-------------------
is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
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 Bank Expenses. Any amounts paid by Bank as provided herein are Bank
-------------
Expenses and are immediately due and payable, and shall bear interest at the
then applicable rate and be secured by the Collateral. No payments by Bank shall
be deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.
9.5 Bank's Liability for Collateral. So long as the Bank complies with
-------------------------------
reasonable banking practices regarding the safekeeping of collateral, the 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.
11
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
-------------------
the Loan Documents, and all other agreements 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 is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.
9.7 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 or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.
If to Borrower: Switchboard Incorporated
000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Chief Financial Officer
FAX: (000)000-0000
If to Bank: Silicon Valley Bank
One Newton Executive Park, Suite 200
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Mr. Xxxxxxxx Xxxx
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
------------------------------------------
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
Xxxxx County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
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
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,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
12.2 Indemnification. Borrower hereby indemnifies, defends and holds the
---------------
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities 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
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 Right of Set-Off. Borrower and any guarantor hereby grant to Bank, a
----------------
lien, security interest and right of setoff 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 the Bank 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 and any guarantor 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 THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 Time of Essence. Time is of the essence for the performance of all
---------------
Obligations in this Agreement.
12.5 Severability of Provision. Each provision of this Agreement is
-------------------------
severable from every other provision in determining the enforceability of any
provision.
12.6 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.
12.7 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, are an original, and all taken together, constitute
one Agreement.
12.8 Survival. All covenants, representations and warranties made in this
--------
Agreement continue in full force while any Obligations remain outstanding. 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.
12.9 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: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) 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 (b) is disclosed to Bank by a third
13
party, if Bank does not know that the third party is prohibited from disclosing
the information.
13 DEFINITIONS
-----------
13.1 Definitions.
-----------
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.
"Affiliate" of a 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.
"Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing that information.
"Borrowing Base" is 80% of Eligible Accounts, as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Cash Management Services" are defined in Section 2.1.4.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
"Collateral" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on Exhibit A.
---------
"Committed Equipment Line" is an Equipment Advance or Equipment Advances of
up to Four Million Dollars ($4,000,000.00).
"Committed Revolving Line" is an Advance or Advances of up to One Million
Dollars ($1,000,000.00). Notwithstanding the foregoing, the availability of the
initial Credit Extension under the Committed Revolving Line shall be subject to
the receipt by the Bank of satisfactory results, in the sole and absolute
discretion of the Bank, of the Initial Audit of Borrower's Accounts pursuant to
Section 6.2 hereof. If the results of the Initial Audit are not satisfactory to
the Bank for any reason, the Bank may, at its discretion, reduce the amount of
the Committed Revolving Line, or not make any Credit Extensions hereunder,
except pursuant to terms satisfactory to Bank.
14
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) 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; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) 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 the guarantee or other support arrangement.
"Credit Extension" is each Advance, Equipment Advance, Letter of Credit,
Exchange Contract, amounts utilized under the Cash Management Services, or any
other extension of credit by Bank for Borrower's benefit.
"Eligible Accounts" are billed Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.2; but Bank may, in its sole discretion: (i) deem any account debtor
of Borrower ineligible for purposes of the application of the Borrowing Base
hereunder, and (ii) reasonably change eligibility standards by giving Borrower
thirty (30) days prior written notice. Unless Bank agrees otherwise in writing,
Eligible Accounts shall not include:
(a) Accounts that the account debtor has not paid within ninety (90)
days of invoice date;
(b) Accounts for an account debtor, fifty percent (50%) or more of
whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts for 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;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality thereof;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval,
xxxx and hold, or other terms if account debtor's payment may be
conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (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;
and
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
15
"Eligible Equipment" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, subject to the
limitations set forth herein, and (b) Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is reasonably
acceptable to Bank in all respects.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance " is defined in Section 2.1.5.
"Equipment Availability End Date" is defined in Section 2.1.5.
"Equipment Maturity Date" is, with respect to each Equipment Advance, the
thirtieth (30th) Payment Date following each such Equipment Advance.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"Event of Default " is defined in Section 8.
"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.
"Guarantor" is any present or future guarantor of the Obligations,
including Switchboard 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.
"Intellectual Property" is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Letter of Credit" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section 2.1.2.
16
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"Material Adverse Change" is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; or (ii) a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iv) Bank determines, based upon information available to it and in its
reasonable judgment, that there is a reasonable 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.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Other Equipment" is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by the Bank, including sales tax,
freight and installation expenses. Unless otherwise agreed to by Bank, not more
than 25% of the proceeds of the Committed Equipment Line shall be used to
finance Other Equipment.
"Payment Date" is the first Business Day of each month.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Investments Schedule and existing on the
Closing Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any state maturing within
2 year from its acquisition, (ii) commercial paper maturing no more than 1
year after its creation and having the highest rating from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, Inc., (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue,
and (iv) any other investments administered through the Bank.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
17
levies, either not delinquent or being contested in good faith and for
which Borrower maintains adequate reserves on its Books, if they have no
priority over any of Bank's security interests;
(c) Leases or subleases and licenses (as between Borrower and
licensee) or sublicenses (as between Borrower and licensee) granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses
--
and sublicenses permit granting Bank a security interest; and
(d) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), 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. Except as otherwise provided elsewhere herein, any
Credit Extension made hereunder based on the Bank's Prime Rate shall increase or
decrease with the changes in the Bank's Prime Rate.
"Responsible Officer" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"Revolving Maturity Date" is the date which is one day prior to the one
year anniversary of the Closing Date.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (pursuant to a subordination agreement entered into between the
Bank, the Borrower and the subordinated creditor), on terms acceptable to Bank.
"Subsidiary" of any Person is any corporation, partnership, limited
liability company, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
[the remainder of this page is intentionally left blank]
18
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 date first above written.
BORROWER:
SWITCHBOARD INCORPORATED
By: /s/Xxxxxx X. Xxxxxxx
--------------------
Name: Xxxxxx X. Xxxxxxx
-----------------
Title: CFO
---
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/Xxxxxxxx X. Xxxx
-------------------
Name: Xxxxxxxx X. Xxxx
----------------
Title: Senior Vice President
---------------------
SILICON VALLEY BANK
By /s/Xxxxxx Xxxxxx
----------------
Name: /s/Xxxxxx Xxxxxx
----------------
Title: Assistant Vice President
------------------------
(Signed in Santa Xxxxx County, California)
19
EXHIBIT A
The Collateral consists of all right, title and interest of Borrower in and
to the following:
All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
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.
The Collateral does not include:
Any copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, 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 intellectual property. To the extent a court
of competent jurisdiction holds that a security interest in any Intellectual
Property is necessary to have a security interest in any accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing Intellectual Property, then the Collateral shall,
effective as of the Closing Date, include the Intellectual Property, to the
extent necessary to permit perfection of the Bank's security interest in such
accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.
20
EXHIBIT B
Loan Payment/Advance Request Form
---------------------------------
DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.
Fax To: (000) 000-0000 Date:_______________
--------------------------------------------------------------------------------
LOAN PAYMENT:
Sample documents Client Name (Borrower)
From Account #___________________ To Account #___________________
(Deposit Account #) (Loan Account #)
Principal $__________ and/or Interest $___________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
Authorized Signature:_______________________ Phone Number:____________
--------------------------------------------------------------------------------
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 representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
Authorized Signature:_______________________ Phone Number:____________
--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are to be
wired. Deadline for same day processing is 3:00pm, E.S.T.
Beneficiary Name:_____________ Amount of Wire: $_____________
Beneficiary Bank:_____________ Account Number:_____________
City and Sate:_____________
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).
Authorized Signature:_____________ 2nd Signature (If Required):_____________
Print Name/Title: _____________ Print Name/Title:_____________
Telephone # _____________ Telephone #_____________
--------------------------------------------------------------------------------
21
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: SWITCHBOARD INCORPORATED Lender: Silicon Valley Bank
Commitment Amount: $1,000,000 (subject to the Initial Audit described in
Section 6.2 of the Loan and Security Agreement)
--------------------------------------------------------------------------------
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. Accounts for an account debtor, 50% or more of whose
Accounts have not been paid within 90 days of invoice date $_______________
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. Other (please explain on reverse) $_______________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________
15. Eligible Accounts (#3 minus #14) $_______________
16. LOAN VALUE OF ACCOUNTS (80% of #15) $_______________
BALANCES
17. Maximum Loan Amount $1,000,000.00
18. Total Funds Available (Lesser of #17 or #16) $_______________
19. Present balance owing on Line of Credit $_______________
20. Outstanding under Sublimits (Letter of Credit, FX Reserve,
Cash Management) $_______________
21. RESERVE POSITION (#18 minus #19 and #20) $_______________
The undersigned represents and warrants 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.
COMMENTS: BANK USE ONLY
By: ___________________________ Received by: _____________________
Authorized Signer AUTHORIZED SIGNER
Date: _________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: ______________________
22
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SWITCHBOARD INCORPORATED
The undersigned authorized officer of SWITCHBOARD INCORPORATED certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer 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.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
----------------- -------- --------
Compliance Certificate Quarterly w/in 5 days of 10-Q filing w/SEC Yes No
Annual Financial Statements FYE within 120 days Yes No
(CPA Audited)
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
BBC & A/R Agings Monthly within 30 days when borrowing Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain at all times:
Minimum Cash maintained at SVB* $20,000,000.00 ____________ Yes No
* In accordance with the terms of Section 6.7 of the Loan Agreement
Comments Regarding Exceptions: See Attached.
Sincerely, BANK USE ONLY
_____________________________ Received by: _________________
SIGNATURE AUTHORIZED SIGNER
_____________________________ Date: ____________
TITLE
_____________________________ Verified __________________
DATE AUTHORIZED SIGNER
Date: ____________
23
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):
Switchboard Incorporated
------------------------
Borrower's State of formation:
Delaware
--------
Borrower has operated under only the following other names (if none, so state):
Envenue; MapsOnUs
-----------------
All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
Exodus Communications data center, Waltham, MA
----------------------------------------------
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:
Fleet Bank, N.A.
----------------
List Acct.
Numbers:________________________________________________________________________
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Subordinated Debt:
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):__________________________________________________________________
________________________________________________________________________________
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
See attached list
-----------------
The following is a list of all of the Borrower's patents which are issued by the
United States Patent and Trademark Office. (Please include name of the patent
and registration number and attach a copy of the patent):
See attached list
-----------------
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):
See attached list
-----------------
24
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
See attached list
-----------------
Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed): In re Initial Public Offering Securities Litigation, 21
-------------------------------------------------------
MC 92 (SAS)
-----------
Tax ID Number 00-0000000
----------
Organizational Number, if any: 2614 992 8100
-------------
