Exhibit 10.1
LOAN AND SECURITY AGREEMENT
     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the
Effective Date between SILICON VALLEY BANK, a California corporation (“Bank”),
and WEBSIDESTORY, 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. If at any
time any change in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and either Borrower or Bank shall so
request, Borrower and Bank shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided that, until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(ii) Borrower shall provide to Bank financial statements or other documents
setting forth a reconciliation between the calculations of such ratio or
requirement made before and after giving effect to such change in 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 hereunder may be repaid in whole or in part at any time without
premium or penalty (other than as provided in Section 3.6(c)) 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 outstanding
Advances, the accrued but unpaid interest thereon, and all other Obligations
arising under this Agreement shall be immediately due and payable; provided,
however, that Borrower may terminate this Agreement at any time without premium
or penalty (other than as provided in Section 3.6(c)) upon written notice to
Bank and repayment in full of the principal amount of all outstanding Advances,
the accrued but unpaid interest thereon and all other Obligations arising under
this Agreement that are then due and payable.
     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. Such aggregate amounts utilized
hereunder shall at all times reduce the amount otherwise available for Advances
under the Revolving Line. The aggregate amount available to be used for the
issuance of Letters of Credit may not exceed the Availability Amount. 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 but taking into consideration any
investment income expected to be earned on such cash collateral), 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

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“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 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 the
Availability Amount (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.
     2.1.4 Cash Management Services Sublimit. Borrower may use up to the
Availability Amount 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 used by
Borrower for Cash Management Services will be treated as Advances under the
Revolving Line, will accrue interest at the interest rate applicable to
Advances, and will reduce the amount otherwise available for Credit Extensions
thereunder.
     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 Revolving Line, Borrower shall
immediately pay to Bank in cash such excess.
     2.2.1 General Provisions Relating to the Advances.
     Each Advance shall, at Borrower’s option in accordance with the terms of
this Agreement, be either in the form of a Prime Rate Advance or a LIBOR
Advance; provided that in no event shall Borrower maintain at any time LIBOR
Advances having more than four (4) different Interest Periods. Borrower shall
pay interest accrued on the Advances at the rates and in the manner set forth in
Section 2.3(b).
     2.3 Payment of Interest on the Advances.
          (a) Computation of Interest. Interest on the Advances and all fees
payable hereunder shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which such

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interest accrues. In computing interest on any Advance, the date of the making
of such Advance shall be included and the date of payment shall be excluded;
provided, however, that if any Advance is repaid on the same day on which it is
made, such day shall be included in computing interest on such Advance.
          (b) Advances. Each Advance shall bear interest on the outstanding
principal amount thereof from the date when made, continued or converted until
paid in full at a rate per annum equal to the Prime Rate minus the Prime Rate
Margin or the LIBOR Rate plus the LIBOR Rate Margin, as the case may be. On and
after the expiration of any Interest Period applicable to any LIBOR Advance
outstanding on the date of occurrence of an Event of Default or acceleration of
the Obligations, the Effective Amount of such LIBOR Advance shall, during the
continuance of such Event of Default or after acceleration, bear interest at a
rate per annum equal to the Prime Rate plus three percentage points (300 basis
points). Pursuant to the terms hereof, interest on each Advance shall be paid in
arrears on each Interest Payment Date. Interest shall also be paid on the date
of any prepayment of any Advance pursuant to this Agreement for the portion of
any Advance so prepaid and upon payment (including prepayment) in full thereof.
All accrued but unpaid interest on the Advances shall be due and payable on the
Revolving Line Maturity Date.
          (c) Default Interest. Except as otherwise provided in Section 2.3(b),
after an Event of Default, Obligations shall bear interest three percentage
points (300 basis points) above the rate effective immediately before the Event
of Default (the “Default Rate”). Payment or acceptance of the increased interest
provided in this Section 2.3(c) 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.
          (d) Prime Rate Advances. Each change in the interest rate of the Prime
Rate Advances based on changes in the Prime Rate shall be effective on the
effective date of such change and to the extent of such change. Bank shall use
its best efforts to give Borrower prompt notice of any such change in the Prime
Rate; provided, however, that any failure by Bank to provide Borrower with
notice hereunder shall not affect Bank’s right to make changes in the interest
rate of the Prime Rate Advances based on changes in the Prime Rate.
          (e) LIBOR Advances. The interest rate applicable to each LIBOR Advance
shall be determined in accordance with Section 3.6(a) hereunder. Subject to
Sections 3.6 and 3.7, such rate shall apply during the entire Interest Period
applicable to such LIBOR Advance, and interest calculated thereon shall be
payable on the Interest Payment Date applicable to such LIBOR Advance.
          (f) Debit of Accounts. Bank may debit any of Borrower’s deposit
accounts, including the Designated Deposit Account, for principal and interest
payments when due, or any other amounts Borrower owes Bank, when due. Bank shall
promptly notify Borrower after it debits Borrower’s accounts. These debits shall
not constitute a set-off.
     2.4 Fees and Bank Expenses. Borrower shall pay to Bank:
          (a) Commitment Fee. A fully earned, non-refundable commitment fee of
$15,000, on the Effective Date and on each anniversary thereof occurring prior
to the Revolving Line Maturity Date; and
          (b) Bank Expenses. All Bank Expenses (including reasonable attorneys’
fees and expenses which attorneys’ fees reimbursable by Borrower for the
documentation and reasonable negotiation of this Agreement will not exceed
$12,500 as of the Effective Date, 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 Advance. Bank’s obligation to make the
initial Advance is subject to the condition precedent that Borrower shall
consent to or have delivered, in form and substance

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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) 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;
          (c) duly executed original signatures to the completed Borrowing
Resolutions for Borrower;
          (d) payoff letters in form and substance satisfactory to Bank
evidencing that at least $15,000,000 of the outstanding principal under the
Existing Notes will be paid in full in connection with the initial Advance, and
evidence satisfactory to Bank that no more than $5,000,000 of the outstanding
principal under the Existing Notes will be outstanding after the Effective Date;
          (e) certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens or have been or, in
connection with the initial Advance, will be terminated or released;
          (f) the Perfection Certificate executed by Borrower;
          (g) a legal opinion of Borrower’s counsel dated as of the Effective
Date together with the duly executed original signatures thereto;
          (h) the duly executed original signatures to each Guaranty, together
with the completed Borrowing Resolutions for each Guarantor;
          (i) the duly executed original signatures to each Guarantor Security
Agreement;
          (j) 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 loss payable and/or additional insured clauses or endorsements
in favor of Bank; and
          (k) payment of the fees and Bank Expenses then due as specified in
Section 2.4 hereof.
     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) for Advances under the Revolving Line, timely receipt of a Notice
of Borrowing; and
          (b) the representations and warranties in Section 5 shall be true in
all material respects on the date of the Notice of Borrowing, and on the
effective 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 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.

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     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.
          (a) Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, each Advance
shall be made upon Borrower’s irrevocable written notice delivered to Bank in
the form of a Notice of Borrowing, each executed by a Responsible Officer of
Borrower 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 will indemnify Bank for any loss Bank suffers due to such
reliance, except in the case of Bank’s gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. Such Notice of
Borrowing must be received by Bank prior to 11:00 a.m. Pacific time, (i) at
least three (3) Business Days prior to the requested Funding Date, in the case
of LIBOR Advances, and (ii) at least one (1) Business Day prior to the requested
Funding Date, in the case of Prime Rate Advances, specifying:
               (i) the requested Funding Date;
               (ii) whether the Advance is to be comprised of LIBOR Advances or
Prime Rate Advances; and
               (iii) the duration of the Interest Period applicable to any such
LIBOR Advances included in such notice; provided that if the Notice of Borrowing
shall fail to specify the duration of the Interest Period for any Advance
comprised of LIBOR Advances, such Interest Period shall be one (1) month.
          (b) The proceeds of all such Advances will then be made available to
Borrower on the Funding Date by Bank by transfer to the Designated Deposit
Account and, subsequently, by wire transfer to such other account as Borrower
may instruct in the Notice of Borrowing. No Advances shall be deemed made to
Borrower, and no interest shall accrue on any such Advance, until the related
funds have been deposited in the Designated Deposit Account.
     3.5 Conversion and Continuation Elections.
          (a) So long as (i) no Event of Default exists; (ii) Borrower shall not
have sent any notice of termination of this Agreement; and (iii) Borrower shall
have complied with such customary procedures as Bank has established from time
to time for Borrower’s requests for LIBOR Advances, Borrower may, upon
irrevocable written notice to Bank:
               (i) elect to convert on any Business Day, Prime Rate Advances
into LIBOR Advances;
               (ii) elect to continue on any Interest Payment Date any LIBOR
Advances maturing on such Interest Payment Date; or
               (iii) elect to convert on any Interest Payment Date any LIBOR
Advances maturing on such Interest Payment Date into Prime Rate Advances.
          (b) Borrower shall deliver a Notice of Conversion/Continuation in
accordance with Section 10 to be received by Bank prior to 11:00 a.m. Pacific
time at least (i) three (3) Business Days in advance of the Conversion Date or
Continuation Date, if any Advances are to be converted into or continued as
LIBOR Advances;

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and (ii) one (1) Business Day in advance of the Conversion Date, if any Advances
are to be converted into Prime Rate Advances, in each case specifying the:
               (i) proposed Conversion Date or Continuation Date;
               (ii) aggregate amount of the Advances to be converted or
continued;
               (iii) nature of the proposed conversion or continuation; and
               (iv) duration of the requested Interest Period.
          (c) If upon the expiration of any Interest Period applicable to any
LIBOR Advances, Borrower shall have timely failed to select a new Interest
Period to be applicable to such LIBOR Advances, Borrower shall be deemed to have
elected to convert such LIBOR Advances into Prime Rate Advances.
          (d) Any LIBOR Advances shall, at Bank’s option, convert into Prime
Rate Advances in the event that (i) an Event of Default or Default shall exist,
or (ii) the aggregate principal amount of the Prime Rate Advances which have
been previously converted to LIBOR Advances, or the aggregate principal amount
of existing LIBOR Advances continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period exceed the
Revolving Line. Borrower agrees to pay Bank, upon demand by Bank (or Bank may,
at its option, charge the Designated Deposit Account or any other account
Borrower maintains with Bank) any amounts required to compensate Bank for any
loss (including loss of anticipated profits), cost, or expense incurred by Bank,
as a result of the conversion of LIBOR Advances to Prime Rate Advances pursuant
to any of the foregoing.
          (e) Notwithstanding anything to the contrary contained herein, Bank
shall not be required to purchase United States Dollar deposits in the London
interbank market or other applicable LIBOR market to fund any LIBOR Advances,
but the provisions hereof shall be deemed to apply as if Bank had purchased such
deposits to fund the LIBOR Advances.
     3.6 Special Provisions Governing LIBOR Advances.
     Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to LIBOR Advances as to the
matters covered:
          (a) Determination of Applicable Interest Rate. As soon as practicable
on each Interest Rate Determination Date, Bank shall determine (which
determination shall, absent manifest error in calculation, be final, conclusive
and binding upon all parties) the interest rate that shall apply to the LIBOR
Advances for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Borrower.
          (b) Inability to Determine Applicable Interest Rate. In the event that
Bank shall have determined (which determination shall be final and conclusive
and binding upon all parties hereto), on any Interest Rate Determination Date
with respect to any LIBOR Advance, that by reason of circumstances affecting the
London interbank market adequate and fair means do not exist for ascertaining
the interest rate applicable to such Advance on the basis provided for in the
definition of LIBOR, Bank shall on such date give notice (by facsimile or by
telephone confirmed in writing) to Borrower of such determination, whereupon
(i) no Advances may be made as, or converted to, LIBOR Advances until such time
as Bank notifies Borrower that the circumstances giving rise to such notice no
longer exist, and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to Advances in respect of
which such determination was made shall be deemed to be rescinded by Borrower.
          (c) Compensation for Breakage or Non-Commencement of Interest Periods.
Borrower shall compensate Bank, upon written request by Bank (which request
shall set forth the manner and method of computing

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such compensation), for all reasonable losses, expenses and liabilities, if any
(including any interest paid by Bank to lenders of funds borrowed by it to make
or carry its LIBOR Advances and any loss, expense or liability incurred by Bank
in connection with the liquidation or re-employment of such funds) such that
Bank may incur: (i) if for any reason (other than a default by Bank or due to
any failure of Bank to fund LIBOR Advances due to impracticability or illegality
under Sections 3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation
of any LIBOR Advance does not occur on a date specified in a Notice of Borrowing
or a Notice of Conversion/Continuation, as the case may be, or (ii) if any
principal payment or any conversion of any of its LIBOR Advances occurs on a
date prior to the last day of an Interest Period applicable to that Advance.
          (d) Assumptions Concerning Funding of LIBOR Advances. Calculation of
all amounts payable to Bank under this Section 3.6 and under Section 3.4 shall
be made as though Bank had actually funded each of its relevant LIBOR Advances
through the purchase of a Eurodollar deposit bearing interest at the rate
obtained pursuant to the definition of LIBOR Rate in an amount equal to the
amount of such LIBOR Advance and having a maturity comparable to the relevant
Interest Period; provided, however, that Bank may fund each of its LIBOR
Advances in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
Section 3.6 and under Section 3.4.
          (e) LIBOR Advances After Event of Default. After the occurrence and
during the continuance of an Event of Default, (i) Borrower may not elect to
have an Advance be made or continued as, or converted to, a LIBOR Advance after
the expiration of any Interest Period then in effect for such Advance and
(ii) subject to the provisions of Section 3.6(c), any Notice of
Conversion/Continuation given by Borrower with respect to a requested
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Borrower and be deemed a request to convert or continue Advances
referred to therein as Prime Rate Advances.
     3.7 Additional Requirements/Provisions Regarding LIBOR Advances.
          (a) If for any reason (including voluntary or mandatory prepayment or
acceleration), Bank receives all or part of the principal amount of a LIBOR
Advance prior to the last day of the Interest Period for such Advance, Borrower
shall immediately notify Borrower’s account officer at Bank and, on demand by
Bank, pay Bank the amount (if any) by which (i) the additional interest which
would have been payable on the amount so received had it not been received until
the last day of such Interest Period exceeds (ii) the interest which would have
been recoverable by Bank by placing the amount so received on deposit in the
certificate of deposit markets, the offshore currency markets, or United States
Treasury investment products, as the case may be, for a period starting on the
date on which it was so received and ending on the last day of such Interest
Period at the interest rate determined by Bank in its reasonable discretion.
Bank’s determination as to such amount shall be conclusive absent manifest
error.
          (b) Borrower shall pay Bank, upon demand by Bank, from time to time
such amounts as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any
Advances relating thereto (such increases in costs and reductions in amounts
receivable being herein called “Additional Costs”), in each case resulting from
any Regulatory Change which:
               (i) changes the basis of taxation of any amounts payable to Bank
under this Agreement in respect of any Advances (other than changes which affect
taxes measured by or imposed on the overall net income of Bank by the
jurisdiction in which Bank has its principal office);
               (ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with, or other liabilities of Bank (including any Advances or any
deposits referred to in the definition of LIBOR); or
               (iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities).

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     Bank will notify Borrower of any event occurring after the Effective Date
which will entitle Bank to compensation pursuant to this Section 3.7(b) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Bank will furnish Borrower with a statement setting
forth the basis and amount of each request by Bank for compensation under this
Section 3.7(b). Determinations and allocations by Bank for purposes of this
Section 3.7(b) of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Advances, of making or maintaining Advances,
or on amounts receivable by it in respect of Advances, and of the additional
amounts required to compensate Bank in respect of any Additional Costs, shall be
conclusive absent manifest error.
          (c) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation, or treaty regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank, or
comparable agency, has or would have the effect of reducing the rate of return
on capital of Bank or any person or entity controlling Bank (a “Parent”) as a
consequence of its obligations hereunder to a level below that which Bank (or
its Parent) could have achieved but for such adoption, change, or compliance
(taking into consideration policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within fifteen
(15) days after demand by Bank, Borrower shall pay to Bank such additional
amount or amounts as will compensate Bank for such reduction. A statement of
Bank claiming compensation under this Section 3.7(c) and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
absent manifest error.
          (d) If, at any time, Bank, in its sole and absolute discretion,
determines that (i) the amount of LIBOR Advances for periods equal to the
corresponding Interest Periods are not available to Bank in the offshore
currency interbank markets, or (ii) LIBOR does not accurately reflect the cost
to Bank of lending the LIBOR Advances, then Bank shall promptly give notice
thereof to Borrower. Upon the giving of such notice, Bank’s obligation to make
the LIBOR Advances shall terminate; provided, however, Advances shall not
terminate if Bank and Borrower agree in writing to a different interest rate
applicable to LIBOR Advances.
          (e) If it shall become unlawful for Bank to continue to fund or
maintain any LIBOR Advances, or to perform its obligations hereunder, upon
demand by Bank, Borrower shall prepay the Advances in full with accrued interest
thereon and all other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment pursuant to
Section 3.7(a)). Notwithstanding the foregoing, to the extent a determination by
Bank as described above relates to a LIBOR Advance then being requested by
Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Borrower shall have the option, subject to the
provisions of Section 3.6(c), to (i) rescind such Notice of Borrowing or Notice
of Conversion/Continuation by giving notice (by facsimile or by telephone
confirmed in writing) to Bank of such rescission on the date on which Bank gives
notice of its determination as described above, or (ii) modify such Notice of
Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or
to have outstanding Advances converted into or continued as Prime Rate Advances
by giving notice (by facsimile or by telephone confirmed in writing) to Bank of
such modification on the date on which Bank gives notice of its determination as
described above.
     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.
Subject to Section 6.6(a), 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 that could
reasonably be expected to result in a recovery of damages in excess of $500,000
for one individual claim or $1,000,000 in the aggregate for all such claims.
Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and grant to Bank in such writing a security interest

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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 or
cash collateralized letters of credit) 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’s Lien in the Collateral shall terminate
automatically and all rights therein shall revert to Borrower. Upon such
termination Bank shall, at Borrower’s sole cost and expense, execute and deliver
such documents as Borrower may reasonably request to evidence the release of
Bank’s Lien in the Collateral.
     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, Authorization; Power and Authority. Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any jurisdiction 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 have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower entitled “Perfection
Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof, except to the extent that Borrower has given Bank not less than
30 days’ prior written notice of any change to Borrower’s exact legal name;
(b) Borrower is an organization of the type and is organized in the jurisdiction
set forth in the Perfection Certificate; (c) the Perfection Certificate
accurately sets forth Borrower’s organizational identification number or
accurately states that Borrower has none; (d) the 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), except to the extent that Borrower has given Bank
not less than 30 days’ prior written notice of any change to the same;
(e) Borrower (and each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational 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 as of the Effective Date. 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 by Borrower of the Loan Documents
to which it is a party have been duly authorized, and do not (i) conflict with
any of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or are being obtained pursuant to Section 6.1(b)) or
(v) subject to the repayment in full of all outstanding principal and accrued
interest under the Existing Notes, 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 reasonably be expected to have a material adverse effect on the
business of Borrower and its Subsidiaries, taken as a whole.
     5.2 Collateral. Borrower has good title to, has rights in, and 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. Borrower
has no deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any,

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described in the Perfection Certificate delivered to Bank in connection
herewith, or of which Borrower has given Bank notice and, subject to
Section 6.6(a), Borrower has taken such actions as are necessary to give Bank a
perfected security interest therein.
     The Collateral is not in the possession of any third party bailee (such as
a warehouse) except as otherwise provided in the Perfection Certificate. 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.
     5.3 Intentionally Omitted.
     5.4 Litigation. Except for actions or proceedings disclosed in Borrower’s
public reports filed with the Securities and Exchange Commission prior to the
Effective Date, 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 that could reasonably be expected to have a material adverse
effect on the business of Borrower and the Guarantors, taken as a whole.
     5.5 No Material Deviation 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. To the best of
Borrower’s knowledge, 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. 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. Neither Borrower nor any of its Subsidiaries is a
“holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public
Utility Holding Company Act of 2005. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to have
a material adverse effect on the business of Borrower and the Guarantors, taken
as a whole. 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 could not reasonably be
expected to have a material adverse effect on the business of Borrower and the
Guarantors, taken as a whole.
     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 has timely paid all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower, except for up to $100,000 in the aggregate which Borrower may
owe from time to time (such amount, the “Tax Threshold”), and except for taxes
contested in accordance with the next sentence. 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

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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 in excess of the Tax Threshold. 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.
     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital, to repay the outstanding principal and
accrued interest under the Existing Notes, and to fund its general business
requirements and not for personal, family, household or agricultural purposes.
     5.11 Designation of Indebtedness under this Agreement as Senior
Indebtedness.
     All principal of, interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding), and all
fees, costs, expenses and other amounts accrued or due under this Agreement
shall constitute “Designated Senior Indebtedness” under the terms of any
indenture to which Borrower is a party.
     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 have been provided and prepared by Borrower in good faith and based
upon reasonable assumptions and 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.
          (a) Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of formation, except as a result of a
transaction permitted by Section 7.3, and maintain its and all its Subsidiaries’
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on the business or
operations of Borrower or any Secured Guarantor. Borrower shall comply, and have
each Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could reasonably be expected to have a
material adverse effect on the business of Borrower and the Guarantors, taken as
a whole.
          (b) Obtain all of the Governmental Approvals necessary for the
performance by Borrower of its obligations under the Loan Documents to which it
is a party and the grant of a security interest to Bank in all of its property.
Borrower shall promptly provide copies of any such obtained Governmental
Approvals to Bank.
     6.2 Financial Statements, Reports, Certificates.
          (a) Deliver to Bank: (i) as soon as available, but no later than five
(5) days after filing with the Securities and Exchange Commission or 50 days
after quarter end (other than fiscal year end) or 90 days after fiscal year end,
Borrower’s 10Q and 10K reports, respectively; (ii) a Compliance Certificate
together with delivery of the 10K and 10Q reports; (iii) within 45 days after
the end of each fiscal year, annual financial projections for the following
fiscal year (on a quarterly basis), together with any related business forecasts
used in the preparation of

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such annual financial projections, provided that Bank shall keep such
information confidential pursuant to Section 12.8 below; (iv) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could reasonably be expected to result in damages or costs to Borrower or any
Subsidiary of $1,000,000 or more, provided that Bank shall keep such information
confidential pursuant to Section 12.8 below; and (v) within 15 business days of
Bank’s request, such budgets, sales projections, operating plans or other
financial information as Bank reasonably requests, provided that Bank shall keep
such information confidential pursuant to Section 12.8 below.
     Each of Borrower’s 10K and 10Q reports required to be delivered pursuant to
Section 6.2(a)(i) shall be deemed to have been delivered to Bank on the date on
which Borrower files each such report on the Securities and Exchange
Commission’s EDGAR system or posts such report or provides a link thereto on
Borrower’s or another website on the Internet; provided, that Borrower shall
provide paper copies to Bank of the Compliance Certificates required by
Section 6.2(a)(ii).
          (b) Within 30 days after the last day of each month, deliver to Bank
its monthly balance sheet, provided that Bank shall keep such information
confidential pursuant to Section 12.8 below.
          (c) Allow Bank, but only if in its discretion it finds necessary, to
audit Borrower’s Collateral at Borrower’s expense; provided, that, in no event
shall such audits be conducted more often than once every twelve months unless a
Default or an Event of Default has occurred and is continuing.
     6.3 Intentionally Omitted.
     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 payments that may be outstanding from time to
time not to exceed $100,000 in the aggregate) 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 in all material respects.
     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 reasonably satisfactory to Bank. All property
policies shall have a lender’s loss payable endorsement showing Bank as an
additional 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 shall endeavor to give Bank at least twenty
(20) days notice before canceling, adversely amending, or declining to renew its
policy. At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. 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 Operating Accounts.
          (a) Within sixty (60) days after the Effective Date, for each
Collateral Account that Borrower 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.

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     6.7 Financial Covenants.
     Borrower shall maintain at all times, to be tested as of the last day of
each quarter, unless otherwise noted, on a consolidated basis with respect to
Borrower and its Subsidiaries:
          (a) Adjusted Quick Ratio. A ratio of Quick Assets to Current
Liabilities minus Deferred Revenue of at least 1.0 to 1.0.
          (b) EBSTDA. Maintain, measured as of the end of each fiscal quarter
during the following periods, EBSTDA of at least the following:

          Period   Minimum EBSTDA
Quarters ending March 31, 2007 and June 30, 2007
  $ 750,000  
 
       
Quarter ending September 30, 2007
  $ 1,500,000  
 
       
Quarters ending after September 30, 2007
  $ 2,500,000  

     6.8 Protection of Intellectual Property Rights. Borrower shall:
(a) protect, defend and maintain the validity and enforceability of its
intellectual property material to Borrower’s business; (b) promptly advise Bank
in writing of material infringements of its intellectual property; and (c) not
allow any intellectual property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.
     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 Designated Senior Indebtedness. Borrower shall designate all principal
of, interest (including all interest accruing after the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), and all fees, costs,
expenses and other amounts accrued or due under this Agreement as “Designated
Senior Indebtedness”, or such similar term, in any future Subordinated Debt
incurred by Borrower after the date hereof, if such Subordinated Debt contains
such term or similar term.
     6.11 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.
     7 NEGATIVE COVENANTS
     Borrower shall not do any of the following without Bank’s prior written
consent:
     7.1 Dispositions. Convey, sell, lease, transfer 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 for reasonably
equivalent consideration;
          (b) Transfers to Borrower or any of its Subsidiaries from Borrower or
any of its Subsidiaries;
          (c) Transfers of property in connection with sale-leaseback
transactions;

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          (d) 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;
          (e) 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;
          (f) Transfers otherwise permitted by the Loan Documents;
          (g) sales or discounting of delinquent accounts in the ordinary course
of business;
          (h) Transfers of obsolete or worn-out property;
          (i) Transfers associated with the making or disposition of a Permitted
Investment;
          (j) Transfers in connection with a permitted acquisition of a portion
of the assets or rights acquired;
          (k) Transfers constituting Permitted Distributions; and
          (l) 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, 10% 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; Jurisdiction of Formation.
     Engage in any material line of business other than those lines of business
conducted by Borrower and its Subsidiaries on the date hereof and any businesses
reasonably related, complementary or incidental thereto or reasonable extensions
thereof. Borrower will not, without prior written notice, change its
jurisdiction of formation.
     7.3 Mergers or Acquisitions.
     Merge or consolidate with any Person other than any Subsidiary of Borrower,
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 the
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, allow, or suffer any Lien on any of its
property, including its intellectual 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, permit any Collateral not to
be subject to the first priority security interest granted herein (subject to
Section 6.6(a)), 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 Lien” herein.

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     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6.(a) hereof.
     7.7 Distributions; Investments. (a) Pay any dividends or make any
distribution or payment on, or redeem, retire or repurchase, any capital stock
of Borrower other than Permitted Distributions; or (b) directly or indirectly
acquire or own any Person, or make any Investment in any Person, or permit any
of its Subsidiaries to do so, in each case other than Permitted Investments.
     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,
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, (b) transactions among Borrower and its Subsidiaries,
(c) customary directors’ fees and expenses in an amount not to exceed $1,000,000
in any one fiscal year, not including stock based compensation, (d) employment
agreements, employee benefit and compensation plans approved by Borrower’s Board
of Directors or a committee thereof or otherwise generally available to
employees of Borrower or its Subsidiaries in the ordinary course of business,
consistent with past practices, (e) payments under officers’ and directors’
indemnification arrangements, and (f) Permitted Distributions.
     7.9 Subordinated Debt. Make or permit any payment on or amendments of any
Subordinated Debt, except (a) payments pursuant to the terms of the Subordinated
Debt which terms have been previously approved by Bank, in writing, such
approval not to be unreasonably withheld, conditioned or delayed; (b) payments
made with Borrower’s capital stock or other Subordinated Debt; or (c) amendments
to Subordinated Debt so long as such Subordinated Debt remains subordinated in
right of payment to this Agreement, the payment terms of such Subordinated Debt
have not been amended, and any Liens securing such Subordinated Debt remain
subordinate in priority to Bank’s Lien hereunder.
     7.10 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 (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 the business of Borrower and its Subsidiaries, taken as a
whole, or permit any of its 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 material liability of Borrower,
including any material 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 on
its due date, or make any payment of interest on any Credit Extension within
three (3) Business Days of its due date (which three (3) Business Day grace
period shall not apply to payments due on the Revolving Line Maturity 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 shall
not apply to payments due on the Revolving Line Maturity Date). During the
applicable 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);

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     8.2 Covenant Default.
          (a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.4, 6.6 or 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 or
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 fifteen (15) days after
the occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the fifteen (15) day period or cannot after diligent
attempts by Borrower be cured within such fifteen (15) 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-five (35) 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 8.2(b) shall not apply, among other things, to financial
covenants or any other covenants set forth in subsection 8.2(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; (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 any Bank Affiliate; (c) Borrower is enjoined,
restrained, or prevented by court order from conducting any material part of its
business; or (d) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under clauses
(a) through (d) hereof are not, within fifteen (15) days after the occurrence
thereof, discharged or stayed (whether through the posting of a bond or
otherwise); provided, however, no Credit Extensions shall be made during such
fifteen (15) day 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 thirty (30) days (but no Credit Extensions
shall be made while any of the conditions described in clause (a) exist and/or
until any Insolvency Proceeding is dismissed);
     8.6 Other Agreements. If Borrower 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, 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 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; provided that, this provision shall not
apply to Indebtedness due under the Existing Notes;
     8.7 Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least $1,000,000
(not covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower and shall
remain unsatisfied, unvacated, or unstayed for a period of thirty (30) days
after the entry thereof (provided that no Credit Extensions will be made prior
to the satisfaction, vacation, or stay of such judgment, order, or decree);
     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 was incorrect in any material respect when made;

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     8.9 Subordinated Debt. If Borrower or any Subsidiary makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent that such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness; 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, or (d) the liquidation, winding up, or termination of
existence of any Guarantor occurs; except for, in the case of clauses (a),
(b) and (d) above, if such noncompliance with this Section 8.9 results from the
merger or consolidation of such Guarantor into Borrower or another Guarantor, or
if the liquidation, winding up or termination of the existence of such Guarantor
occurs and its remaining net assets are distributed to Borrower or another
Guarantor.
     8.11 Conditions Subsequent to Closing. Borrower fails:
          (a) within ten Business Days of the Effective Date, to provide
evidence satisfactory to Bank that all indebtedness under the Existing Notes is
paid in full;
          (b) within 60 days of the Effective Date, to deliver duly executed
Control Agreements with respect to all of Borrower’s and Guarantors’ deposit
accounts and securities accounts; or
          (c) within 90 days of the Effective Date, to deliver a fully executed
landlord’s consent, in form and substance acceptable to Bank, with respect to
Borrower’s premises located at 10182 Telesis Court, San Diego, California 92121.
     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;

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          (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;
          (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) place a “hold” on any account maintained with Bank and/or 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 reasonable access to 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 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, 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.
     9.4 Application of Payments and Proceeds. Borrower shall have no right to
specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. 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 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.

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     9.5 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.
     9.6 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.
     9.7 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, 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, facsimile number or email address by giving the other party written
notice thereof in accordance with the terms of this Section 10.

         
 
  If to Borrower:   WebSideStory, Inc.
 
      10182 Telesis Court
 
      San Diego, CA 92121
 
      Attn: Chief Financial Officer
 
      Fax: (858) 546-0695
 
      Email: claire.long@websidestory.com
 
       
 
  If to Bank:   Silicon Valley Bank
 
      3003 Tasman Dr.
 
      Santa Clara, CA 95054
 
      Attn: Buzz Kreppel
 
      Fax: (408) 748-9478
 
      Email: bkreppel@svbank.com

     11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
     California 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 Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such

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court. Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such
summons, complaints, and other process may be made by registered or certified
mail addressed to Borrower at the address set forth in Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.
     TO THE FULLEST 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.
     WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.
     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 and the other Loan
Documents; provided that, Bank shall not sell, transfer, negotiate or grant
participation to any person or entity that is a competitor to Borrower.
     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 relating to this
Agreement (including reasonable attorneys’ fees and expenses but excluding
consequential damages), except for Claims and/or losses proximately caused by
Bank’s or such other indemnified person’s gross negligence or willful
misconduct.

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     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 and 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, are 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.
     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; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall first 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 through no
fault of 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.
Obligations under this provision shall survive for two calendar years after
termination of this Agreement.
     12.9 Attorneys’ Fees, Costs and Expenses. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
     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.
     “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.

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     “Agreement” is defined in the preamble hereof.
     “Availability Amount” is (a) the Revolving Line, 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 Reserve, minus (c) the FX
Reserve, minus (d) any amounts used for Cash Management Services, (e) minus the
Temporary Reserve, and minus (f) the outstanding principal balance of any
Advances.
     “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, amending,
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 relating
to this Agreement.
     “Borrower” is defined in the preamble hereof.
     “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 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 other than a Saturday, Sunday or other day on
which banking institutions in the State of California are authorized or required
by law or other governmental action to close, except that if any determination
of a “Business Day” shall relate to a LIBOR Advance, the term “Business Day”
shall also mean a day on which dealings are carried on in the London interbank
market, and if any determination of a “Business Day” shall relate to an FX
Forward Contract, the term “Business Day” shall mean a day on which dealings are
carried on in the country of settlement of the foreign (i.e., non-Dollar)
currency.
     “Capital Expenditures” means, for any period, the aggregate of all
expenditures of the Borrower and its Subsidiaries during such period determined
on a consolidated basis that, in accordance with GAAP, are or should be included
in “property, plant and equipment” or similar items reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries.
     “Cash Equivalents” means (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.
     “Code” is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the State of California; provided, that, to the
extent that the Code is used to define any term herein or in any Loan

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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 State of
California, 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 B.
     “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.
     “Continuation Date” means any date on which Borrower elects to continue a
LIBOR Advance into another Interest Period.
     “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.
     “Conversion Date” means any date on which Borrower elects to convert a
Prime Rate Advance to a LIBOR Advance or a LIBOR Advance to a Prime Rate
Advance.
     “Credit Extension” is any Advance, FX Forward Contract, amount utilized for
Cash Management Services, or any other extension of credit by Bank for
Borrower’s benefit under this Agreement.
     “Credit Party” means Borrower, and each Guarantor.
     “Current Assets” are, on any date, the amounts that under GAAP should be
included on that date as current assets on the balance sheet of Borrower and its
Subsidiaries, on a consolidated basis.
     “Current Liabilities” are, on any date, all obligations and liabilities of
Borrower to Bank on that date, plus, without duplication, the aggregate amount
of the Total Liabilities of Borrower and its Subsidiaries on a consolidated
basis on that date that mature within one (1) year of such date.

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     “Default Rate” is defined in Section 2.3(c).
     “Deferred Revenue” is, on any date, all amounts received or invoiced by
Borrower or any of its Subsidiaries in advance of performance under contracts
and not yet recognized as revenue by Borrower and its Subsidiaries on a
consolidated basis as of such date.
     “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.
     “Domestic Subsidiary” means a Subsidiary organized under the laws of the
United States or any state or territory thereof or the District of Columbia.
     “EBSTDA” shall mean (a) Net Income, plus (b) stock-based compensation
expense, plus (c) to the extent deducted in the calculation of Net Income,
depreciation expense and amortization expense, plus (d) income tax expense, plus
(e) to the extent deducted in the calculation of Net Income, non-cash
impairments of assets, including but not limited to, goodwill and intangible
assets, and related non-cash charges, minus (f) Capital Expenditures.
     “Effective Amount” means with respect to any Advances on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowing and prepayments or repayments thereof occurring on such date.
     “Effective Date” means February 23, 2007.
     “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.
     “Existing Notes” means the Senior Notes issued by Borrower on February 1,
2006 to former members and option holders of Visual Sciences, LLC, in an
aggregate principal amount of $20,000,000.
     “Foreign Currency” means lawful money of a country other than the United
States.
     “Foreign Subsidiary” means a Subsidiary that is not a Domestic Subsidiary.
     “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.

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     “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.
     “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.
     “Governmental Approval” is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
     “Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
     “Guarantor” is any present or future Domestic Subsidiary of Borrower,
including Visual Sciences, LLC, a Delaware limited liability company, and
WebSideStory Search and Content Solutions, Inc., a California corporation.
     “Guarantor Security Agreement” a security agreement in form and substance
acceptable to Bank, executed by a Guarantor in favor of Bank.
     “Guaranty” a guaranty in form and substance acceptable to Bank, executed by
a Guarantor in favor of Bank.
     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price
of property or services (other than trade payables), 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.
     “Interest Payment Date” means, with respect to any LIBOR Advance, the last
day of each Interest Period applicable to such LIBOR Advance and, with respect
to Prime Rate Advances, the first (1st) day of each month (or, if the first day
of the month does not fall on a Business Day, then on the first Business Day
following such date), and each date a Prime Rate Advance is converted into a
LIBOR Advance to the extent of the amount converted to a LIBOR Advance.
     “Interest Period” means, as to any LIBOR Advance, the period commencing on
the date of such LIBOR Advance, or on the conversion/continuation date on which
the LIBOR Advance is converted into or continued as a LIBOR Advance, and ending
on the date that is one (1), three (3), or six (6) months thereafter, in each
case as Borrower may elect in the applicable Notice of Borrowing or Notice of
Conversion/Continuation; provided,

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however, that (a) no Interest Period with respect to any LIBOR Advance shall end
later than the Revolving Line Maturity Date, (b) the last day of an Interest
Period shall be determined in accordance with the practices of the LIBOR
interbank market as from time to time in effect, (c) if any Interest Period
would otherwise end on a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless, in the case of a LIBOR
Advance, the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day, (d) any Interest Period pertaining to a LIBOR
Advance that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period, and (e) interest shall accrue from and
include the first Business Day of an Interest Period but exclude the last
Business Day of such Interest Period.
     “Interest Rate Determination Date” means each date for calculating LIBOR
for purposes of determining the interest rate in respect of an Interest Period.
The Interest Rate Determination Date shall be the second Business Day prior to
the first day of the related Interest Period for a LIBOR Advance.
     “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).
     “LIBOR” means, for any Interest Rate Determination Date with respect to an
Interest Period for any Advance to be made, continued as or converted into a
LIBOR Advance, the rate of interest per annum determined by Bank to be the per
annum rate of interest at which deposits in United States Dollars are offered to
Bank in the London interbank market (rounded upward, if necessary, to the
nearest 1/100th of one percent (0.01%)) in which Bank customarily participates
at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior
to the first day of such Interest Period for a period approximately equal to
such Interest Period and in an amount approximately equal to the amount of such
Advance.
     “LIBOR Advance” means an Advance that bears interest based at the LIBOR
Rate.
     “LIBOR Rate” means, for each Interest Period in respect of LIBOR Advances
comprising part of the same Advances, an interest rate per annum (rounded upward
to the nearest 1/16th of one percent (0.0625%)) equal to LIBOR for such Interest
Period divided by one (1) minus the Reserve Requirement for such Interest
Period.
     “LIBOR Rate Margin” is two and one-half percentage points (250 basis
points).
     “Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.
     “Loan Documents” are, collectively, this Agreement, the Perfection
Certificate, 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.

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     “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; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.
     “Material Indebtedness” is any Indebtedness the principal amount of which
is equal to or greater than $500,000.
     “Net Income” means, as calculated on a consolidated basis for Borrower and
its Subsidiaries for any period as at any date of determination, the net profit
(or loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.
     “Notice of Borrowing” means a notice given by Borrower to Bank in
accordance with Section 3.2(a), substantially in the form of Exhibit C, with
appropriate insertions.
     “Notice of Conversion/Continuation” means a notice given by Borrower to
Bank in accordance with Section 3.5, substantially in the form of Exhibit D,
with appropriate insertions.
     “Obligations” are any Credit Party’s obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts any Credit Party owes Bank
now or later, under this Agreement or any other Loan Documents, including,
without limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn 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 any Credit Party assigned to Bank, and the performance of any
Credit Party’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 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
     “Perfection Certificate” is defined in Section 5.1.
     “Permitted Distributions” means:
     (a) purchases of capital stock from current or former employees,
consultants and directors pursuant to repurchase agreements or other similar
agreements in an aggregate amount not to exceed $250,000 in any fiscal year
provided that at the time of such purchase no 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;

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     (h) the settlement or performance of such Person’s obligations under any
equity derivative transaction, option contract or similar transaction or
combination of transactions; and
     (i) so long as no Event of Default has occurred and is continuing, other
distributions or dividends in respect of Borrower capital stock, or redemptions,
retirements or repurchases of Borrower capital stock, in an aggregate amount not
to exceed $100,000 during the term of this Agreement.
     “Permitted Indebtedness” is:
     (a) Borrower’s Indebtedness to Bank under this Agreement and any other Loan
Document;
     (b) (i) any Indebtedness that does not exceed $100,000 in principal amount
existing on the Effective Date, and (ii) any Indebtedness in excess of $100,000
in principal amount existing on the Effective Date and shown on the Perfection
Certificate;
     (c) Subordinated Debt;
     (d) unsecured Indebtedness to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of business;
     (e) guaranties of Permitted Indebtedness;
     (f) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;
     (g) Indebtedness consisting of interest rate, currency, or commodity swap
agreements, interest rate cap or collar agreements or arrangements designated to
protect Borrower or any of its Subsidiaries against fluctuations in interest
rates, currency exchange rates, or commodity prices;
     (h) Indebtedness between Borrower and any of its Subsidiaries or among any
of Borrower’s Subsidiaries;
     (i) Indebtedness with respect to documentary letters of credit, or
Indebtedness with respect to other letters of credit in an aggregate amount not
to exceed $500,000 outstanding at any time;
     (j) capitalized leases and purchase money Indebtedness not to exceed
$500,000 in the aggregate in any fiscal year secured by Permitted Liens;
     (k) Indebtedness of entities acquired in any permitted merger or
acquisition transaction;
     (l) refinanced Permitted Indebtedness, provided that the amount of such
Indebtedness is not increased except by an amount equal to a reasonable premium
or other reasonable amount paid in connection with such refinancing and by an
amount equal to any existing, but unutilized, commitment thereunder;
     (m) Indebtedness in a principal amount of up to $5,000,000 under the
Existing Notes plus any interest accrued thereunder, provided, that, such
indebtedness shall only be permitted during the first ten Business Days after
the Effective Date; and
     (n) other Indebtedness in an aggregate principal amount outstanding at any
time not to exceed $500,000.
     “Permitted Investments” are:
     (a) Investments existing on the Effective Date;

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     (b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agencies or any State maturing within 1 year from
its acquisition, (ii) commercial paper maturing no more than 2 years after its
creation and having the highest rating from either Standard & Poor’s Corporation
or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of deposit
maturing no more than 2 years after issue;
     (c) Investments approved by the Borrower’s Board of Directors or otherwise
pursuant to a Board-approved investment policy;
     (d) Investments in or to Borrower or any of its Subsidiaries;
     (e) Investments consisting of Collateral Accounts in the name of Borrower
or any Subsidiary so long as, subject to Section 6.6(a), Bank has a first
priority, perfected security interest in such Collateral Accounts;
     (f) Investments consisting of extensions of credit to Borrower’s or its
Subsidiaries’ customers in the nature of accounts receivable, prepaid royalties
or notes receivable arising from the sale or lease of goods, provision of
services or licensing activities of Borrower or its Subsidiaries;
     (g) Investments received in satisfaction or partial satisfaction of
obligations owed by financially troubled obligors;
     (h) Investments acquired in exchange for any other Investments in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization;
     (i) Investments acquired as a result of a foreclosure with respect to any
secured Investment;
     (j) Investments consisting of interest rate, currency, or commodity swap
agreements, interest rate cap or collar agreements or arrangements designated to
protect a Person against fluctuations in interest rates, currency exchange
rates, or commodity prices;
     (k) Investments consisting of loans and advances to employees in an
aggregate outstanding principal amount not to exceed $250,000 at any time; and
     (l) other Investments not to exceed $250,000 in the aggregate at any time.
     “Permitted Liens” are:
     (a) (i) Liens securing Permitted Indebtedness described under clause (b) of
the definition of “Permitted Indebtedness,” (ii) Liens arising under this
Agreement or other Loan Documents or (iii) Liens disclosed on Schedule 13.1
attached hereto;
     (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 or any of its Subsidiaries maintains adequate reserves on its Books,
provided that no notice of any such Lien has been filed or recorded under the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted
thereunder;
     (c) Liens (including with respect to capital leases) (i) on property
(including accessions, additions, parts, replacements, fixtures, improvements
and attachments thereto, and the proceeds thereof) acquired or held by Borrower
or any of its Subsidiaries incurred for financing such property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) other than Accounts and
Inventory, including without limitation Liens securing Permitted Indebtedness
under clause (j) of the definition of “Permitted Indebtedness” or (ii) existing
on property (and accessions, additions, parts, replacements, fixtures,
improvements and attachments thereto, and the proceeds thereof) when acquired
other than Accounts and Inventory, if the Lien is confined to such property
(including accessions, additions, parts, replacements, fixtures, improvements
and attachments thereto, and the proceeds thereof);

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     (d) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in clauses (a) through (c) and (p), 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 it
secures may not increase;
     (e) leases or subleases of real property granted in the ordinary course of
business; and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;
     (f) non-exclusive licenses of intellectual property granted to third
parties in the ordinary course of business, and licenses of intellectual
property that could not result in a legal transfer of title of the licensed
property that may be exclusive in respects other than territory and that may be
exclusive as to territory only as to discreet geographical areas outside of the
United States;
     (g) leases or subleases granted in the ordinary course of Borrower’s
business, including in connection with Borrower’s leased premises or leased
property, and any easements, rights-of-way, restrictions, encumbrances or zoning
or similar laws that the interest or title of such lessor or sublessor may be
subject to;
     (h) Liens in favor of customs and revenue authorities arising as a matter
of law to secure the payment of customs duties in connection with the
importation of goods;
     (i) customary Liens granted in favor of a trustee to secure fees and other
amounts owing to such trustee under an indenture or other similar agreement;
     (j) Liens consisting of pledges of cash, cash equivalents or government
securities to secure swap or foreign exchange contracts or letters of credit, in
an aggregate amount not to exceed $500,000 at any time;
     (k) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
     (l) Liens in favor of other financial institutions arising in connection
with Borrower’s deposit or securities accounts held at such institutions;
     (m) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business and which are
not delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
     (n) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);
     (o) Liens incurred or deposits made to secure the performance of bids,
trade contracts (other than for borrowed money), contracts for the purchase of
property, leases, statutory or regulatory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case, incurred
in the ordinary course of business and not representing an obligation for
borrowed money; and
     (p) other Liens securing obligations of Borrower or any of its Subsidiaries
not to exceed in the aggregate at any time $250,000.
     “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.

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     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is
not Bank’s lowest rate.
     “Prime Rate Advance” means an Advance that bears interest based at the
Prime Rate.
     “Prime Rate Margin” is one-quarter percentage point (25 basis points).
     “Quick Assets” are, on any date, the unrestricted cash and Cash
Equivalents, net billed accounts receivable and investments on that date of
Borrower and its Subsidiaries, on a consolidated basis.
     “Registered Organization” is any “registered organization” as defined in
the Code with such additions to such term as may hereafter be made.
     “Regulatory Change” means, with respect to Bank, any change on or after the
date of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
     “Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
     “Reserve Requirement” means, for any Interest Period, the average maximum
rate at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D against “Eurocurrency liabilities” (as such term is used in
Regulation D) by member banks of the Federal Reserve System. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by Bank by reason of any Regulatory Change
against (a) any category of liabilities which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of LIBOR
or (b) any category of extensions of credit or other assets which include
Advances.
     “Responsible Officer” is any of the Chief Executive Officer, President,
Chief Financial Officer, Controller and any Senior Vice President of Borrower.
     “Revolving Line” is the revolving credit facility under this Agreement
permitting one or more Advances in an amount not to exceed at any time an
aggregate principal amount of $15,000,000.
     “Revolving Line Maturity Date” is February 22, 2009.
     “Securities Account” is any “securities account” as defined in the Code
with such additions to such term as may hereafter be made.
     “Secured Guarantor” is any Guarantor that has entered into a Guarantor
Security Agreement in favor of Bank.
     “Settlement Date” is defined in Section 2.1.3.
     “Subordinated Debt” is (a) Indebtedness incurred by Borrower subordinated
to Borrower’s Indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form reasonably acceptable to Bank and approved by
Bank in writing in its reasonable discretion, and (b) to the extent the terms of
subordination do not change adversely to Bank, refinancings, refundings,
renewals, amendments or extensions of any of the foregoing.

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     “Subsidiary” means, with respect to any Person, any Person of which more
than 50.0% 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.
     “Temporary Reserve” shall mean, an amount equal to the outstanding
principal amount plus interest accrued under the Existing Notes immediately
following the initial Advance, provided, that, such amount shall be reduced to
$0, upon delivery of evidence satisfactory to Bank, that all indebtedness under
the Existing Notes has been paid in full.
     “Total Liabilities” are, on any day, all obligations that should, under
GAAP, be classified as liabilities on the balance sheet on that date of Borrower
and its Subsidiaries on a consolidated basis, including all Indebtedness and the
current portion of Subordinated Debt permitted by Bank to be paid by Borrower,
but excluding all other Subordinated Debt.
     “Transfer” is defined in Section 7.1.
[Signature page follows.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.

          BORROWER:    
 
        WEBSIDESTORY, INC.    
 
       
By
Name:
  /s/ Claire Long
 
Claire Long    
Title:
  Chief Financial Officer    
 
        BANK:    
 
        SILICON VALLEY BANK    
 
       
By
Name:
  /s/ Tim Bubnack
 
Tim Bubnack    
Title:
  Senior Relationship Manager     Effective Date: 2/22/07    

[Signature page to Loan and Security Agreement]

 

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EXHIBIT A
The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:
     All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases (except with
respect to leases of real property), 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, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities (except as provided below), 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) the presently existing
and hereafter arising issued and outstanding shares of capital stock owned by
Borrower or any of its Subsidiaries of any Foreign Subsidiary; (b) 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; (c) any motor
vehicles; or (d) any General Intangible, Investment Property (as defined in the
Code) or other such rights of Borrower arising under any contract, lease,
instrument, license or other document if (but only to the extent that) the grant
of a security interest therein would (x) constitute a violation of a valid and
enforceable restriction of the terms of such General Intangible, Investment
Property or under any law, regulation, permit, order or decree of any
Governmental Authority, unless and until all required consents shall have been
obtained (for the avoidance of doubt, the restrictions described herein are not
negative pledges or similar undertakings or prohibitions on granting Liens in
favor of a lender or other financial counterparty) or (y) expressly give any
other party in respect of any such contract, lease, instrument, license or other
document, the right to terminate its obligations thereunder; provided, however,
that the limitations set forth in clause (d) above shall not affect, limit,
restrict or impair the grant by Borrower of a security interest pursuant to this
Agreement in any such Collateral to the extent that an otherwise applicable
prohibition or restriction on such grant is rendered ineffective by an
applicable law, including the Code; provided, further, that in any of the above
cases, at such time as any such property or asset ceases to be an excluded asset
pursuant to the foregoing, the same shall become subject to the security
interest granted hereunder immediately and automatically.
     Borrower hereby agrees not to encumber any of its copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing, without Bank’s prior written consent.

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EXHIBIT B
COMPLIANCE CERTIFICATE

         
TO:
  SILICON VALLEY BANK   Date:                                         
FROM:
  WEBSIDESTORY, INC.    

     The undersigned authorized officer of WEBSIDESTORY, INC. (“Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (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
Monthly balance sheet
  Monthly within 30 days   Yes   No
 
           
Quarterly financial statements with Compliance Certificate
  Quarterly within 50 days   Yes   No
 
           
Annual financial statements (CPA Audited) + Compliance Certificate
  FYE within 90 days   Yes   No
 
           
10-Q and 10-K
  Within 5 days after filing with SEC   Yes   No

                  Financial Covenant   Required   Actual   Complies
Maintain on a Quarterly Basis:
               
 
               
Minimum Adjusted Quick Ratio
  1.0:1.0                          :1.0   Yes   No
 
               
Minimum EBSTDA
  $750,000 for quarters ending 3/31/07 and 6/30/07 $1,500,000 for quarter ending
9/30/07 $2,500,000 for quarters ending after 9/30/07 through the term of the
Agreement   $                           Yes   No

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

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

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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated:                                         
In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.
Dated:                                         
I. Adjusted Quick Ratio (Section 6.7(a))
Required: 1.00:1.00
Actual:

         
A.
  Aggregate value of the unrestricted cash and cash equivalents of Borrower and
its Subsidiaries   $                    
 
       
B.
  Aggregate value of the net billed accounts receivable of Borrower and its
Subsidiaries   $                    
 
       
C.
  Aggregate value of the Investments of Borrower and its Subsidiaries  
$                    
 
       
D.
  Quick Assets (the sum of lines A through C)   $                    
 
       
E.
  Aggregate value of Obligations to Bank   $                    
 
       
F.
  Aggregate value of liabilities that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all
Indebtedness, and not otherwise reflected in line E above that matures within
one (1) year   $                    
 
       
G.
  Current Liabilities (the sum of lines E and F)   $                    
 
       
H.
  Aggregate value of all amounts received or invoiced by Borrower or any of its
Subsidiaries in advance of performance under contracts and not yet recognized as
revenue by Borrower and its Subsidiaries on a consolidated basis  
$                    
 
       
I.
  Line G minus line H   $                    
 
       
J.
  Adjusted Quick Ratio (line D divided by line I)                       

Is line J equal to or greater than 1.00:1:00?
                     No, not in compliance                     
                     Yes, in compliance

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XV. EBSTDA (Section 6.7(b))
Required: See chart below

          Period   EBSTDA
Quarters ending 3/31/07 and 6/30/07
  $ 750,000  
 
       
Quarter ending 9/30/07
  $ 1,500,000  
 
       
Quarters ending 12/31/07 and thereafter
  $ 2,500,000  

Actual:

              A.   Net Income of Borrower and its Subsidiaries  
$                    
 
            B.   To the extent included in the determination of Net Income    
 
           
 
  1.   The provision for income taxes   $                    
 
           
 
  2.   Depreciation expense   $                    
 
           
 
  3.   Amortization expense   $                    
 
           
 
  4.   Stock based compensation expense   $                    
 
           
 
  5.   Non-cash impairments of assets, including but not limited to, goodwill
and intangible assets, and related non-cash charges   $                    
 
           
 
  6.   Capital expenditures   $                    
 
           
or
  7.   The sum of lines 1 through 5 minus line 6   $                    
 
            C.   EBSTDA (line A plus line B.7)   $                    

Is line C equal to or greater than the applicable amount required per the chart
above?
                     No, not in compliance                    
                     Yes, in compliance

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EXHIBIT C
FORM OF NOTICE OF BORROWING
WEBSIDESTORY, INC.
Date:                                         

To:   Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attention: Corporate Services Department

Re: Loan and Security Agreement dated as of                        , 2007 (as
amended, modified, supplemented or restated from time to time, the “Loan
Agreement”), by and between WebSideStory, Inc. (“Borrower”) and Silicon Valley
Bank (the “Bank”)
Ladies and Gentlemen:
     The undersigned refers to the Loan Agreement, the terms defined therein and
used herein as so defined, and hereby gives you notice irrevocably, pursuant to
Section 3.4(a) of the Loan Agreement, of the borrowing of an Advance.
     1. The Funding Date, which shall be a Business Day, of the requested
borrowing is                     .
     2. The aggregate amount of the requested borrowing is
$                    .
     3. The requested Advance shall consist of $                     of Prime
Rate Advances and $                     of LIBOR Advances.
     4. The duration of the Interest Period for the LIBOR Advances included in
the requested Advance shall be                      months.
     The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Advance before and
after giving effect thereto, and to the application of the proceeds therefrom,
as applicable:
          (a) all representations and warranties of Borrower contained in the
Loan Agreement are true, accurate and complete in all material respects as of
the date hereof; 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;
          (b) no Event of Default has occurred and is continuing, or would
result from such proposed Advance; and

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          (c) the requested Advance will not cause the aggregate principal
amount of the outstanding Advances to exceed, as of the designated Funding Date,
(i) the Revolving Line, 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 (including any
amounts used for Cash Management Services).

              Borrower   WEBSIDESTORY, INC.    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:  
 
   
 
     
 
   

For internal Bank use only

                          LIBOR Pricing Date   LIBOR   LIBOR Variance   Maturity
Date
 
                                 %        

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EXHIBIT D
FORM OF NOTICE OF CONVERSION/CONTINUATION
WEBSIDESTORY, INC.
Date:                                        

To:   Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attention:

Re: Loan and Security Agreement dated as of                      ___, 2007 (as
amended, modified, supplemented or restated from time to time, the “Loan
Agreement”), by and between WebSideStory, Inc. (“Borrower”) and Silicon Valley
Bank (the “Bank”)
Ladies and Gentlemen:
     The undersigned refers to the Loan Agreement, the terms defined therein
being used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 3.5 of the Loan Agreement, of the [conversion]
[continuation] of the Advances specified herein, that:
     1. The date of the [conversion] [continuation] is
                                        , 20___.
     2. The aggregate amount of the proposed Advances to be [converted] is
$                     or [continued] is $                    .
     3. The Advances are to be [converted into] [continued as] [LIBOR] [Prime
Rate] Advances.
     4. The duration of the Interest Period for the LIBOR Advances included in
the [conversion] [continuation] shall be                      months.
     The undersigned, on behalf of Borrower, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
proposed [conversion] [continuation], before and after giving effect thereto and
to the application of the proceeds therefrom:
          (a) no Event of Default has occurred and is continuing, or would
result from such proposed [conversion] [continuation].
[Signature page follows.]

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              Borrower   WEBSIDESTORY, INC.    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:  
 
   
 
     
 
   

For internal Bank use only

                          LIBOR Pricing Date   LIBOR   LIBOR Variance   Maturity
Date
 
                                 %        

2