Document:

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                                                                    EXHIBIT 10.1

                          LOAN AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                              SILICON VALLEY BANK

                                      AND

                              DIGITAL IMPACT, INC.
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                                TABLE OF CONTENTS

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1.       ACCOUNTING AND OTHER TERMS.............................................................................     1

2.       LOAN AND TERMS OF PAYMENT..............................................................................     1

         2.1      Promise to Pay................................................................................     1

                  2.1.1    Revolving Advances...................................................................     1

                  2.1.2    Letters of Credit Sublimit...........................................................     2

                  2.1.3    FX Forward Contracts.................................................................     2

                  2.1.4    Cash Management Services.............................................................     2

         2.2      Termination of Commitment to Lend.............................................................     2

         2.3      Overadvances..................................................................................     3

         2.4      Interest Rates................................................................................     3

         2.5      Term Loan Option..............................................................................     4

         2.6      Prepayment....................................................................................     4

         2.7      General Provisions............................................................................     4

         2.8      Fees..........................................................................................     5

3.       Conditions Of Credit Extensions........................................................................     5

         3.1      Conditions Precedent to Initial Credit Extension..............................................     5

         3.2      Conditions Precedent to all Credit Extensions.................................................     6

4.       CREATION OF SECURITY INTEREST..........................................................................     6

         4.1      Grant of Security Interest....................................................................     6

         4.2      Authorization to File Financing Statements....................................................     7

5.       REPRESENTATIONS AND WARRANTIES.........................................................................     7

         5.1      Due Organization and Authorization............................................................     7

         5.2      Collateral....................................................................................     7

         5.3      Litigation....................................................................................     8

         5.4      No Material Deterioration in Financial Statements.............................................     8

         5.5      Solvency......................................................................................     8

         5.6      Regulatory Compliance.........................................................................     8

         5.7      Subsidiaries..................................................................................     9

         5.8      Full Disclosure...............................................................................     9

6.       AFFIRMATIVE COVENANTS..................................................................................     9

         6.1      Government Compliance.........................................................................     9

         6.2      Financial Statements, Reports, Certificates...................................................    10

         6.3      Inventory; Returns............................................................................    10

         6.4      Taxes.........................................................................................    10

         6.5      Insurance.....................................................................................    10
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                               TABLE OF CONTENTS
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         6.6      Primary Accounts..............................................................................    11

         6.7      Financial Covenants...........................................................................    11

         6.8      Protection of Intellectual Property Rights....................................................    12

         6.9      Further Assurances............................................................................    12

7.       NEGATIVE COVENANTS.....................................................................................    12

         7.1      Dispositions..................................................................................    12

         7.2      Changes in Business, Locations of Collateral..................................................    12

         7.3      Dissolution...................................................................................    13

         7.4      Mergers; Consolidations.......................................................................    13

         7.5      Indebtedness..................................................................................    13

         7.6      Encumbrance...................................................................................    13

         7.7      Distributions; Investments....................................................................    13

         7.8      Transactions with Affiliates..................................................................    13

         7.9      Subordinated Debt.............................................................................    13

         7.10     Compliance....................................................................................    14

8.       EVENTS OF DEFAULT......................................................................................    14

         8.1      Payment Default...............................................................................    14

         8.2      Covenant Default..............................................................................    14

         8.3      Attachment....................................................................................    14

         8.4      Insolvency....................................................................................    15

         8.5      Other Agreements..............................................................................    15

         8.6      Judgments.....................................................................................    15

         8.7      Misrepresentations............................................................................    15

         8.8      Change of Control.............................................................................    15

9.       RIGHTS AND REMEDIES....................................................................................    15

         9.1      Rights and Remedies...........................................................................    15

         9.2      Power of Attorney.............................................................................    16

         9.3      Accounts, Notification and Collection.........................................................    17

         9.4      Bank Expenses.................................................................................    17

         9.5      Bank's Liability for Collateral...............................................................    17

         9.6      Remedies Cumulative...........................................................................    17

         9.7      Demand Waiver.................................................................................    17

10.      NOTICES................................................................................................    18

11.      CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.............................................................    18

12.      GENERAL PROVISIONS.....................................................................................    19
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         12.1     Successors and Assigns........................................................................    19

         12.2     Indemnification...............................................................................    19

         12.3     Attorneys' Fees, Costs and Expenses...........................................................    19

         12.4     Right of Set-Off..............................................................................    19

         12.5     Time of Essence...............................................................................    20

         12.6     Severability of Provisions....................................................................    20

         12.7     Amendments in Writing, Integration............................................................    20

         12.8     Counterparts..................................................................................    20

         12.9     Survival......................................................................................    20

         12.10    Confidentiality...............................................................................    20

13.      DEFINITIONS............................................................................................    21

         13.1     Definitions...................................................................................    21
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                           LOAN AND SECURITY AGREEMENT

         THIS LOAN AND SECURITY AGREEMENT (as amended, restated, or otherwise
modified from time to time, this "AGREEMENT") dated the Effective Date, between
SILICON VALLEY BANK ("BANK") and DIGITAL IMPACT, INC., a Delaware corporation,
whose address is 177 Bovet Road, San Mateo, California 94402 ("BORROWER"),
provides the terms on which Bank will lend to Borrower, and Borrower will repay
Bank.

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. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings as set forth in SECTION 13. All other terms contained in
this Agreement, unless otherwise indicated, shall have the meanings provided by
the Code, to the extent such terms are defined therein.

2.       LOAN AND TERMS OF PAYMENT

         2.1      PROMISE TO PAY

         Borrower hereby unconditionally promises to pay Bank the unpaid
principal amount of all Credit Extensions hereunder with all interest, fees, and
finance charges due thereon as and when due in accordance with this Agreement.

                  2.1.1    REVOLVING ADVANCES

                           (a)      Subject to the terms and conditions hereof,
Bank shall make Advances to Borrower from time to time until the Revolving
Maturity Date not exceeding the Committed Revolving Line minus the Sublimit
Utilization Amount. Until the Revolving Maturity Date and subject to the terms
hereof and the applicable terms and conditions precedent in SECTIONS 3.1 and
3.2, Borrower may borrow, repay, and reborrow under this SECTION 2.1.1. The
proceeds of the Advances shall be used solely for working capital and other
general business requirements of Borrower, including, without limitation, to
provide cash collateral to secure Borrower's reimbursement obligations under
standby letters of credit.

                           (b)      Pursuant to the terms of SECTION 2.4(a),
interest on each Advance shall be paid in arrears on the first day of each
month. The outstanding principal amount of and all accrued but unpaid interest
on the Advances shall be due and payable on the Revolving Maturity Date, except
as otherwise set forth in SECTION 2.5.

                           (c)      To obtain an Advance, Borrower must follow
the procedures set forth in SECTION 3.2.

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                  2.1.2    LETTERS OF CREDIT SUBLIMIT

         Bank will issue Letters of Credit for Borrower's account not exceeding
the Committed Revolving Line minus the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the FX Reserve, and
(c) the sum of the outstanding principal balance of the Advances. Each Letter of
Credit will have an expiry date of no later than 180 days after the Revolving
Maturity Date, but Borrower's reimbursement obligation will be secured by cash
on terms acceptable to Bank on or before the Revolving Maturity Date if the term
of this Agreement is not extended by Bank. Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request.

                  2.1.3    FX FORWARD CONTRACTS

         If there is availability under the Committed Revolving Line, then
Borrower may enter into foreign exchange forward contracts with the Bank under
which Borrower commits to purchase from or sell to Bank a set amount of foreign
currency more than one business day after the contract date (the "FX FORWARD
CONTRACT"). Bank will subtract ten percent (10%) of each outstanding FX Forward
Contract from the foreign exchange sublimit (the "FX RESERVE"). The foreign
exchange sublimit shall be the Committed Revolving Line minus the sum of (a) all
amounts for services utilized under the Cash Management Services Sublimit, (b)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), and (c) the sum of the outstanding principal
balance of the Advances. The total 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.

         Borrower may use amounts up to the Committed Revolving Line minus the
sum of (a) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), (b) the FX Reserve, and (c) the sum of the
outstanding principal balance of the Advances (the "CASH MANAGEMENT SERVICES
SUBLIMIT") for Bank's Cash Management Services, which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in various cash management services agreements related to
such services (the "CASH MANAGEMENT SERVICES"). Such aggregate amounts utilized
under the Cash Management Services Sublimit will at all times reduce the amount
otherwise available to be borrowed under the Committed Revolving Line. Any
amounts Bank pays on behalf of Borrower or any amounts that are not paid by
Borrower for any Cash Management Services will be treated as Advances under the
Committed Revolving Line and will accrue interest at the rate for Advances.

         2.2      TERMINATION OF COMMITMENT TO LEND

         Bank's obligation to make Credit Extensions shall terminate on the
earlier of (a) the occurrence and continuance of an Event of Default or if there
exists any event, condition, or act which with notice or lapse of time, or both,
would constitute an Event of Default or (b) the Revolving Maturity Date.

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         2.3      OVERADVANCES

         If, at any time Borrower's aggregate obligations under SECTIONS 2.1.1,
2.1.2, 2.1.3, and 2.1.4, exceed the Committed Revolving Line, Borrower shall pay
Bank the excess within 2 Business Days of receipt by Borrower of written notice
from Bank.

         2.4      INTEREST RATES

                           (a)      During the Revolving Period, each Advance
shall bear interest on the outstanding principal amount thereof from the date
when made until paid in full at a rate per annum equal to the Prime Rate.

                           (b)      If Borrower has selected the Term Loan
Option, then, commencing on the Term Loan Option Date, the outstanding principal
amount of the Advances shall bear interest, at Borrower's option, (i) at a rate
per annum equal to the Prime Rate ("TERM LOAN OPTION ONE") or (ii) at a fixed
rate on the outstanding principal amount thereof from the Term Loan Option Date
until paid in full at a rate per annum equal to the 36-month Treasury Rate in
effect on the Term Loan Option Date plus four percent (4.00%) ("TERM LOAN OPTION
TWO").

                           (c)      Interest on the Credit Extensions 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 interest accrues.
In computing interest on any Credit Extension, the date of the making of such
Credit Extension shall be included and the date of payment shall be excluded;
provided, however, that if any Credit Extension is repaid on the same day on
which it is made, such day shall be included in computing interest on such
Credit Extension. Each change in the interest rate of the Credit Extensions
based on changes in the Prime Rate shall be effective on the effective date of
such change and to the extent of such change.

                           (d)      If Borrower fails to achieve a quarterly
revenue equal to or greater than the amounts set forth in column B in the table
set forth in SECTION 6.7(b) opposite each time period set forth in such table,
the interest rates in SECTIONS 2.4(a) and 2.4(b) shall be increased one-half
percent (.50%) per annum during the period beginning on the first day of the
fiscal quarter immediately following the quarter Borrower failed to achieve the
required quarterly revenue and continuing until the first day of the fiscal
quarter following the fiscal quarter for which Borrower does achieve the
targeted quarterly revenue amount set forth in the table (the "RATE INCREASE
PERIOD"); provided, however, in no event shall such interest rate increase occur
more than once during any Rate Increase Period pursuant to the terms of this
SECTION 2.4(d). After an Event of Default occurs and so long as such Event of
Default continues, including after an acceleration of the Obligations pursuant
to SECTION 9.1(a) (whether before or after entry of judgment to the extent
permitted by law), Obligations shall accrue interest at two percent (2.00%)
above the rate effective immediately before the Event of Default. Payment or
acceptance of the increased interest provided in this SECTION 2.4(d) 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.

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         2.5      TERM LOAN OPTION

                           (a)      To select the Term Loan Option, no less than
five (5) calendar days prior to the Revolving Maturity Date, Borrower shall
complete, execute, and deliver to Bank an election notice substantially in the
form attached hereto as EXHIBIT D.

                           (b)      If Borrower selects Term Loan Option One,
the Advances are payable in thirty-six (36) equal monthly installments of
principal, plus accrued interest, beginning on the Repayment Date and ending on
the Term Loan Maturity Date. Borrower shall have the option to prepay all of the
Advances then-outstanding under Term Loan Option One so long as Borrower (i)
provides written notice to Bank of its election to prepay such Advances at least
five (5) Business Days prior to such prepayment and (ii) pays, on the date of
prepayment, (A) all unpaid principal and accrued interest with respect to such
Advances being prepaid, and (B) all other sums, if any, that shall have become
due and payable with respect to this Agreement. Borrower shall also have the
option to prepay less than all of the Advances then-outstanding under Term Loan
Option One so long as Borrower (x) provides written notice to Bank of its
election to prepay a portion of the Advances at least five (5) Business Days
prior to such prepayment and (i) pays, on the date of prepayment, (A) such
portion of the Advances and accrued interest with respect to such portion being
prepaid, and (B) all other sums, if any, that shall have become due and payable
with respect to this Agreement. When repaid or prepaid, Advances repaid pursuant
hereto or prepaid may not be reborrowed.

                           (c)      If Borrower selects Term Loan Option Two,
the Advances are payable in thirty-six (36) equal monthly installments of
principal and interest, beginning on the Repayment Date and ending on the Term
Loan Maturity Date; provided, however, if Borrower chooses to prepay the
Advances, such prepayment shall comply with the terms of SECTION 2.6. When
repaid or prepaid, Advances repaid pursuant to the terms of this SECTION 2.5(b)
or prepaid pursuant to the terms of SECTION 2.6 may not be reborrowed.

         2.6      PREPAYMENT

         Following the Revolving Period, under Term Loan Option Two, Borrower
shall have the option to prepay all, but not less than all, of the Advances so
long as Borrower (a) provides written notice to Bank of its election to prepay
the Advances at least two (2) Business Days prior to such prepayment, and (b)
pays, on the date of the prepayment (i) all accrued and unpaid interest with
respect to the Advances through the date the prepayment is made (which shall be
a Business Day); (ii) the outstanding principal amount of the Advances; (iii) if
the Term Loan Option Two is in effect, a premium equal to the Make-Whole
Premium; and (iv) all other sums, if any, that shall have become due and payable
hereunder with respect to this Agreement.

         2.7      GENERAL PROVISIONS

         Bank may debit any of Borrower's deposit accounts maintained with Bank
for principal and interest payments owing or any amounts Borrower owes Bank
pursuant to the Loan Documents, including the Designated Deposit Account. These
debits are not a set-off. Payments received after 12:00 noon are considered
received at the opening of business on the

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next Business Day. When a payment is due on a day that is not a Business Day,
the payment is due the next Business Day and additional fees or interest accrue.

         2.8      FEES

         Borrower shall pay to Bank:

                           (a)      all Bank's Expenses (including reasonable
attorneys' fees and expenses) incurred through and after the Effective Date,
when due; and

                           (b)      upon the issuance of a Letter of Credit, a
fully earned, non-refundable letter of credit fee (the "LETTER OF CREDIT FEE")
equal to .50% per annum of the face amount of the issued Letter of Credit;
provided, however, such Letter of Credit Fee shall be waived for any Letter of
Credit transferred to Bank from the current issuer, Comerica Bank;

                           (c)      on the Effective Date, a fully-earned,
non-refundable loan fee (the "LOAN FEE") equal to $20,000; provided, however,
if, on the Effective Date, the investment accounts into which Borrower deposits
or invests at least fifty percent (50%) of its total investment amounts are
maintained with Silicon Valley Bank Securities and such investment accounts are
subject to a Control Agreement, then the Loan Fee shall be reduced to $10,000;
and

                           (d)      if, after the date hereof, any law or
regulation increases Bank's costs or reduces Bank's income for any loan, the
increase in cost or reduction in income or additional expense immediately upon
Borrower's receipt of an invoice therefor from Bank.

3.       CONDITIONS OF CREDIT EXTENSIONS

         3.1      CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION

         Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that the following have been satisfied, all in form and
substance reasonably satisfactory to Bank:

                           (a)      the parties shall have executed and
delivered the Loan Documents;

                           (b)      Borrower shall have delivered one or more
executed Control Agreement(s), in form and substance satisfactory to Bank, by
and among Borrower, Bank, and any bank or financial institution as is necessary
for Bank to perfect its security interest in any Collateral Accounts;

                           (c)      Borrower shall have delivered its Operating
Documents and a good standing certificate of Borrower from the Secretary of
State of Borrower's jurisdiction of formation;

                           (d)      Borrower shall have delivered resolutions of
its Board of Directors authorizing the Credit Extensions and transactions
contemplated herein;

                           (e)      Bank shall have received the certificates of
insurance described in

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SECTION 6.5 hereof;

                           (f)      Borrower shall have paid all costs and fees,
including Bank Expenses, then due; and

                           (g)      Borrower shall have delivered to Bank, in
addition to the documents required in SECTION 3.2, all documents, certificates,
and other assurances that Bank or its counsel may reasonably request.

         3.2      CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS

         Bank's obligation to make each Credit Extension, including the initial
Credit Extension, is subject to the following:

                           (a)      To obtain an Advance, Borrower must notify
Bank by facsimile or telephone by 12:00 noon Pacific time on the Borrower's
desired Funding Date (which shall be a Business Day). If such notification is by
telephone, Borrower must promptly confirm the notification by delivering to Bank
a completed Payment/Advance Form in the form attached as EXHIBIT B. On the
Funding Date, Bank shall credit and/or transfer (as applicable to the Designated
Deposit Account) an amount equal to the Advance requested. Bank may make
Advances under this Agreement based on instructions from a Responsible Officer
or his or her designee (or without instructions if a Credit Extension is
necessary to meet Obligations which have become due). Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower shall indemnify Bank for any loss Bank suffers due to such
reliance.

                           (b)      The representations and warranties in
SECTION 5 shall be true and correct in all material respects, except those
representations and warranties expressly referring to another date shall be true
and correct in all material respect as of such date on the date of the
Payment/Advance Form and on the Funding Date, and no Event of Default shall have
occurred and be continuing, or result from, an Advance and/or Credit Extension.
Borrower's receipt of an Advance and/or Term Loan is Borrower's representation
and warranty on that date that the representations and warranties in SECTION 5
remain true and correct in all material respects, except those representations
and warranties expressly referring to another date shall be true and correct in
all material respect as of such date.

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 and the performance of each of Borrower's duties
under the Loan Documents, a continuing security interest in the Collateral and
all proceeds and products thereof. Except for Permitted Liens, Borrower warrants
and represents that the security interest granted herein shall be a first
priority security interest in the Collateral. During the existence of an Event
of Default, Bank may place a "hold" on any deposit account pledged as
Collateral.

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         Borrower agrees that any disposition of the Collateral in violation of
this Agreement, by either Borrower or any other Person, shall be deemed to
violate the rights of Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations (other than inchoate indemnity
obligations). If Borrower shall at any time, acquire a commercial tort claim in
excess of $50,000, Borrower shall promptly notify Bank in a writing signed by
Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.

         4.2      AUTHORIZATION TO FILE FINANCING STATEMENTS

         Borrower hereby authorizes Bank to file financing statements with all
appropriate jurisdictions, to perfect or protect Bank's security interest or
rights hereunder.

5.       REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants as follows:

         5.1      DUE ORGANIZATION AND AUTHORIZATION

         Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. In connection
with this Agreement, Borrower has delivered to Bank a certificate signed by
Borrower and entitled "Collateral Information Certificate". Borrower represents
and warrants to Bank that: (a) Borrower's exact legal name is that indicated on
the Collateral Information Certificate and on the signature page hereof; (b)
Borrower is an organization of the type, and is organized in the jurisdiction,
set forth in the Collateral Information Certificate; (c) the Collateral
Information Certificate accurately sets forth Borrower's organizational
identification number or accurately states that Borrower has none; and (d) the
Collateral Information 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, and (e) all other information set forth on the
Collateral Information Certificate pertaining to Borrower is accurate and
complete in all material respects. If Borrower does not now have an
organizational identification number, but later obtains one, Borrower shall
promptly notify Bank of such organizational identification number.

         The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.

         5.2      COLLATERAL

         Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Except as set forth in the Collateral Information Certificate,
Borrower has no deposit accounts or

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investment accounts other than the deposit accounts with Bank or investments
accounts with Bank's Affiliates. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. Except as set forth in the Collateral
Information Certificate, the Collateral is not in the possession of any third
party bailee (such as a warehouse). Except as hereafter disclosed to Bank in
writing by Borrower, none of the components of the Collateral shall be
maintained at locations other than as provided in the Collateral Information
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
shall first obtain the written consent of Bank, and such bailee must acknowledge
in writing that the bailee is holding such Collateral for the benefit of Bank.
All Inventory is in all material respects of good and marketable quality, free
from material defects. Borrower is the licensee or sole owner of the
Intellectual Property (or, if commercially available in the marketplace, could
license upon commercially reasonable terms), except for non-exclusive licenses
granted to its customers in the ordinary course of business. Each Patent is
valid and enforceable and no part of the Intellectual Property has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property violates the rights of any third party,
except to the extent such claim could not reasonably be expected to cause a
Material Adverse Change.

         5.3      LITIGATION

         Except as shown in the Collateral Information Certificate, there are no
actions or proceedings pending or, to the knowledge of Borrower's Responsible
Officers, threatened by or against Borrower or any Subsidiary in which a
decision could reasonably be expected to cause a Material Adverse Change.

         5.4      NO MATERIAL DETERIORATION IN FINANCIAL STATEMENTS

         All consolidated financial statements for Borrower, including
information reported to Bank in connection with the delivery of any Compliance
Certificate pursuant to Section 6.2, and any Subsidiary, delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

         5.5      SOLVENCY

         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.

         5.6      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

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Board of Governors). Borrower has complied in all material respects with the
Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances
or rules, the violation of which could reasonably be expected to cause a
Material Adverse Change. None of Borrower's or any Subsidiary's properties or
assets has been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each
Subsidiary have timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP. Borrower and each Subsidiary 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 its business as currently conducted, except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.

         5.7      SUBSIDIARIES

         Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.

         5.8      FULL DISCLOSURE

         No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements given to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading, it
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results.

6.       AFFIRMATIVE COVENANTS

         Borrower shall, and shall cause each of its Subsidiaries to, do all of
the following for so long as Bank has an obligation to lend or there are
outstanding Obligations (other than inchoate indemnity obligations):

         6.1      GOVERNMENT COMPLIANCE

                           (a)      Except as otherwise permitted under this
Agreement, maintain its and all its Subsidiaries' legal existence and good
standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to cause a Material Adverse Change; and

                           (b)      Comply, and have each of its Subsidiaries
comply, with all laws, ordinances and regulations to which it is subject, for
which noncompliance would reasonably be expected to cause a Material Adverse
Change.

                                       9

<PAGE>

         6.2      FINANCIAL STATEMENTS, REPORTS, CERTIFICATES

                           (a)      Deliver to Bank: (i) as soon as available,
but no later than thirty (30) days after the last day of each month, a company
prepared consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period certified by a Responsible Officer and
in a form reasonably acceptable to Bank; (ii) as soon as available, but no later
than ninety (90) days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an opinion on the financial statements from a
nationally-recognized, independent, certified public accounting firm; (iii)
within five (5) Business Days of filing, notification of all reports on Forms
10-K and 10-Q filed with the Securities and Exchange Commission; (iv) a prompt
report of any legal actions pending or threatened in writing against Borrower or
any Subsidiary that could reasonably be expected to result in damages or costs
to Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000) or
more; (v) as soon as available, but no later than thirty (30) days after the end
of each fiscal year, a one (1) year (prepared on a quarterly basis) financial
projections of Borrower on a consolidated basis, including a balance sheet and
statements of income and cash flows and showing projected operating revenues,
expenses and debt service of Borrower on a consolidated basis prepared under
GAAP; and (vii) budgets, sales projections, operating plans or other financial
information reasonably requested by Bank.

                           Borrower's 10K and 10Q reports required to be
delivered pursuant to this Sections 6.2(a), shall be deemed to have been
delivered on the date on which Borrower posts such report or provides a link
thereto on Borrower's website on the internet.

                           (b)      Borrower shall deliver to Bank, together
with the monthly financial statements set forth in clause (a)(i) above and the
annual financial statements set forth in clause (a)(ii) above, a Compliance
Certificate signed by a Responsible Officer in the form of EXHIBIT C. If the
financial statements are deemed delivered via internet posting, the Compliance
Certificate shall continue to be delivered via paper copies.

         6.3      INVENTORY; RETURNS

         Keep all Inventory in good and marketable condition, free from material
defects. Returns and allowances between Borrower and its account debtors shall
follow Borrower's customary practices as they exist on the Effective Date.

         6.4      TAXES

         Make, and cause each Subsidiary to make, timely payment of all material
federal, state, and local taxes or assessments (other than taxes and assessments
which Borrower is contesting in good faith, with adequate reserves maintained in
accordance with GAAP) and will deliver to Bank, on demand, appropriate
certificates attesting to such payments.

         6.5      INSURANCE

         Keep its business and the Collateral insured for risks and in amounts
of the type customarily maintained in its industry. Insurance policies shall be
in a form, with companies, and in amounts of the type customarily maintained in
its industry. All property policies shall

                                       10

<PAGE>

have a lenders' loss payable endorsement showing Bank as an additional loss
payee; all liability policies shall show Bank as an additional insured; all
policies shall provide that the insurer must give Bank at least twenty (20) days
notice before canceling its policy. At Bank's request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. During the
existence of an Event of Default, proceeds payable under any policy shall, at
Bank's option, be payable to Bank on account of the Obligations, and in all
other instances proceeds shall be payable to Borrower.

         6.6      PRIMARY ACCOUNTS

                           (a)      Within sixty (60) days after the Effective
Date, maintain Borrower's primary operating accounts with Bank; and

                           (b)      Provide Bank five (5) Business Days advance
written notice before establishing any Deposit Account, Securities Account or
Commodity Account (collectively, the "COLLATERAL ACCOUNTS") at or with any bank
or financial institution (other than Bank). In addition, for each Collateral
Account that Borrower at any time maintains, Borrower shall cause each
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 security interest in such Collateral Account.

         6.7      FINANCIAL COVENANTS

                           (a)      As of the last calendar day of each month,
Borrower shall maintain an Adjusted Quick Ratio of not less than 1.50:1.00; and

                           (b)      For each date that is a quarter-end,
Borrower shall achieve a quarterly revenue equal to or greater than the amounts
set forth in column A below opposite each time period set forth below:

<TABLE>
<CAPTION>
                                                                      MINIMUM QUARTERLY REVENUE
                                                                ------------------------------------
                PERIOD                                              A                        B
--------------------------------------------                    ----------               -----------
<S>                                                             <C>                      <C>
For the three months ending 12/31/04                            $7,200,000               $ 8,300,000
For the three months ending 3/31/05                             $7,800,000               $ 9,000,000
For the three months ending 6/30/05 and each
quarter-end thereafter                                          $8,000,000               $10,000,000
</TABLE>

         Borrower's failure to maintain a quarterly revenue equal to or greater
than the amounts set forth in column B in the table above for each period
opposite such amounts above shall cause the interest rate payable by Borrower
under this Agreement to increase pursuant to the terms of SECTION 2.4(d).

                                       11

<PAGE>

         6.8      PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

         Protect, defend and maintain the validity and enforceability of the
Intellectual Property, except to the extent that the protection, defense,
maintenance, validity or enforceability of such Intellectual Property is no
longer in the best interest of Borrower as determined in good faith by Borrower
and is not likely to result in a Material Adverse Change; promptly advise Bank
in writing of material infringements of all material Intellectual Property; and
not allow any Intellectual Property material to Borrower's business to be
abandoned, forfeited or dedicated to the public unless Borrower, in its good
faith, deems it to be in the best interest of Borrower and such abandonment,
forfeiture or dedication is not likely to result in a Material Adverse Change.

         6.9      FURTHER ASSURANCES

         Borrower shall execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.

7.       NEGATIVE COVENANTS

         Borrower shall not, and shall not permit any of its Subsidiaries to, do
any of the following without Bank's prior written consent, for so long as Bank
has an obligation to lend or there are any outstanding Obligations (other than
inchoate indemnity obligations):

         7.1      DISPOSITIONS

         Convey, sell, lease, transfer or otherwise dispose of (collectively a
"TRANSFER"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers of (a) Inventory in the ordinary
course of business; (b) non-exclusive licenses and similar arrangements for the
use of the property of Borrower or its Subsidiaries in the ordinary course of
business; (c) worn-out, damaged, or obsolete Equipment; (d) Transfers associated
with the making or disposition of a Permitted Investment; (e) dispositions of
cash or Permitted Investments in a manner not prohibited by this Agreement; (f)
Transfers consisting of sale and leaseback transactions in connection with the
financing of property acquired within 180 days of acquisition of such property
to the extent such transactions are Permitted Indebtedness; (g) Transfers not
otherwise permitted in this SECTION 7.1, provided, that the aggregate book value
of all such other Transfers by Borrower and its Subsidiaries, together, shall
not exceed One Hundred Thousand Dollars ($100,000) in any fiscal year.

         7.2      CHANGES IN BUSINESS, LOCATIONS OF COLLATERAL

         Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto. Borrower shall not, without ten (10) days prior written notice to Bank:
(a) relocate its chief executive office, or add any new offices or business
locations, including warehouses (unless such new offices or business locations
contain less than $25,000 in Borrower's assets or property), (b) change its
jurisdiction of organization, (c) change its organizational structure or type,
(d) change its legal name, or (e) change any organizational number (if any)
assigned by its jurisdiction of organization.

                                       12

<PAGE>

         7.3      DISSOLUTION.

         Permit any Subsidiary to dissolve or discontinue operations unless no
Material Adverse Change could reasonably result.

         7.4      MERGERS; CONSOLIDATIONS

         Merge or consolidate with another corporation or entity (except that a
Subsidiary may merge or consolidate with or into another Subsidiary or
Borrower), or acquire all or substantially all of the capital stock or property
of a Person other than a Subsidiary; provided that Borrower or any of its
Subsidiaries may merge or consolidate with another corporation or entity or
acquire all or substantially all of the capital stock or property of a Person
other than a Subsidiary, if (a) a Default or Event of Default shall not have
occurred and be continuing and would not occur as a result of such transaction,
and (b) Borrower survives such transaction.

         7.5      INDEBTEDNESS

         Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

         7.6      ENCUMBRANCE

         Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
herein.

         7.7      DISTRIBUTIONS; INVESTMENTS

         Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or pay any dividends or make any distribution or payment
or redeem, retire or purchase any capital stock except for Permitted
Distributions.

         7.8      TRANSACTIONS WITH AFFILIATES

         Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for (i) 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); or (ii) transactions among Borrower and its Subsidiaries
and among Borrower's Subsidiaries.

         7.9      SUBORDINATED DEBT

         Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.

                                       13

<PAGE>

         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, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.

8.       EVENTS OF DEFAULT

         Any one of the following is an Event of Default:

         8.1      PAYMENT DEFAULT

         If Borrower fails to pay (a) the principal or interest portion of any
Credit Extension when due, or (b) any other monetary Obligations within three
(3) days after written notice to Borrower. During any cure period, the failure
to cure the payment default is not an Event of Default (but no Credit Extension
will be made during the cure period).

         8.2      COVENANT DEFAULT

                           (a)      If Borrower fails to perform any obligation
under SECTIONS 6.2 or 6.7 or violates any of the covenants contained in SECTION
7 of this Agreement, or

                           (b)      If Borrower fails or neglects to perform,
keep, or observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any other Loan Document, or in any
other present or future agreement between Borrower and Bank and as to any
default under such other term, provision, condition, covenant or agreement that
can be cured, has failed to cure such default within thirty (30) days after the
occurrence thereof.

         8.3      ATTACHMENT

         If (a) any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in ten (10) days; (b) the service of process upon
Borrower seeking to attach, by trustee or similar process, any funds of Borrower
on deposit with Bank, or any entity under the control of Bank (including a
subsidiary); (c) Borrower is enjoined, restrained, or prevented by court order
from conducting a material part of its business; (d) a judgment or other claim
becomes a Lien on a material portion of Borrower's assets; or (e) a notice of
lien, levy, or assessment is filed against any of Borrower's assets by any
government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period).

                                       14

<PAGE>

         8.4      INSOLVENCY

         If (a) Borrower is unable to pay its debts (including trade debts) as
they mature; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within 60 days
(but no Credit Extensions shall be made before any Insolvency Proceeding is
dismissed).

         8.5      OTHER AGREEMENTS

         If there is a default in any agreement to which Borrower is a party
with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000)
or that could result in a Material Adverse Change.

         8.6      JUDGMENTS

         If a judgment or judgments for the payment of money (not covered by
insurance) in an amount, individually or in the aggregate, of at least Five
Hundred Thousand Dollars ($500,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of 30 days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment).

         8.7      MISREPRESENTATIONS

         If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement (when read together with Borrower's
filings with the Securities and Exchange Commission) now or later in any
warranty or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document.

         8.8      CHANGE OF CONTROL

         If a Change of Control occurs.

9.       RIGHTS AND REMEDIES

         9.1      RIGHTS AND REMEDIES

         When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:

                           (a)      declare all Obligations immediately due and
payable (but if an Event of Default described in SECTION 8.4 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;

                                       15

<PAGE>

                           (c)      settle or adjust disputes and claims
directly with account debtors for amounts, on terms and in any order that Bank
considers advisable and notify any Person owing Borrower money of Bank's
security interest in such funds and verify the amount of such account. Borrower
shall collect all payments in trust for Bank and, if requested by Bank,
immediately deliver the payments to Bank in the form received from the account
debtor, with proper endorsements for deposit;

                           (d)      make any payments and do any acts it
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;

                           (e)      apply to the Obligations any (i) balances
and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or
for the credit or the account of Borrower;

                           (f)      ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.
Bank is 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;

                           (g)      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;

                           (h)      require Borrower to provide cash collateral
in the face amount of all undrawn Letters of Credit;

                           (i)      terminate any FX Forward Contracts; and

                           (i)      dispose of the Collateral according to the
Code.

         9.2      POWER OF ATTORNEY

         Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, to be effective upon the occurrence and during the continuance
of an Event of Default, to: (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; and (e) 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

                                       16

<PAGE>

name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred until
all Obligations (other than inchoate indemnity 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 (other than inchoate indemnity obligations) have been fully repaid
and performed and Bank's obligation to provide Credit Extensions terminates.

         9.3      ACCOUNTS, NOTIFICATION AND COLLECTION

         In the event that an Event of Default occurs and is continuing, Bank
may notify any Person owing Borrower money of Bank's security interest in the
funds and verify and/or collect the amount of the Account. After the occurrence
and during the continuance of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.

         9.4      BANK EXPENSES

         Any amounts paid by Bank as provided herein are Bank Expenses and are
immediately due and payable and shall bear interest at the highest applicable
default rate and be secured by the Collateral. No payments by Bank shall be
deemed an agreement to make similar payments in the future or Bank's waiver of
any Event of Default.

         9.5      BANK'S LIABILITY FOR COLLATERAL

         So long as Bank complies with reasonable banking practices regarding
the safekeeping of Collateral, 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      REMEDIES CUMULATIVE

         Bank's rights and remedies under this Agreement, the other Loan
Documents, and all other agreements among Borrower and Bank, 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 enforcing its
rights is not a waiver, election, or acquiescence. No waiver hereunder by Bank
shall be effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.

         9.7      DEMAND WAIVER

         Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

                                       17

<PAGE>

10.      NOTICES

         Notices or demands by either party about this Agreement must be in
writing and personally delivered or sent by an overnight delivery service, or by
certified mail, postage prepaid, return receipt requested, or by facsimile at
the addresses and facsimile numbers listed below. A party may change its notice
address by written notice to the other party.

                  If to Borrower:    Digital Impact, Inc.
                                     177 Bovet Road, Suite 200
                                     San Mateo, California 94402
                                     Attn: Legal Department
                                     Fax: (650) 356-3592

                  with a copy to:    Wilson Sonsini Goodrich & Rosati, P.C.
                                     12 East 49th Street, 30th Floor
                                     New York, NY 10011
                                     Attn: Selim Day, Esq.
                                     Fax: (650) 493-6811

                  If to Bank:        Silicon Valley Bank
                                     2400 Geng Road, Suite 200
                                     Palo Alto, California 94303
                                     Attn: Maria Fischer Leaf
                                     Fax: (650) 320-0016

                  with a copy to:    Bingham McCutchen LLP
                                     1900 University Circle
                                     East Palo Alto, California 94303
                                     Attn: Pamela J. Martinson, Esq.
                                     Fax: (650) 849-4800

11.      CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

         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 California, and Borrower accepts jurisdiction
of the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE
FOREGOING, BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK
DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE BANK'S RIGHTS AGAINST BORROWER OR ITS PROPERTY.

         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

                                       18

<PAGE>

WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12.      GENERAL PROVISIONS

         12.1     SUCCESSORS AND ASSIGNS

         This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights or Obligations under it without Bank's prior written consent which may be
granted or withheld in Bank's sole discretion. Bank has the right, without the
consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits under this Agreement, the Loan Documents or any other
related agreement to any other bank or financial institution.

         12.2     INDEMNIFICATION

         Borrower hereby indemnifies, defends and holds Bank and its respective
officers, employees, and agents harmless against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses, or Bank's
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys' fees and
expenses), except in the case of clause (a) and clause (b), for losses caused by
Bank's gross negligence or willful misconduct.

         12.3     ATTORNEYS' FEES, COSTS AND EXPENSES

         In any action or proceeding between Borrower and Bank arising out of
the Loan Documents the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.

         12.4     RIGHT OF SET-OFF

         Borrower hereby grants to Bank, a lien, security interest and right of
set-off as security for all Obligations to Bank hereunder, whether now existing
or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a Bank subsidiary) or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set-off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER OR
ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

                                       19

<PAGE>

         12.5     TIME OF ESSENCE

         Time is of the essence for the payment and performance of all
Obligations in this Agreement.

         12.6     SEVERABILITY OF PROVISIONS

         Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.

         12.7     AMENDMENTS IN WRITING, INTEGRATION

         All amendments to this Agreement must be in writing signed by both Bank
and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter, and supersede prior negotiations or
agreements. All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Agreement
and the Loan Documents are superceded by this Agreement and the Loan Documents.

         12.8     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.

         12.9     SURVIVAL

         All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations (other than inchoate indemnity
obligations) remain outstanding. The obligation of Borrower in SECTION 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.

         12.10    CONFIDENTIALITY

         In handling any confidential information or non-public information
concerning the Borrower and its Subsidiaries, Bank will maintain the
confidentiality of such information, but disclosure of information may be made:
(a) to Bank's subsidiaries or affiliates in connection with their business with
Borrower; (b) to prospective transferees or purchasers of any interest in the
Credit Extensions, provided, they are bound by confidentiality obligations
similar to those set forth herein; (c) as required by law, regulation, subpoena,
or other order; (d) as required in connection with Bank's examination or audit,
provided that any Person receiving confidential or non-public information is
bound by confidentiality obligations similar to those set forth herein, or
similar regulations; and (e) as Bank considers appropriate in exercising
remedies under this Agreement, provided that any Person receiving confidential
or non-public information is bound by confidentiality obligations similar to
those set forth herein, or similar regulations. Confidential information or
non-public information does not include information that either: (x) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (y) is disclosed to Bank by a
third party, if, at the time

                                       20

<PAGE>

of disclosure, Bank does not know that the third party is prohibited from
disclosing the information.

13.      DEFINITIONS

         13.1     DEFINITIONS

         In this Agreement:

         "ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

         "ADJUSTED QUICK RATIO" means (a) the sum of unrestricted cash and Cash
Equivalents plus accounts receivable divided by (b) the sum of Current
Liabilities plus Obligations (to the extent not already included in Current
Liabilities) minus Deferred Revenue.

         "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.

         "AFFILIATE" is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person's senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person's managers and members.

         "BANK EXPENSES" are all audit fees and expenses and costs or expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).

         "BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.

         "BRITISH POUNDS" or "(POUND)" means lawful currency of the United
Kingdom.

         "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which Bank is closed.

         "CASH EQUIVALENTS" are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any state
maturing within one (1) year from its acquisition, (b) commercial paper maturing
no more than one (1) year after its creation and having the highest rating from
either Standard & Poor's Corporation or Moody's Investors Service, Inc., (c)
Bank's certificates of deposit issued maturing no more than one (1) year after
issue, and (d) any other investments administered through Bank or its
Affiliates.

                                       21

<PAGE>

         "CHANGE IN CONTROL" is a transaction in which any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "ACT")) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of greater than 35% of the
shares of all classes of stock then outstanding of a Person ordinarily entitled
to vote in the election of the directors of such Person.

         "CODE" is the Uniform Commercial Code as adopted in California as
amended and in effect from time to time.

         "COLLATERAL" is the property described on EXHIBIT A attached hereto.

         "COLLATERAL INFORMATION CERTIFICATE" means the Collateral Information
Certificate of Borrower dated September 29, 2004.

         "COMMITTED REVOLVING LINE" is an aggregate principal amount equal to
$8,000,000.

         "COMMODITY ACCOUNT" has the meaning ascribed to it in the Code.

         "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 the guarantee or other support arrangement.

         "CONTROL AGREEMENT" means, collectively, any control agreement entered
into among Borrower, Bank and the depositary bank, securities intermediary, or
commodity intermediary at which Borrower maintains a deposit account, securities
account, or a commodity account, pursuant to which Bank obtains control (within
the meaning of the applicable provision of the Code) over such deposit account,
securities account, or commodity account.

         "COPYRIGHT" means any of the following now owned or hereafter acquired
or created (as a work for hire for the benefit of Borrower) by Borrower or in
which Borrower now holds or hereafter acquires or receives any right or
interest, in whole or in part: (a) any copyright, whether registered or
unregistered, held pursuant to the laws of the United States or of any other
country or foreign jurisdiction, (b) registration, application or recording in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or foreign jurisdiction, (c) any
continuation, renewal or extension thereof, and (d) any registration to be
issued in any pending application, and shall include any right or interest in
and to work protectable by any of the foregoing which are presently or in the
future owned, created or

                                       22

<PAGE>

authorized (as a work for hire for the benefit of Borrower) or acquired by
Borrower, in whole or in part.

         "CREDIT EXTENSION" is each Advance or any other extension of credit by
Bank for Borrower's benefit.

         "CURRENT LIABILITIES" are amounts that under GAAP should be included on
that date as current liabilities on Borrower's consolidated balance sheet.

         "DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.

         "DEPOSIT ACCOUNTS" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit, whether maintained with Bank or other institutions.

         "DESIGNATED DEPOSIT ACCOUNT" means that certain deposit account
maintained with Bank in the name of Borrower, account number 3300447461.

         "DOLLARS" or "$" means lawful currency of the United States of America.

         "EFFECTIVE DATE" means the date that Bank signs this Agreement as
indicated on the signature page hereof.

         "EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

         "FUNDING DATE" is the date on which an Advance is made to or on account
of Borrower.

         "GAAP" is generally accepted accounting principles in effect under the
laws of the United States of America from time to time.

         "GENERAL INTANGIBLES" means all present and future "general
intangibles" as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, in which Borrower has any
interest and includes without limitation all Intellectual Property, payment
intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income tax refunds, security and other deposits, options to purchase or
sell real or personal property, rights in all litigation presently or hereafter
pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any kind.

         "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

                                       23

<PAGE>

         "INSOLVENCY PROCEEDING" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

         "INTELLECTUAL PROPERTY" means any intellectual property, in any medium,
of any kind or nature whatsoever, now or hereafter owned or acquired or received
by Borrower or in which Borrower now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any Copyright, Trademark,
Patent, trade secret, customer list, Internet domain name (including any right
related to the registration thereof), proprietary or confidential information,
mask work, source, object or other programming code, invention (whether or not
patented or patentable), technical information, procedure, design, knowledge,
know-how, software, data base, data, skill, expertise, recipe, experience,
process, model, drawing, material or record, all claims for damages by way of
past, present and future infringement of any of the rights included above and
all licenses or other rights to use any property or rights of a type described
above.

         "INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

         "INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

         "INVESTMENT PROPERTY" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated, in which Borrower has any interest.

         "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

         "LOAN DOCUMENTS" are, collectively, this Agreement, the Negative Pledge
Agreement, any note executed by Borrower, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

         "MAKE WHOLE PREMIUM" means an amount equal to: (a) two percent (2.00%)
of the outstanding Advances if the prepayment is made on or before the first
anniversary of the Term Loan Option Date; (b) one percent (1.00%) of the
outstanding Advances if the prepayment is made after the first anniversary of
the Term Loan Option Date but on or prior to the second

                                       24

<PAGE>

anniversary of the Term Loan Option Date; and (c) one-half percent (.50%) of
outstanding Advances if the prepayment is made after the second anniversary of
the Term Loan Option Date but prior to the third anniversary of the Term Loan
Option Date.

         "MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.

         "MATERIAL ADVERSE CHANGE" is: (a) a material impairment in the
perfection or priority of Banks' security interest 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 on a consolidated
basis; or (c) a material impairment of the prospect of repayment of any portion
of the Obligations.

         "NEGATIVE PLEDGE AGREEMENT" is that certain Negative Pledge Agreement
dated as of the date hereof by and between Borrower and Bank.

         "OBLIGATIONS" are debts, principal, interest, Bank Expenses, and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.

         "OPERATING DOCUMENTS" shall mean, for any Person, such Person's
formation documents, as currently filed with the Secretary of State of such
Person's state of formation, 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), each of the
foregoing with all current modifications and amendments thereto.

         "OTHER PROPERTY" means (a) the following as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future "commercial tort
claims", "documents", "instruments", "promissory notes", "chattel paper",
"letters of credit", "letter-of-credit rights", "fixtures", "farm products" and
"money"; and (b) all other goods and personal property of every kind, tangible
and intangible, whether or not governed by the Code, but shall not include
Intellectual Property.

         "PATENT" means any of the following now hereafter owned or acquired or
received by Borrower or in which Borrower now holds or hereafter acquires or
receives any right or interest: (a) letters patent and right corresponding
thereto, of the United States or any other country or other foreign
jurisdiction, any registration and recording thereof, and any application for
letters patent, and rights corresponding thereto, of the United States or any
other country or other foreign jurisdiction, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or other foreign jurisdiction; (b) any
reissue, continuation, continuation-in-part or extension thereof; (c) any petty
patent, divisional, and patent of addition; and (d) any patent to issue in any
such application.

                                       25
<PAGE>

         "PERMITTED DISTRIBUTIONS" means:

                  (a) purchases of capital stock from former employees,
consultants and directors pursuant to repurchase agreements or other similar
agreements;

                  (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) payments of dividends or distributions made by any
Subsidiary of Borrower to Borrower or another Subsidiary of Borrower;

                  (e) mandatory dividends provided for under Borrower's
Certificate of Incorporation as in existence as of the Effective Date;

                  (f) exchanges of equity securities of Borrower for other
equity securities of Borrower that do not provide for any mandatory dividend or
redemption prior to the Maturity Date (as defined in the Schedule);

                  (g) other distributions or dividends in respect of Borrower's
capital stock in cash, not in excess of $100,000;

                  (h) purchases of Borrower's capital stock pursuant to a
repurchase plan approved by the Borrower's Board of Directors and in effect on
the Effective Date not to exceed an aggregate amount of $2,000,000;

                  (i) 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; and

                  (j) purchases of fractional shares of capital stock arising
out of stock dividends, splits or combinations or business combinations.

         "PERMITTED INDEBTEDNESS" is:

                  (a) Borrower's indebtedness to Bank under this Agreement or
the other Loan Documents;

                  (b) Indebtedness existing on the Effective Date and shown on
the Collateral Information Certificate;

                  (c) Subordinated Debt;

                  (d) Indebtedness to trade creditors incurred in the ordinary
course of business;

                  (e) capitalized leases and purchase money Indebtedness secured
by Permitted Liens not exceeding $2,000,000;

                                       26

<PAGE>
                  (f) Indebtedness secured by Permitted Liens;

                  (g) Indebtedness under any performance, surety, statutory or
appeal bonds or similar obligations incurred in the ordinary course of business

                  (h) (i) Indebtedness of Borrower to any of its Subsidiaries to
the extent it is Subordinated Debt; (ii) Indebtedness of any Subsidiary of
Borrower to another Subsidiary of Borrower; and (iii) Indebtedness of any
Subsidiary to Borrower to the extent permitted under clause (h) of the
definition of Permitted Investments;

                  (i) Indebtedness consisting of interest rate, currency, or
commodity swap agreements, interest rate cap or collar agreements or
arrangements designed to protect a Person against fluctuations in interest
rates, currency exchange rates, or commodity prices;

                  (j) Guaranties of Permitted Indebtedness;

                  (k) Indebtedness of entities acquired in any permitted merger
or acquisition transaction;

                  (l) other Indebtedness not otherwise permitted by SECTION 7.5
not exceeding $500,000 in the aggregate outstanding at any time; and

                  (m) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (l) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be, 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.

         "PERMITTED INVESTMENTS" are:

                  (a) Investments shown on the Collateral Information
Certificate and existing on the Effective Date;

                  (b) Cash Equivalents;

                  (c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;

                  (d) Investments accepted in connection with Transfers
permitted by SECTION 7.1;

                  (e) 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;

                  (f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to

                                       27

<PAGE>

employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors;

                  (g) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;

                  (h) (i) Investments of Subsidiaries of Borrower in or to
Borrower; (ii) Investments of Subsidiaries of Borrower in or to other
Subsidiaries of Borrower; (iii) Investments of Borrower in or to Subsidiaries
(other than Digital Impact Emarketing UK Ltd) in an amount not to exceed five
percent (5.00%) of Borrower's net assets in any fiscal year so long as no Event
of Default exists or would result therefrom; and (iv) Investments of Borrower in
Digital Impact Emarketing UK Ltd in an amount not to exceed (pound)100,000 in
any month so long as no Event of Default exists or would result therefrom;

                  (i) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;

                  (j) Investments received in satisfaction or partial
satisfaction of obligations owed by financially troubled obligors;

                  (k) Investments acquired as a result of a foreclosure with
respect to any secured Investment;

                  (l) Deposits, prepayment and other credits to suppliers made
in the ordinary course of business not in excess of $50,000;

                  (m) Investments approved pursuant to an investment policy
approved by the Borrower's Board of Directors and attached hereto as Appendix 1;

                  (n) Subject to Section 6.6 hereof, Investments consisting of
deposit and securities accounts;

                  (o) Investments consisting of interest rate, currency, or
commodity swap agreements, interest rate cap or collar agreements or
arrangements which constitute Permitted Indebtedness designed to protect a
Person against fluctuations in interest rates, currency exchange rates, or
commodity prices; and

                  (p) Investments in connection with any transaction that is
otherwise permitted by SECTION 7.4 of this Agreement, including the creation of
any Subsidiary necessary to consummate a transaction that is otherwise permitted
by SECTION 7.4 of this Agreement.

         "PERMITTED LIENS" are:

                                       28

<PAGE>

                  (a) Liens existing on the Effective Date and shown on the
Collateral Information Certificate or arising under this Agreement or other Loan
Documents;

                  (b) Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good faith and
for which Borrower maintains adequate reserves on its Books, if they have no
priority over any of Bank's security interests;

                  (c) purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;

                  (d) leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower's business, if the
leases, subleases, licenses and sublicenses permit granting Bank a security
interest;

                  (e) Liens incurred in the extension, renewal or refinancing of
the indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase;

                  (f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under SECTION 8.3 or 8.6;

                  (g) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts and securities accounts held at such
institutions, provided that Bank has a perfected security interest in the
amounts held in such accounts;

                  (h) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the applicable Person;

                  (i) pledges or deposits in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation, other than any Lien imposed by ERISA;

                  (j) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), contracts for the purchase of
property, leases, statutory 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;

                  (k) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;

                                       29

<PAGE>

                  (l) Liens on assets acquired in transactions otherwise
permitted by SECTION 7.4 of this Agreement, provided that such Liens were not
created in connection with such transactions; and

                  (m) Liens on insurance proceeds securing the payment of
financed insurance premiums.

         "PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.

         "PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not the lowest rate offered by Bank, and, in any event, shall not be less
than four percent (4.00%) per annum.

         "REPAYMENT DATE" means first day of the month following the Term Loan
Option Date.

         "RESPONSIBLE OFFICER" is any of the Chief Executive Officer, President,
Chief Financial Officer, or the Controller of Borrower.

         "REVOLVING MATURITY DATE" is the date that is 364 days from the
Effective Date.

         "REVOLVING PERIOD" means the period from the Effective Date through,
and including, the Revolving Maturity Date.

         "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
among Bank, Borrower and the subordinated creditor), on terms reasonably
acceptable to Bank.

         "SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person. Without further attribution, "Subsidiary" means a Subsidiary of
Borrower.

         "SUBLIMIT UTILIZATION AMOUNT" means the sum of (a) all amounts for
services utilized under the Cash Management Services Sublimit, (b) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), and (c) the FX Reserve.

         "TERM LOAN OPTION" means Borrower's option to have up to $5,000,000 of
the then-outstanding principal amount of the Advances be repaid pursuant to the
terms of Term Loan Option One or Term Loan Option Two.

         "TERM LOAN OPTION DATE" is the calendar day following the Revolving
Maturity Date.

         "TERM LOAN MATURITY DATE" means the date that is thirty-five (35)
months from the Repayment Date.

                                       30

<PAGE>

         "TRADEMARK" means any of the following now or hereafter owned or
acquired or received by Borrower or in which Borrower now holds or hereafter
acquires or receives any right or interest: (a) any trademark, trade name,
corporate name, business name, trade style, service mark, logo, other source or
business identifier, print or label on which any of the foregoing have appeared
or appear, design or other general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and any
applications in connection therewith, including registration, recording and
application in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
other foreign jurisdiction and (b) any reissue, extension or renewal of any of
the foregoing.

         "TREASURY RATE" is the Treasury Yield Percentage.

         "TREASURY YIELD PERCENTAGE" is the average weekly yield (of the week
ending figures) in the most recent Federal Reserve Statistical Release on
actively traded U.S. Treasury obligations of similar maturity to the principal
being repaid or if a Statistical Release is not published, the arithmetic
average (to the nearest .01%) of the per annum yields to maturity for each
Business Day during the week (ending at least two Business Days before the
determination is made) of all actively traded marketable U.S. Treasury fixed
interest rate securities with a constant maturity or, or not more than 30 days
longer or shorter than the average life of the principal and interest payments
that are being prepaid (excluding securities that can be surrendered at face
value to pay Federal estate tax, or which provide for tax benefits to the
holder.)

                            [Signature page follows.]

                                       31

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

BORROWER                             DIGITAL IMPACT, INC.

                                     By: /s/ DAVID OPPENHEIMER
                                     Name: David Oppenheimer
                                     Title: Senior Vice-President, Finance and
                                            Chief Financial Officer

BANK                                 SILICON VALLEY BANK

                                     By: /s/ MARIA FISHER LEAF
                                     Name: Maria Fisher Leaf
                                     Title: Senior Vice President
                                     Effective Date: October 1, 2004

                                       32

<PAGE>

                                    EXHIBIT A

         "COLLATERAL" means of all of Borrower's right, title and interest in
and to the following whether owned now or hereafter acquired or arising, and
wherever located: all its Accounts; all its Inventory; all its Equipment; all
its Deposit Accounts; all its General Intangibles (not including its
Intellectual Property); all its Investment Property; all its Other Property; and
any and all claims, rights and interests in any of the foregoing, and all
guaranties and security for any of the foregoing, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, all of the foregoing,
and Borrower's Books relating to any of the foregoing.

         Notwithstanding the foregoing, the Collateral shall include all
Accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of Borrower's Intellectual Property. To the
extent a court of competent jurisdiction holds that a security interest in any
Intellectual Property is necessary to have a security interest in any Accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of such Intellectual Property, then the Collateral shall,
effective as of the Effective Date, include the Intellectual Property, to the
extent necessary to permit perfection of Bank's security interest in such
Accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.

         Notwithstanding the foregoing, the Collateral shall not include (a) to
the extent the pledge thereof would result in increased United States income tax
liability to Borrower or any Subsidiary, more than 65% of the issued and
outstanding voting capital stock of any Subsidiary of Borrower that is
incorporated or organized in a jurisdiction other than the United States or any
state or territory thereof or the District of Columbia, and (b) the following
accounts maintained by Borrower with Comerica Bank: account numbers
9397-50000009924, 9397- 50000001012, 9397-50000000998, 9397-50000972, 11701, and
11501.

<PAGE>

                                    EXHIBIT B

LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON PST

FAX TO: _________________

CLIENT NAME: __________________________________          DATE: _________________

- LOAN PAYMENT:

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

Principal $_________________________ and/or Interest $ _________________________

         All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

AUTHORIZED SIGNATURE: _______________________________  Phone Number: ___________

- LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.

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

Amount of Advance $ ___________________________

         All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

AUTHORIZED SIGNATURE: ______________________________ Phone Number: _____________

- OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 12:00 noon, PST

Beneficiary Name: _______________________       Amount of Wire: $_______________

Beneficiary Bank: _______________________       Account Number: ________________

City and State: _________________________

Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __
Beneficiary Bank Code (Swift, Sort, Chip, etc.): _______________________________
                                                  (FOR INTERNATIONAL WIRE ONLY)

Intermediary Bank: ______________________________    Transit (ABA) #: __________

For Further Credit to: _________________________________________________________

Special Instruction: ___________________________________________________________

<PAGE>

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

Authorized Signature: _______________  2nd Signature (If Required): ____________

Print Name/Title: ___________________  Print Name/Title: _______________________

Telephone # _________________________  Telephone # _____________________________

<PAGE>

                                    EXHIBIT C

                             COMPLIANCE CERTIFICATE

TO:               SILICON VALLEY BANK
FROM:             DIGITAL IMPACT, INC.

         The undersigned Responsible Officer of Digital Impact, Inc.
("BORROWER") certifies that under the terms and conditions of the Loan and
Security Agreement dated as of the Effective Date between Borrower and Bank (as
amended, restated, or otherwise modified from time to time, the "AGREEMENT"),
(i) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects on
this date, except those representations and warranties expressly referring to
another date which shall be true and correct in all material respects as of such
date. In addition, the undersigned Responsible Officer certifies that Borrower
(x) has complied with Section 6.4 of the Agreement with respect to payment of
taxes of Borrower and its Subsidiaries and (y) DOES NOT HAVE ANY LEGAL ACTIONS
PENDING OR THREATENED IN WRITING AGAINST BORROWER OR ANY OF ITS SUBSIDIARIES
WHICH BORROWER HAS NOT PREVIOUSLY NOTIFIED IN WRITING TO BANK PURSUANT TO
SECTION 6.2 OF THE AGREEMENT. Attached are the required financial reports
supporting the certification. 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.

PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMNS.

<TABLE>
<CAPTION>
      REPORTING COVENANT                           REQUIRED                                 COMPLIES
      ------------------                           --------                                 --------
<S>                                         <C>                                            <C>     <C>
Monthly financial statements + CC           Monthly, within 30 days                        Yes      No

Annual financial statements + CC            Annually, within 90 days                       Yes      No

Notice of 10Q, 10K filings                  Within 5 days of filing                        Yes      No
</TABLE>

<TABLE>
<CAPTION>
FINANCIAL
COVENANTS                      REQUIRED                                           ACTUAL                COMPLIES
---------                      --------                                           ------                --------
<S>                            <C>                                              <C>                   <C>        <C>
Adjusted Quick                 1.50:1.00                                        ___ :1.00             Yes        No
Ratio

                                                                                                      Yes        No
</TABLE>

<TABLE>
<CAPTION>
Minimum Quarterly        Period
Revenue                  ending            Minimum Quarterly Revenue            $________
                         ------            -------------------------
<S>                      <C>             <C>              <C>                   <C>
                                               A               B

                         12/31/04        $7,200,000       $ 8,300,000

                         3/31/05         $7,800,000       $ 9,000,000

                         6/30/05
                         and             $8,000,000       $10,000,000
                         thereafter
</TABLE>

(Attach summary of any litigation not previously disclosed that must be
disclosed pursuant to Section 6.2.)

<PAGE>

Sincerely,

DIGITAL IMPACT, INC.

By: ____________________________
Name: __________________________
Title: ______________________

          BANK USE ONLY

Received by: ____________________
              AUTHORIZED SIGNER

Date: ___________________________

Verified: _______________________
              AUTHORIZED SIGNER

Date: ___________________________

Compliance Status:      Yes      No

<PAGE>

                                    EXHIBIT D

                                 ELECTION NOTICE

                                                            Date: ______________

TO:      SILICON VALLEY BANK
         3003 Tasman Drive
         Santa Clara, CA 95054
         Attention: Corporate Services Department

RE:      Loan and Security Agreement dated the Effective Date (as amended,
         modified, supplemented or restated from time to time, the "Loan
         Agreement"), by and between DIGITAL IMPACT, INC. as the borrower
         thereunder, and SILICON VALLEY BANK, as the lender (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 2.5(a) of the Loan Agreement, of its election of the Term Loan
Option.

         1. As of the Term Loan Option Date, the aggregate amount of the
outstanding Advances requested to be repaid pursuant to the Term Loan Option is
$_____________ (collectively, the "TERM LOAN OPTION ADVANCE").

         2. The Term Loan Option Advance shall be repaid under Term Loan Option
[One] [Two]*.

         3. The undersigned hereby certifies that, on the date hereof and on the
Term Loan Option Date, 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 those representations and
warranties expressly referring to another date are true, accurate and complete
in all material respects as of such date; and provided, further, that the
representations and warranties set forth in SECTION 5 of the Loan Agreement
shall be deemed to be made with respect to the financial statements most
recently delivered to the Bank pursuant to SECTION 6.2 of the Loan Agreement.

         BORROWER                      DIGITAL IMPACT, INC.

                                       By: _____________________________________
                                       Name: ___________________________________
                                       Title: __________________________________

______________________________
* Select desired option.exv4w2

 

Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) dated December 9,
2003 is by and among (i) Glenbrook Group, LLC, a Delaware limited liability
company (the “Buyer”) and (ii) Northgate Innovations, Inc., a California
corporation (the “Seller” and interchangeably, the “Company” and, together with
Buyer, the “Parties” and each individually a “Party”).

RECITALS:

     A. The Parties have entered into (i) that certain Stock Purchase Agreement
dated December 9, 2003, between Buyer and the Company (the “Company Stock
Purchase Agreement”) pursuant to which the Company will issue (a) 4 million
shares of the Company’s Common Stock to Buyer and (b) the Warrants to J & M
Interests, LLC, a Delaware limited liability company (“J & M Interests”) in
exchange for the consideration specified therein, and (ii) that certain Stock
Purchase Agreement dated December 9, 2003, by and among the Buyer and Andy Teng
(the “CEO Stock Purchase Agreement”) pursuant to which Buyer will purchase from
Andy Teng 7.6 million shares of the Company’s Common Stock.

     B. The Company Stock Purchase Agreement provides that the Parties will
enter into this Registration Rights Agreement with respect to the Registrable
Securities.

     C. This Registration Rights Agreement provides for certain rights and
restrictions applicable to the Registrable Securities to be purchased by and
issued to Buyer and J & M Interests pursuant to the Stock Purchase Agreements.
It will be become effective upon completion of the Closing.

     D. Undefined capitalized terms herein are defined in the Stock Purchase
Agreements.

AGREEMENT:

     NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants contained herein and in the Stock Purchase Agreements, each Party
agrees as follows:

ARTICLE 1.

DEFINITIONS

     For purposes of this Agreement:

     “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such Person. For the purposes of this definition, “Control,” when used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms “Affiliated,” “Controlling” and “Controlled” have
meanings correlative to the foregoing.

 

 

     “Blue Sky Application” is defined in Section 5.1 of this Agreement.

     “Business Day” means a day other than (i) a Saturday or Sunday, and (ii)
any other day on which banks in the State of New York are closed or authorized
by law to close.

     “Buyer” is defined in the preamble to this Agreement.

     “CEO Stock Purchase Agreement” is defined in the recitals to this
Agreement.

     “Common Stock” means the Company’s common stock, par value $.03 per share.

     “Company Stock Purchase Agreement” is defined in the recitals to this
Agreement.

     “Delay Notice” is defined in Section 3.1(l) of this Agreement.

     “Holders” is defined in Section 2.4 of this Agreement.

     “Material Development Condition” is defined in Section 3.1(l) of this
Agreement.

     “Maximum Offering Size” is defined in Section 2.3.

     “Prospectus” means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus.

     “Register,” “registered” and “registration” refer to a registration made
by preparing and filing a Registration Statement or similar document in
compliance with the Securities Act (as defined below), and the declaration or
ordering of effectiveness of such Registration Statement or document.

     “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares,
(iii) any Common Stock obtained by Buyer or J & M Interests, LLC after the
allocation and conversion of any of the Preferred Stock held in the Lan Plus,
Inc. Employee Stock Option Plan (the “ESOP”) in connection with termination
and/or foreclosure proceedings against the ESOP and (iv) any other securities
issues in exchange for the foregoing securities by virtue of any stock split,
combination, stock dividend, merger, consolidation or other similar event.

     “Registration Statement” means any registration statement of the Company
filed with the SEC on the appropriate form pursuant to the Securities Act which
covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.

     “Shares” means the shares of Common Stock purchased pursuant to the Stock
Purchase Agreements.

2

 

     “SEC” means the U.S. Securities and Exchange Commission.

     “Stock Purchase Agreements” means (i) the Company Stock Purchase Agreement
and (ii) the CEO Stock Purchase Agreement.

     “Warrants” means the 2,500,000 warrants to purchase an equal number of
shares of the Company’s Common Stock, bearing an exercise price of $.50 per
share and a term of five (5) years, issuable to J & M Interests pursuant to the
Company Stock Purchase Agreement.

     “Warrant Shares” means the shares of the Company’s Common Stock issuable
upon the exercise of the Warrants.

ARTICLE 2.

REGISTRATION RIGHTS

     2.1 Registration Statements.

     Promptly following the Closing (but not later than one hundred twenty
(120) days thereafter), the Company shall prepare and file with the SEC a
Registration Statement on Form S-1 covering the resale of the Registrable
Securities. Such Registration Statement also shall cover, to the extent
allowable under the Securities Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. The Company shall not permit any
securities other than the Registrable Securities to be included in such
Registration Statement. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3.1 hereof to the Buyer and its
counsel prior to its filing or other submission. The Company shall use its
Best Efforts to cause the Registration Statement to be filed pursuant to this
Section 2.1 to be declared effective by the SEC not later than the date that is
165 days after the Closing Date or 195 days following the Closing Date if the
Registration Statement is subject to review by the Securities and Exchange
Commission Staff. The Company shall keep the Registration Statement filed
pursuant to this Section 2.1 effective and current under the Securities Act
until the date that is two (2) years after the Closing Date, unless a
replacement Registration Statement filed pursuant to Section 2.2 hereof shall
have been declared effective by the SEC prior to the expiration of such two (2)
year period, in which case the time provisions set forth in Section 2.2 hereof
shall control, provided, however, that such two (2) year period shall be
extended until the date on which all of the Registrable Securities are eligible
for resale pursuant to Rule 144(k) under the Securities Act.

     2.2 Registration on Form S-3.

     Promptly after such time as the Company is eligible to use Form S-3 (but
not later than fifteen (15) days after becoming eligible), irrespective of any
prior filing of any Registration Statement in respect of any Registrable
Securities, the Company shall prepare and file with the SEC a replacement
Registration Statement on Form S-3 (or, if Form S-3 is not then available to
the Company, on such form of registration statement as is then available to
effect a registration for resale of the Registrable Securities, subject to the
Buyer’s prior written consent), covering the

3

 

resale of the Registrable Securities. Such Registration Statement also shall
cover, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities. The
Company may permit securities other than the Registrable Securities to be
included in such Registration Statement; provided, that the inclusion of such
securities in such Registration Statement shall not affect or limit the number
of Registrable Securities included in such Registration Statement. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3.1 hereof to the Buyer and its counsel prior to its
filing or other submission. The Company shall use its Best Efforts to cause
the Registration Statement to be filed pursuant to this Section 2.2 to be
declared effective by the SEC not later than the earlier of: (A) the date that
is seventy five (75) days after the date on which the Company became eligible
to use Form S-3; and (B) sixty (60) days after the Registration Statement is
filed with the SEC. The Company shall keep the Registration Statement filed
pursuant to this Section 2.2 effective and current under the Securities Act
until the date on which all of the Registrable Securities are eligible for
resale pursuant to Rule 144(k) of the Securities Act.

     2.3 Incidental Registration.

     (a) If the Company at any time proposes to register any of its securities
under the 1933 Act for sale to the public pursuant to an underwritten offering,
whether for its own account or for the account of other stockholders of the
Company or both, each such time it will promptly give written notice to all
holders of the Registrable Securities (whether or not such Registrable
Securities are currently registered under the 1933 Act) of its intention so to
do. Upon the written request of any such holder, which is received by the
Company within fifteen (15) days after the giving of any such notice by the
Company, to register and include any or all of its Registrable Securities
(whether or not currently registered under the 1933 Act) in such underwritten
offering, the Company will use its reasonable commercial efforts to cause such
Registrable Securities as to which registration and inclusion shall have been
so requested to be included in such registration statement. The right of any
holder of such Registrable Securities to include Registrable Securities in such
registration shall be conditioned upon such holder’s participation in such
underwriting to the extent provided herein. The Company may abandon or
withdraw any such registration at any time without any liability or obligation
to any holder of Registrable Securities.

     (b) Notwithstanding any other provision of this Section 2.3, if the
managing underwriter or underwriters determine that the number of shares to be
included in such registration (including any securities that the Company, the
holders of Registrable Securities and any other stockholders with registration
rights (other than Registrable Securities) exceeds the largest number of shares
that can be sold without having an adverse effect on such offering (the
“Maximum Offering Size”), the Company will include in such registration, in the
following priority, up to the Maximum Offering Size:

     (w) first, that number of the securities held by any
stockholders exercising a demand registration pursuant to a
written agreement between such stockholders and the Company,
if any, as would not cause the offering to exceed the Maximum
Offering Size (allocated, if necessary for the

4

 

offering not to exceed the Maximum Offering Size, pro
rata among such holders on the basis of the number of shares
of registrable securities so requested to be included in such
registration); and

     (x) second, if the Maximum Offering Size has not been
exceeded, that number of securities proposed to be registered
for the account of the Company; and

     (y) third, if the Maximum Offering Size has not been
exceeded, all Registrable Securities requested to be included
in such registration by the holders of Registrable Securities
and any other securities proposed to be registered for the
account of any person with incidental registration rights
pursuant to a written agreement executed prior to the delivery
of the notice set forth in Section 2.3(a) hereof (allocated, if
necessary for the offering not to exceed the Maximum Offering
Size, pro rata among such holders on the basis of the number of
            shares of Registrable Securities and other securities so
requested to be included in such registration); and

     (z) fourth, if the Maximum Offering Size has not been
exceeded, any securities proposed to be registered for the
account of any other persons with such priorities among them as
the Company shall determine.

     2.4 Expenses.

     The Company will pay all expenses associated with each registration under
this Agreement, including, without limitation, filing and printing fees,
counsel and accounting fees and expenses, costs associated with clearing the
Registrable Securities for sale under applicable state securities laws, listing
fees and the reasonable expenses of the Buyer and other holders of Registrable
Securities (collectively, the “Holders”) in connection with the registration
including, without limitation, the reasonable attorney fees of one counsel to
the Holders, but excluding discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
with respect to the Registrable Securities being sold.

     2.5 Failure to Comply.

          If a Registration Statement: (i) is not filed within the time periods set
forth in any of Section 2.1 — 2.2 hereof, as the case may be; (ii) is not
effective by the time set forth in any of Section 2.1 — 2.2 hereof, as the case
may be; or (iii) is suspended or otherwise is not effective or current for any
reason for at least thirty (30) days during any period that it is to be
effective or current as provided in any of Section 2.1 — 2.2 and Section 3.1
hereof, as the case may be (any such occurrence described in the immediately
preceding clauses (i), (ii) or (iii), a “Registration Default”), the Company
will make payments to each Holder as partial liquidated damages for the minimum
amount of damages to the Holders by reason thereof, and not as a penalty, at
the rate of $0.05 per share of Common Stock held by such Holder per month, for
each calendar month during which the Registration Default continues (pro rated
for any period less than 30 days). Each such payment shall be due and payable
within five (5) days after the end of each calendar month during the
Registration Default until the termination of such Registration Default and

5

 

within five (5) days after such termination. Such payments shall be in
partial compensation to each Holder, and shall not constitute such Holder’s
exclusive remedy for such events. The Registration Default shall terminate
upon (x) the filing of the Registration Statement in the case of clause (i) of
this Section 2.5, (y) the effective date of the Registration Statement in the
case of clause (ii) of this Section 2.5, and (z) the ability of each Holder to
effect sales pursuant to the Registration Statement in the case of clause (iii)
of this Section 2.5. The amounts payable as partial liquidated damages
pursuant to this paragraph shall be payable in lawful money of the United
States. Amounts payable as partial liquidated damages to each Holder hereunder
shall cease when such Holder no longer holds the Registrable Securities.

     2.6 Underwritten Offering.

     If any of the Registrable Securities are to be sold in an underwritten
offering at the request of the Holders, the investment banker that will
administer the offering will be selected by the Company with the consent of the
holders of a majority of the Registrable Securities included in such offering,
which consent shall not be unreasonably withheld. No Holder may participate in
any underwritten offering hereunder unless such Holder: (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements; and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such arrangements.

ARTICLE 3.

COMPANY OBLIGATIONS

     3.1 Company Obligations

     The Company will use its Best Efforts to effect the registration of the
Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, as expeditiously as possible:

     (a) use its Best Efforts to cause such Registration Statement to
become effective and to remain continuously effective for the periods
provided in Section 2.1 hereof;

     (b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be
necessary to keep the Registration Statement effective for the period
specified in Section 2.1 hereof and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the distribution of
all of the Registrable Securities covered thereby;

     (c) provide copies to and permit counsel designated by the Holders

to review each Registration Statement and all amendments and supplements
thereto no fewer than seven (7) days prior to their filing with the SEC
and not file any document to which such counsel reasonably objects;

6

 

     (d) furnish to the Holders and their designated legal counsel: (i)
promptly after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company (but not later than two (2) Business
Days after the filing date, receipt date or sending date, as the case may
be) one (1) copy of any Registration Statement and any amendment thereto,
each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought
confidential treatment); and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements
thereto and such other documents as each Buyer may reasonably request in
order to facilitate the disposition of the Registrable Securities owned
by such Buyer that are covered by the related Registration Statement;

     (e) in the event of an underwritten offering, the Company shall
enter into and perform its reasonable obligations under an underwriting
agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the
underwriter of such offering;

     (f) if required by the underwriter, or if any Holder is described in
the Registration Statement as an underwriter, the Company shall furnish,
on the effective date of the Registration Statement (except with respect
to clause 3.1(f)(i) below) and on the date that Registrable Securities
are delivered to an underwriter, if any, for sale in connection with the
Registration Statement (including any Holder deemed to be an
underwriter): (i) in the case of an underwritten offering, an opinion,
dated as of the closing date of the sale of Registrable Securities to the
underwriters, from independent legal counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as
is customarily given in an underwritten public offering, addressed to the
underwriters and the Holders participating in such underwritten offering
and (ii) a letter, dated as of the effective date of such Registration
Statement and confirmed as of the applicable dates described above, from
the Company’s independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters (including any Holder deemed to be an underwriter);

     (g) use its Best Efforts to: (i) prevent the issuance of any stop
order or other suspension of effectiveness and; (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible
moment;

     (h) prior to any public offering of Registrable Securities, use its
Best Efforts to register or qualify or cooperate with the Holders and
their counsel in connection with the registration or qualification of
such Registrable Securities for offer and sale under the securities or
blue sky laws of such jurisdictions requested by the Holders and do any
and all other commercially reasonable acts or things necessary or
advisable to enable the distribution in such jurisdictions of the
Registrable Securities covered by the Registration Statement; and provide
evidence of any such action so taken to such Holder promptly upon such
filing; and continue such qualification at all times through the resale
of all

7

 

Registrable Securities; provided, however, that the Company will not
be required to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (h),
(y) subject itself to general taxation in any such jurisdiction or (z)
file a general consent to service of process in any such jurisdiction.

     (i) use its Best Efforts to cause all Registrable Securities covered
by a Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar securities
issued by the Company are then listed;

     (j) immediately notify the Holders, at any time when a Prospectus
relating to Registrable Securities is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event
as a result of which, the Prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing or is no longer current, and at the request
of any such Holder, as promptly as reasonably practicable prepare and
furnish to such Holder a reasonable number of copies of a supplement to
or an amendment of such Prospectus as may be necessary such that, as
thereafter delivered to the purchasers of such Registrable Securities,
such Prospectus shall (i) not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and (ii) be current; and

     (k) otherwise use its Best Efforts to comply in all material
respects with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act, take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders, as soon
as reasonably practicable, but not later than the date on which such
filings are made with the SEC, copies of the Company’s filings under the
Securities Act and Exchange Act made with the SEC.

     (l) with respect to any Registration Statement filed or to be filed
pursuant to Section 2.1 above, if the Board of Directors of the Company
determines that, in its reasonable good faith judgment, it would (because
of the existence of, or in reasonable anticipation of, any acquisition or
corporate reorganization or other transaction, financing activity, or
other development involving the Company, or the unavailability for
reasons beyond the Company’s control of any required financial statements
related to such acquisition or corporate reorganization or any other
event or condition of similar significance to the Company) be materially
disadvantageous (a “Material Development Condition”) to the Company to
file such Registration Statement with the SEC, or to amend or supplement
a Registration Statement that has been filed with the SEC, then the
Company shall, notwithstanding any other provisions of this Agreement, be
entitled, upon the giving to the Holders of a certificate signed by an
executive officer of the Company stating that in the reasonable good
faith judgment of the Board of Directors that a Material Development
Condition has occurred (a “Delay Notice”), (i) to cause sales of
Registrable Securities by the Holders pursuant to such Registration
Statement to cease or (ii) in the event no such Registration Statement
has yet been filed or declared effective, to

8

 

delay the filing of any such Registration Statement until, in the
reasonable good faith judgment of the Board of Directors, such Material
Development Condition no longer exists (notice of which the Company shall
promptly deliver to the Holders of the Registrable Securities).
Notwithstanding the foregoing provisions of this Section 3.1(l): (1) in
no event may such cessation or delay be, for each such Registration
Statement, for a period of more than ninety (90) consecutive days in any
twelve-month period from the giving of its Delay Notice to the Holders
with respect to such Material Development Condition, as above provided;
and (2) in the event a Registration Statement is filed and subsequently
withdrawn or if the Holders are required to cease using an effective
Registration Statement, by reason of any existing or anticipated Material
Development Condition as provided above, the Company shall cause a new
Registration Statement or an amendment or supplement to an effective
Registration Statement covering the Registrable Securities to be filed
with the SEC as soon as practicable, but in no event more than thirty
(30) days, after such Material Development Condition ceases to exist or,
if sooner, as soon as practicable after the expiration of such ninety
(90) day period.

     3.2 Due Diligence Review; Information.

     (a) The Company shall make available, during normal business hours
and on reasonable notice, for inspection and review by the Holders,
advisors to and representatives of the Holders (who may or may not be
affiliated with the Holders and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of Registrable
Securities on behalf of the Holders pursuant to a Registration Statement
or amendments or supplements thereto or any blue sky, NASD or other
filing, all financial and other records, all SEC Filings (as defined in
the Stock Purchase Agreements) and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company’s officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the
Holders or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole
purpose of enabling the Holders and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct
initial and ongoing due diligence with respect to the Company and the
accuracy of such Registration Statement.

     (b) The Company shall not disclose material nonpublic information to
the Holders, or to advisors to or representatives of the Holders, unless
prior to disclosure of such information the Company identifies such
information as being material nonpublic information and provides the
Holders, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review. If
the Holders decide to accept such material nonpublic information, they
shall not receive such information until they shall have entered into a
confidentiality agreement with the Company, in form and substance
satisfactory to the Company.

9

 

ARTICLE 4.

BUYERS OBLIGATIONS

     4.1 Obligations of the Holder.

     (a) Each Holder shall furnish in writing to the Company such
information regarding itself, the Registrable Securities held by it, the
intended method of disposition of the Registrable Securities held by it
and such other information as may be required to be disclosed by it under
the Securities Act, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request. At least ten (10) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall
notify each Holder of the information the Company requires from such
Holder if such Holder elects to have any of the Registrable Securities
included in the Registration Statement. A Holder shall provide such
information to the Company at least five (5) Business Days prior to the
first anticipated filing date of such Registration Statement if such
Holder elects to have any of the Registrable Securities included in such
Registration Statement.

     (b) Each Holder, by its acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless such Buyer has notified the Company in
writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

     (c) In the event of an underwritten offering which includes
Registrable Securities of the Holders, each such Holder agrees to enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities.

     (d) Each Holder agrees that, upon receipt of any Delay Notice or any
notice from the Company of the happening of an event pursuant to Section
3.1(j) hereof, such Holder will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities, until the Holder’s receipt of the copies of
the supplemented or amended Prospectus filed with the SEC and declared
effective and, if so directed by the Company, the Holder shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to
the Company a certificate of destruction) all copies in the Holder’s
possession of the Prospectus covering the Registrable Securities current
at the time of receipt of such notice.

     (e) No Holder may participate in any third party underwritten
registration hereunder unless it: (i) agrees to sell the Registrable
Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company; (ii) completes and
executes all questionnaires, powers of attorney, custody agreements,
indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; and (iii)
agrees to pay its

10

 

pro rata share of all underwriting discounts and commissions.
Notwithstanding the foregoing, no Holder shall be required to make any
representations to such underwriter, other than those with respect to
itself and the Registrable Securities owned by it, including its right to
sell the Registrable Securities, and any indemnification in favor of the
underwriter by the Holders shall be several and not joint and limited in
the case of any Holder, to the proceeds received by such Holder from the
sale of its Registrable Securities. The scope of any such
indemnification in favor of an underwriter shall be limited to the same
extent as the indemnity provided in Section 5.2 hereof.

ARTICLE 5.

INDEMNIFICATION

     5.1 Indemnification by the Company.

     The Company will, to the fullest extent permitted by law, indemnify and
hold harmless each Holder and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who controls
such Holder (within the meaning of the Securities Act), against any losses,
claims, damages, liabilities and expenses (including reasonable attorney fees),
joint or several, to which such Holder, officer, director, member, or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof; (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a “Blue Sky Application”); (iii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading; (iv) any violation by
the Company or its agents of any rule or regulation promulgated under the
Securities Act applicable to the Company or its agents and relating to action
or inaction required of the Company in connection with such registration; or
(v) any failure to register or qualify the Registrable Securities included in
any such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on a Holder’s behalf (the undertaking of any
underwriter chosen by the Company being attributed to the Company) and will
reimburse such Holder, and each such officer, director or member and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by such Holder or any such controlling person in
writing specifically for use in such Registration Statement or Prospectus.
This Section 5.1 shall not inure to the benefit of any Holder from whom the
person asserting any such losses, claims, damages or liabilities purchased
Registrable Securities if a copy of the Prospectus (as then

11

 

amended or supplemented and furnished by the Company to the Holder) was not
sent or given by or on behalf of such Holder to such person, if such is
required by law, within the time required by the Securities Act and if such
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.

     5.2 Indemnification by the Holders.

     In connection with any registration pursuant to the terms of this
Agreement, each Holder will furnish to the Company in writing such information
as the Company reasonably requests concerning the Holders or the proposed
manner of distribution for use in connection with any Registration Statement or
Prospectus and agrees, severally but not jointly, to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its directors,
officers, employees, stockholders and each person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses (including reasonable attorney fees) resulting from
any untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary prospectus or amendment or
supplement thereto or necessary to make the statements therein not misleading,
to the extent, but only to the extent that such untrue statement or omission is
contained in any information furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or Prospectus or
amendment or supplement thereto. In no event shall the liability of a Holder
be greater in amount than the dollar amount of the proceeds (net of all
expenses paid by such Holder and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by such Holder upon the
sale of the Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.

     5.3 Conduct of Indemnification Proceedings.

     Any person entitled to indemnification hereunder shall: (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification; and (ii) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party;
provided that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in (but not control) the
defense of such claim, but the fees and expenses of such counsel shall be at
the expense of such person unless: (A) the indemnifying party has agreed to pay
such fees or expenses; or (B) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably satisfactory to
such person; or (C) in the reasonable judgment of any such person, based upon
written advice of its counsel, a conflict of interest exists between such
person and the indemnifying party with respect to such claims (in which case,
if the person notifies the indemnifying party in writing that such person
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such person); provided, further, that the indemnifying party shall
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party; and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the

12

 

indemnifying party in the defense of any such claim or litigation. No
indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. The indemnifying party will not be subject to any
liability for any settlement made without its consent.

     5.4 Contribution.

     If for any reason the indemnification provided for in Sections 5.1 – 5.2
of this Agreement is unavailable to an indemnified party or insufficient to
hold it harmless, other than as expressly specified therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation.
In no event shall the contribution obligation of a holder of Registrable
Securities be greater in amount than the dollar amount of the proceeds (net of
all expenses paid by such holder and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

ARTICLE 6.

MISCELLANEOUS

     6.1 Amendments and Waivers.

     Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and holders of at least 70% of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities, each future holder of all such
securities, and the Company.

     6.2 Notices.

     All notices and other communications provided for or permitted hereunder
shall be made as set forth in Section 10.5 of the Stock Purchase Agreements.

     6.3 Assignments and Transfers by Holders.

     The provisions of this Agreement shall be binding upon and inure to the
benefit of the Buyers and their respective successors and assigns. The
registration rights granted to the Holders pursuant to this Agreement may not
be transferred without the prior written consent of Buyer; provided that such
registration rights may be transferred, in whole or in part, (i) by the Buyer
in connection with any distribution of Registrable Securities to an equity
owner of Buyer,

13

 

(ii) to a partner or other equity owner (or their partners, shareholders,
or members) in or an Affiliate of one of more Holder(s) in connection with a
transfer of an equity interest in Buyer to such Person.

     6.4 Assignments and Transfers by the Company.

     This Agreement may not be assigned by the Company (whether by operation of
law or otherwise) without the prior written consent of the holders of at least
70% of the Registrable Securities.

     6.5 Benefits of the Agreement.

     The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

     6.9 Further Assurances.

     The parties shall execute and deliver all such further instruments and
documents and take all such other actions as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the fulfillment
of the agreements herein contained.

     6.10 Entire Agreement.

     This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

     6.11 Specific Performance.

     Each Party acknowledges and agrees that the other Parties would be damaged
irreparably if any provision of this Agreement is not performed in accordance
with its specific terms or is otherwise Breached. Accordingly, each Party
agrees that the other Parties will be entitled to an injunction or injunctions
to prevent Breaches of the provisions of this Agreement and to enforce
specifically this Agreement and its terms and provisions in any Action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, subject to Sections 6.12 and
6.16, in addition to any other remedy to which they may be entitled, at Law or
in equity.

     6.12 Submission to Jurisdiction; No Jury Trial.

     (a) Submission to Jurisdiction. Each Party submits to the
jurisdiction of any state or federal court sitting in the State of
California in any Action arising out of or relating to this Agreement and agrees that all claims in respect of
the Action may be heard and determined in any such court. Each Party
also agrees not to bring any Action

14

 

arising out of or relating to this
Agreement in any other court. Each Party agrees that a final judgment in
any Action so brought will be conclusive and may be enforced by Action on
the judgment or in any other manner provided at Law or in equity. Each
Party waives any defense of inconvenient forum to the maintenance of any
Action so brought and waives any bond, surety, or other security that
might be required of any other Party with respect thereto.

     (b) Waiver of Jury Trial. THE PARTIES EACH HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR
ANY DEALINGS AMONG THEM RELATING TO THE TRANSACTIONS. The scope of this
waiver is intended to be all encompassing of any and all Actions that may
be filed in any court and that relate to the subject matter of the
Transactions, including, Contract claims, tort claims, breach of duty
claims, and all other common Law and statutory claims. The Parties each
acknowledge that this waiver is a material inducement to enter into a
business relationship and that they will continue to rely on the waiver
in their related future dealings. Each Party further represents and
warrants that it has reviewed this waiver with its legal counsel, and
that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. NOTWITHSTANDING ANYTHING TO
THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT
BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of an
Action, this Agreement may be filed as a written consent to trial by a
court.

     6.13 Time.

     Time is of the essence in the performance of this Agreement.

     6.14 Counterparts.

     This Agreement may be executed in two or more counterparts, each of which
will be deemed an original but all of which together will constitute one and
the same instrument.

     6.15 Headings.

     The article and section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.

     6.16 Governing Law.

     This Agreement and the performance of the Transactions and obligations of
the Parties hereunder will be governed by and construed in accordance with the
laws of the State of California, without giving effect to any choice of Law
principles.

15

 

     6.17 Severability.

     The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision
of this Agreement, as applied to any Party or to any circumstance, is adjudged
by a Governmental Body, arbitrator, or mediator not to be enforceable in
accordance with its terms, the Parties agree that the Governmental Body,
arbitrator, or mediator making such determination will have the power to modify
the provision in a manner consistent with its objectives such that it is
enforceable, and/or to delete specific words or phrases, and in its reduced
form, such provision will then be enforceable and will be enforced.

     6.18 Construction.

     The Parties have participated jointly in the negotiation and drafting of
this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring any
Party because of the authorship of any provision of this Agreement. Any
reference to any federal, state, local, or foreign Law will be deemed also to
refer to Law as amended and all rules and regulations promulgated thereunder,
unless the context requires otherwise. words “include,” “includes,” and
“including” will be deemed to be followed by “without limitation.” Pronouns in
masculine, feminine, and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to include the plural
and vice versa, unless the context otherwise requires. The words “this
Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The Parties intend that each representation,
warranty, and covenant contained herein will have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached will not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.

     6.19 Incorporation of Exhibits, Annexes, and Schedules.

     The Exhibits, Annexes, Schedules, and other attachments identified in this
Agreement are incorporated herein by reference and made a part hereof.

     6.20 Remedies.

     Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and in addition to any other rights,
obligations, or remedies otherwise available at Law or in equity. Except as
expressly provided herein, nothing herein will be considered an election of
remedies.

     6.21 Electronic Signatures.

     (a) Notwithstanding the Electronic Signatures in Global and National
Commerce Act (15 U.S.C. Sec. 7001 et.seq.), the Uniform Electronic
Transactions Act, or any other
Law relating to or enabling the creation, execution, delivery, or
recordation of any Contract or signature by electronic means, and
notwithstanding any course of conduct

16

 

engaged in by the Parties, no Party
will be deemed to have executed a Transaction Document or other document
contemplated thereby (including any amendment or other change thereto)
unless and until such Party shall have executed such Transaction Document
or other document on paper by a handwritten original signature or any
other symbol executed or adopted by a Party with current intention to
authenticate such Transaction Document or such other document
contemplated.

     (b) Delivery of a copy of a Transaction Document or such other
document bearing an original signature by facsimile transmission (whether
directly from one facsimile device to another by means of a dial-up
connection or whether mediated by the worldwide web), by electronic mail
in “portable document format” (“.pdf”) form, or by any other electronic
means intended to preserve the original graphic and pictorial appearance
of a document, will have the same effect as physical delivery of the
paper document bearing the original signature, provided a copy bearing an
original signature on paper is subsequently physically delivered.
“Originally signed” or “original signature” means or refers to a
signature that has not been mechanically or electronically reproduced.

[Remainder of page intentionally blank; signature pages follow]

17

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first above written.

	 	 	 	 	 
	 	GLENBROOK GROUP, LLC

 	 
	 	By:  	 	 
	 	Name: 	Samuel J. Furrow, Jr. 	 
	 	Title: 	Manager 	 
	 

	 	 	 	 	 
	 	NORTHGATE INNOVATIONS, INC.

 	 
	 	By:  	 	 
	 	Name: 	Andy Teng 	 
	 	Title: 	Chief Executive Officer 	 
	 

18

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