Document:

<PAGE>

                                                                  EXHIBIT 10.5.1

                           PHASE FORWARD INCORPORATED
                       TERMINATION AND AMENDMENT AGREEMENT

         This Termination and Amendment Agreement is made as of June 4, 2004 by
and among Phase Forward Incorporated, a Delaware corporation (the "Company"),
and each stockholder of the Company executing the Counterpart Signature Page
attached hereto (each, a "Stockholder" and collectively, the "Stockholders").

         1. Termination of Stock Purchase Agreements. In connection with the
Company's initial public offering of common stock (the "IPO"), the following
agreements are hereby terminated, effective immediately prior to the closing of
the IPO provided the price in the IPO equals or exceeds $7.50 (and, after June
1, 2005, $11.36) per share (subject to appropriate adjustments for stock splits,
stock dividends, combinations and other similar recapitalizations affecting such
shares): (i) the Series A Convertible Preferred Stock Purchase Agreement dated
as of November 14, 1997, (ii) the Series B Convertible Preferred Stock Purchase
Agreement dated as of November 12, 1998, (iii) the Series C Convertible
Preferred Stock Purchase Agreement dated as of November 19, 1999, and (iv) the
Series D Convertible Preferred Stock Purchase Agreement dated as of December 27,
2001.

         2. Amendment of Rights Agreement. The Stockholders, on behalf of all
parties (other than Company) to the Fifth Amended and Restated Investors' Rights
Agreement, dated as of December 27, 2001, as amended to date (the "Rights
Agreement"), hereby amend the Rights Agreement as follows:

         (a)      the definition "Initial Public Offering" in Section 1, Article
                  I of the Rights Agreement is hereby deleted in its entirety
                  and replaced with the following definition: "Initial Public
                  Offering means the initial public offering of shares of Common
                  Stock pursuant to a Registration Statement at a price to the
                  public that equals or exceeds $7.50 (and, after June 1, 2005,
                  $11.36) per share (subject to appropriate adjustments for
                  stock splits, stock dividends, combinations and other similar
                  recapitalizations affecting such shares) resulting in gross
                  proceeds to the Company (net of all underwriting discounts and
                  commissions) of at least $20,000,000."; and

         (b)      the phrase "In connection with the Company's Initial Public
                  Offering" in Section 3, Article IV of the Rights Agreement is
                  hereby deleted in its entirety and replaced with the following
                  phrase: "In connection with any Initial Public Offering
                  occurring after June 1, 2005".

         3. Effectiveness.

                  (a) The provisions of Section 1 hereof shall become effective
         upon the execution of this Termination and Amendment Agreement by: (1)
         the Company; (2) the holders of at least two-thirds of the outstanding
         shares of Series A Convertible Preferred Stock, voting as a separate
         class; (3) the holders of at least majority of the outstanding shares
         of Series B Convertible Preferred Stock, voting as a separate class;
         (4) the holders
<PAGE>
         of at least two-thirds of the outstanding shares of Series C
         Convertible Preferred Stock, voting as a separate class; and (5) the
         holders of at least two-thirds of the outstanding shares of Series D
         Convertible Preferred Stock purchased under the Series D Convertible
         Preferred Stock Purchase Agreement, voting as a separate class.

                  (b) The provisions of Section 2 hereof shall become effective
         upon the execution of this Termination and Amendment Agreement by: (1)
         the Company; (2) Paul Bleicher; (3) the Paul A. Bleicher 1999
         Irrevocable Trust; and (4) the holders of at least two thirds of the
         outstanding shares of Series A Convertible Preferred Stock, Series B
         Convertible Preferred Stock, Series C Convertible Preferred Stock, and
         Series D Convertible Preferred Stock, voting together as a single
         class.

         4. Counterparts. This Termination and Amendment Agreement may be
executed by the parties hereto in separate counterparts, each of which once so
executed and delivered (including by facsimile) shall be considered an original,
but all such counterparts shall together constitute one and the same instrument.

         5. Governing Law. This Termination and Amendment Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware except as to its conflicts of laws principles.

         IN WITNESS WHEREOF, the parties have executed this Termination and
Amendment Agreement as of the day first above written.

                                   PHASE FORWARD INCORPORATED

                                   By:   /s/ Robert K. Weiler
                                         -------------------------------
                                         Robert K. Weiler
                                         President and Chief Executive Officer
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   SCHRODER VENTURES INTERNATIONAL
                                   LIFE SCIENCES FUND II LP1

                                   By:     Schroder Venture Managers Inc.,
                                           as General Partner

                                   By:     /s/ Gary Carr   /s/Douglas Mello
                                           ------------------------------------
                                           Name:  Gary Carr
                                           Title:  Director & Vice President

                                   SCHRODER VENTURES INTERNATIONAL
                                   LIFE SCIENCES FUND II LP2

                                   By:     Schroder Venture Managers Inc.,
                                           as General Partner

                                   By:     /s/ Gary Carr   /s/Douglas Mello
                                           ------------------------------------
                                           Name:  Gary Carr
                                           Title:  Director & Vice President

                                   SCHRODER VENTURES INTERNATIONAL
                                   LIFE SCIENCES FUND II LP3

                                   By:     Schroder Venture Managers Inc.,
                                           as General Partner

                                   By:     /s/ Gary Carr  /s/Douglas Mello
                                           ------------------------------------
                                           Name:  Gary Carr
                                           Title:  Director & Vice President
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   SCHRODER VENTURES INTERNATIONAL LIFE SCIENCES
                                   FUND II STRATEGIC PARTNERS L.P.

                                   By:     Schroder Venture Managers Inc.,
                                           as General Partner

                                   By:     /s/ Gary Carr  /s/Douglas Mello
                                           ------------------------------------
                                           Name:  Gary Carr
                                           Title:  Director & Vice President

                                   SCHRODER VENTURES INTERNATIONAL LIFE SCIENCES
                                   FUND II GROUP CO-INVESTMENT SCHEME

                                   By:     SITCO Nominees Ltd. - VC 01903,
                                           as nominee

                                   By:     /s/ Gary Carr  /s/Douglas Mello
                                           ------------------------------------
                                           Name:  Gary Carr
                                           Title:  Director & Vice President

                                   SCHRODER VENTURES INVESTMENTS LIMITED

                                   By:     SV (Nominees) Ltd.,
                                           as nominee

                                   By:     /s/  Alistair Boyle
                                           -------------------------------------
                                   Name:   Alistair Boyle
                                   Title:  Alternate to Laurence S. McNairn,
                                           Director
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   DLJ CAPITAL CORP.

                                   By:     /s/  Ronald M. Hunt
                                           -------------------------------------
                                           By:   Ronald M. Hunt
                                           Its:  Director

                                   DLJ ESC II, L.P.

                                   By:     DLJ LBO Plans Management Corporation
                                   Its:    General Partner

                                   By      /s/  Ronald M. Hunt
                                           -------------------------------------
                                           By:   Ronald M. Hunt
                                           Its:  Attorney in fact

                                   SPROUT CAPITAL VIII, L.P.

                                   By:     DLJ Capital Corp.
                                   Its:    Managing General Partner

                                   By:     /s/  Ronald M. Hunt
                                           -------------------------------------
                                           By:   Ronald M. Hunt
                                           Its:  Director

                                   SPROUT VENTURE CAPITAL, L.P.

                                   By:     DLJ Capital Corp.
                                   Its:    General Partner

                                   By:     /s/  Ronald M. Hunt
                                           -------------------------------------
                                           By:   Ronald M. Hunt
                                           Its:  Director

                                   THE SPROUT CEO FUND, L.P.

                                   By:     DLJ Capital Corp.
                                   Its:    General Partner

                                   By:     /s/ Ronald M. Hunt
                                           -------------------------------------
                                           By:  Ronald M. Hunt
                                           Its: Director
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   NORTH BRIDGE VENTURE PARTNERS V-A, L.P.

                                   By:     North Bridge Venture Management V,
                                           L.P., as General Partner

                                   By:     /s/  Illegible
                                           -------------------------------------
                                           General Partner

                                   NORTH BRIDGE VENTURE PARTNERS V-B, L.P.

                                   By:     North Bridge Venture Management V,
                                           L.P., as General Partner

                                   By:     /s/  Illegible
                                           -------------------------------------
                                           General Partner
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   THOMAS WEISEL CAPITAL PARTNERS, L.P.

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:     /s/ Laurence B. Sorrell
                                           -------------------------------------
                                           Name:     Laurence B. Sorrell
                                           Title:    Managing Partner

                                   THOMAS WEISEL CAPITAL PARTNERS
                                   EMPLOYEE FUND, L.P.

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:      /s/ Laurence B. Sorrell
                                           -------------------------------------
                                           Name:     Laurence B. Sorrell
                                           Title:    Managing Partner

                                   TWP CEO FOUNDERS CIRCLE (QP), L.P.

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:     /s/  Douglas M. Karp
                                           -------------------------------------
                                           Name:     Douglas M. Karp
                                           Title:    Managing Partner

                                   TWP CEO FOUNDERS CIRCLE (AI), L.P.

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:     /s/ Laurence B. Sorrell
                                           -------------------------------------
                                           Name:     Laurence B. Sorrell
                                           Title:    Managing Partner
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   TWP 2000 CO-INVESTMENT FUND, L.P.

                                   By:     Thomas Weisel Capital Management LLC,
                                           as General Partner

                                   By:     /s/  Jack Helfund
                                           -------------------------------------
                                           Name:     Jack Helfund
                                           Title:    Associate General Counsel

                                   THOMAS WEISEL CAPITAL PARTNERS (DUTCH), L.P.

                                   By:     Thomas Weisel Capital Partners LLC
                                           (Dutch), as General Partner

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:     /s/ Laurence B. Sorrell
                                           -------------------------------------
                                           Name:     Laurence B. Sorrell
                                           Title:    Managing Partner

                                   THOMAS WEISEL CAPITAL PARTNERS (DUTCH II),
                                   L.P.

                                   By:     Thomas Weisel Capital Partners LLC
                                           (Dutch), as General Partner

                                   By:     Tailwind Capital Partners LLC,
                                           as General Partner

                                   By:     /s/ Laurence B. Sorrell
                                           -------------------------------------
                                           Name:     Laurence B. Sorrell
                                           Title:    Managing Partner
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   ATLAS VENTURE FUND III, L.P.

                                   By:     Atlas Venture Associates III, L.P.,
                                           as General Partner

                                   By:     Atlas Venture Associates III, Inc.,
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.

                                   ATLAS VENTURE ENTREPRENEURS' FUND III, L.P.

                                   By:     Atlas Venture Associates III, L.P.,
                                           as General Partner

                                   By:     Atlas Venture Associates III, Inc.,
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.

                                   ATLAS VENTURE FUND V, L.P.

                                   By:     Atlas Venture Associates V, L.P.,
                                           as General Partner

                                   By:     Atlas Venture Associates V, Inc.,
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   ATLAS VENTURE PARALLEL FUND V-A, C.V.

                                   By:     Atlas Venture Associates V, L.P.,
                                           as General Partner

                                   By:     Atlas Venture Associates V, Inc.,
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.

                                   ATLAS VENTURE PARALLEL FUND V-B, C.V.

                                   By:     Atlas Venture Associates V, L.P.,
                                           as General Partner

                                   By:     Atlas Venture Associates V, Inc.,
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.

                                   ATLAS VENTURE ENTREPRENEURS' FUND V, L.P.

                                   By:     Atlas Venture Associates V, L.P.
                                           as General Partner

                                   By:     Atlas Venture Associates V, Inc.
                                           as General Partner

                                   By:     /s/ Illegible
                                           -------------------------------------
                                           Name:
                                           Title:    V.P.
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   ABS CAPITAL PARTNERS, L.P.

                                   By:     ABS Partners, L.P.,
                                           as General Partner

                                   By:     /s/  Donald B. Hebb, Jr.
                                           -------------------------------------
                                           Name:     Donald B. Hebb, Jr.
                                           Title:    Managing Partner

                                   ABS CAPITAL PARTNERS II, L.P.

                                   By:     ABS Partners II, LLC,
                                           as General Partner

                                   By:     /s/  Donald B. Hebb, Jr.
                                           -------------------------------------
                                           Name:     Donald B. Hebb, Jr.
                                           Title:    Managing Partner
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   HLM/UH FUND, L.P.

                                   By:      HLM Management Co. Inc,
                                            its Manager

                                   By:     /s/ Peter Grua
                                           -------------------------------------
                                           Name:  Peter Grua
                                           Title:  President

                                   PACIFIC VENTURE GROUP II, L.P.

                                   By      PVG Equity Partners II LLC
                                           its General Partner

                                   By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                   PVG ASSOCIATES II, L.P.

                                   By:     PVG Equity Partners II LLC
                                           its General Partner

                                   By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                   BIOVENTURES INVESTORS LIMITED PARTNERSHIP

                                   By      BioVentures Investors, LLC,
                                           its General Partner

                                   By:     /s/ Marc Goldberg
                                           -------------------------------------
                                           Name:  Marc Goldberg
                                           Title:  Managing Director
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   ST. PAUL FIRE AND MARINE
                                   INSURANCE COMPANY

                                   By:
                                           -------------------------------------
                                           Name: James R. Simons
                                           Title: Authorized Representative

                                   ST. PAUL VENTURE CAPITAL IV, LLC

                                   By:
                                           -------------------------------------
                                           Name: James R. Simons
                                           Title: Managing Member

                                   ST. PAUL VENTURE CAPITAL V, LLC

                                   By:
                                           -------------------------------------
                                           Name: James R. Simons
                                           Title: Managing Member

                                   ST. PAUL VENTURE CAPITAL VI, LLC

                                   By:  SPVC Management VI, LLC
                                   Its: Managing Member

                                   By:
                                           -------------------------------------
                                           Name: James R. Simons
                                           Title: Managing Director

                                   HOUSATONIC EQUITY INVESTORS SBIC, L.P.

                                   By:  Housatonic Equity Partners SBIC, LLC,
                                   its general partner

                                   By:     /s/  Barry D. Reynolds
                                           -------------------------------------
                                           Name: Barry D. Reynolds
                                           Title: Managing Director
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   ONSET ENTERPRISE ASSOCIATES, L.P.

                                   By:     OEA Management, L.P. its general
                                           partner

                                   By:     /s/ Terry Opdendyk
                                           -------------------------------------
                                           Name:  Terry Opdendyk
                                           Title:  General Partner

                                   ONSET ENTERPRISE ASSOCIATES II, LP

                                   By:     OEA II Management, L.P. its general
                                            partner

                                   By:     /s/ Terry Opdendyk
                                           -------------------------------------
                                           Name:  Terry Opdendyk
                                           Title:  General Partner

                                   ONSET VENTURES SERVICES CORPORATION

                                   By:     /s/ Terry Opdendyk
                                           -------------------------------------
                                           Name:  Terry Opdendyk
                                           Title:  General Partner

                                   SALIX VENTURES, L.P.

                                   By:     Salix Partners LLC, its general
                                           partner

                                   By:     /s/ Christopher Grant, Jr.
                                           -------------------------------------
                                           Name:  Christopher Grant, Jr.
                                           Title:  Managing Member
<PAGE>
              Signature Page To Termination and Amendment Agreement

                                   NEW ENTERPRISE ASSOCIATES VI, LP

                                   By:     NEA Partners VI, Limited Partnership
                                            its general partner

                                   By:     /s/ C. Richard Kramlich
                                           -------------------------------------
                                           Name:  C. Richard Kramlich
                                           Title:  General Partner

                                   ELI LILLY AND COMPANY

                                   By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                   INTERNATIONAL BUSINESS MACHINES CORPORATION

                                   By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                   By:
                                           -------------------------------------
                                           Paul Bleicher

                                   PAUL A. BLEICHER 1999 IRREVOCABLE
                                   TRUST

                                   By:
                                           -------------------------------------
                                           Name:
                                           Title:<PAGE>
                                                                    Exhibit 10.6

                        FIFTH LOAN MODIFICATION AGREEMENT

         This Fifth Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of April 27, 2004, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and PHASE FORWARD INCORPORATED, a Delaware corporation ("Borrower").

1.       DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of April 17, 2002,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of April 17, 2002 between Borrower and Bank, as
amended by a certain First Loan Modification Agreement dated as of December 24,
2002, as further amended by a certain Second Loan Modification Agreement dated
as of February 28, 2003, as further amended by a certain Third Loan Modification
Agreement dated as of March 31, 2003, and as further amended by a certain Fourth
Loan Modification Agreement dated as of February 27, 2004 (as amended, the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.

2.       DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

         Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.       DESCRIPTION OF CHANGE IN TERMS.

         A.       Modifications to Loan Agreement.

                  1.       The Loan Agreement shall be amended by deleting the
                           following text appearing in Section 2.1.1 thereof,
                           entitled "Revolving Advances":

                                             "(a) Bank shall make Advances not
                                    exceeding (i) the Committed Revolving Line
                                    or the Borrowing Base, whichever is less,
                                    and minus (ii) the aggregate outstanding
                                    Advances hereunder. Amounts borrowed under
                                    this Section may be repaid and reborrowed
                                    during the term of this Agreement."

                           and inserting in lieu thereof the following:

                                             "(a) Bank shall make Advances not
                                    exceeding (i) the lesser of (A) the
                                    Committed Revolving Line or (B) the
                                    Borrowing Base minus (ii) the amount of all
                                    outstanding Letters of Credit (including
                                    drawn but unreimbursed Letters of Credit),
                                    minus (iii) the FX Reserve, and minus (iv)
                                    the aggregate outstanding Advances hereunder
                                    (including any Cash Management Services).
                                    Amounts borrowed under this Section may be
                                    repaid and reborrowed during the term of
                                    this Agreement."

                  2.       The Loan Agreement shall be amended by inserting
                           after Section 2.1.9 thereof, the following new
                           Section 2.1.10 entitled "2004 Equipment Advances":

                                    "2.1.10 2004 EQUIPMENT ADVANCES.

<PAGE>

                                    (a)      From the 2004 Closing Date through
                            Equipment Availability End Date No. 4, Bank shall
                            make Equipment Advances to Borrower in an aggregate
                            amount not exceeding Committed Equipment Line No. 4.
                            Provided that no Event of Default has occurred and
                            is continuing through September 30, 2004, from
                            October 1, 2004 through Equipment Availability End
                            Date No. 5, Bank shall make Equipment Advances to
                            Borrower in an aggregate amount not exceeding the
                            Committed Equipment Line No. 5. Except as provided
                            below, the Equipment Advances may only be used to
                            finance Eligible Equipment purchased within ninety
                            (90) days (determined based upon the applicable
                            invoice date of such Eligible Equipment) of each
                            Equipment Advance request. Equipment Advances shall
                            not exceed one hundred percent (100%) of the invoice
                            amount of such Eligible Equipment, excluding taxes,
                            shipping, warranty charges, freight discounts and
                            installation expense relating to such Equipment,
                            unless such costs constitute Other Equipment. Each
                            Equipment Advance must be for a minimum amount of
                            $100,000.00.

                                    (b)      Interest accrues on all Equipment
                           Advances under Committed Equipment Line No. 4 and
                           Committed Equipment Line No. 5 from the date of each
                           such Equipment Advance at the per annum rate equal to
                           the Prime Rate, and shall be payable monthly.
                           Equipment Advances outstanding on Equipment
                           Availability End Date No. 4 are payable in (a)
                           thirty-six (36) consecutive equal monthly
                           installments of principal, plus, (b) monthly payments
                           of accrued interest, beginning on the first (1st) day
                           of each month following Equipment Availability End
                           Date No. 4, and ending on September 1, 2007.
                           Equipment Advances outstanding on Equipment
                           Availability End Date No. 5 are payable in (a)
                           thirty-six (36) consecutive equal monthly
                           installments of principal, plus, (b) monthly payments
                           of accrued interest, beginning on the first (1st) day
                           of each month following Equipment Availability End
                           Date No. 5, and ending on March 1, 2008. Equipment
                           Advances when repaid may not be reborrowed.

                                    (c)      To obtain an Equipment Advance,
                           Borrower must notify Bank (the notice is irrevocable)
                           by facsimile no later than 3:00 p.m. Eastern time one
                           (1) Business Day before the day on which the
                           Equipment Advance is to be made. The notice in the
                           form of EXHIBIT B (Payment/Advance Form) must be
                           signed by a Responsible Officer or designee and
                           include a copy of the invoice for the Equipment being
                           financed."

                  3.       The Loan Agreement shall be amended by inserting
                           after Section 2.1.10 thereof, the following new
                           Sections 2.1.11, 2.1.12, and 2.1.13:

                                    "2.1.11 LETTERS OF CREDIT SUBLIMIT.

                                    (a) Bank shall issue or have issued Letters
                           of Credit for Borrower's account not exceeding (i)
                           the lesser of the Committed Revolving Line or the
                           Borrowing Base minus (ii) the outstanding principal
                           balance of any Advances (including any Cash
                           Management Services), minus (iii) the amount of all
                           Letters of Credit (including drawn but unreimbursed
                           Letters of Credit), plus an amount equal to any
                           Letter of Credit Reserves. The face amount of
                           outstanding Letters of Credit (including drawn but
                           unreimbursed Letters of Credit and any Letter of
                           Credit Reserve) may not exceed $5,000,000.00. Each
                           Letter of Credit shall have an expiry date no later
                           than 180 days after the Revolving Maturity Date
                           provided Borrower's Letter of Credit reimbursement
                           obligation shall be secured by cash on terms
                           acceptable to Bank on and after (i) the Revolving
                           Maturity Date if the Revolving Maturity Date is not
                           extended by

<PAGE>

                           Bank, or (ii) the occurrence of an Event of Default
                           hereunder. All Letters of Credit shall be, in form
                           and substance, acceptable to Bank in its sole
                           discretion and shall be subject to the terms and
                           conditions of Bank's form of standard Application and
                           Letter of Credit Agreement. Borrower agrees to
                           execute any further documentation in connection with
                           the Letters of Credit as Bank may reasonably request.

                                    (b)      The obligation of Borrower to
                           immediately reimburse Bank for drawings made under
                           Letters of Credit shall be absolute, unconditional
                           and irrevocable, and shall be performed strictly in
                           accordance with the terms of this Agreement and such
                           Letters of Credit, under all circumstances
                           whatsoever. Borrower shall indemnify, defend,
                           protect, and hold Bank harmless from any loss, cost,
                           expense or liability, including, without limitation,
                           reasonable attorneys' fees, arising out of or in
                           connection with any Letters of Credit.

                                    (c)      Borrower may request that Bank
                           issue a Letter of Credit payable in a currency other
                           than United States Dollars. If a demand for payment
                           is made under any such Letter of Credit, Bank shall
                           treat such demand as an Advance to Borrower of the
                           equivalent of the amount thereof (plus cable charges)
                           in United States currency at the then prevailing rate
                           of exchange in San Francisco, California, for sales
                           of that other currency for cable transfer to the
                           country of which it is the currency.

                                    (d)      Upon the issuance of any letter of
                           credit payable in a currency other than United States
                           Dollars, Bank shall create a reserve (the "Letter of
                           Credit Reserve") under the Committed Revolving Line
                           for letters of credit against fluctuations in
                           currency exchange rates, in an amount equal to ten
                           percent (10%) of the face amount of such letter of
                           credit. The amount of such reserve may be amended by
                           Bank from time to time to account for fluctuations in
                           the exchange rate. The availability of funds under
                           the Committed Revolving Line shall be reduced by the
                           amount of such reserve for so long as such letter of
                           credit remains outstanding.

                                    2.1.12   FOREIGN EXCHANGE SUBLIMIT. If there
                           is availability under the Committed Revolving Line
                           and the Borrowing Base, then Borrower may enter in
                           foreign exchange forward contracts with the Bank
                           under which Borrower commits to purchase from or sell
                           to Bank a set amount of foreign currency more than
                           one business day after the contract date (the "FX
                           Forward Contract"). Bank shall subtract 10% of each
                           outstanding FX Forward Contract from the foreign
                           exchange sublimit, which sublimit is a maximum of
                           $5,000,000.00 (the "FX Reserve"). The total FX
                           Forward Contracts at any one time may not exceed 10
                           times the amount of the FX Reserve. Bank may
                           terminate the FX Forward Contracts if an Event of
                           Default occurs and is continuing.

                                    2.1.13   CASH MANAGEMENT SERVICES SUBLIMIT.
                           Borrower may use up to $5,000,000.00 for the Bank's
                           Cash Management Services, which may include merchant
                           services, direct deposit of payroll, business credit
                           card, and check cashing services identified in the
                           various cash management services agreements related
                           to such Cash Management Services (the "Cash
                           Management Services"). Such aggregate amounts
                           utilized under the Cash Management Services Sublimit
                           shall at all times reduce the amount otherwise
                           available for Credit Extensions under the Committed
                           Revolving Line. Any amounts Bank pays on behalf of
                           Borrower or any amounts that are not paid by Borrower
                           for any Cash Management Services will be treated as
                           Advances under the Committed

<PAGE>

                           Revolving Line and will accrue interest at the
                           interest rate applicable to Advances."

                  4.       The Loan Agreement shall be amended by deleting
                           Section 2.2 thereof, entitled "Overadvances", in its
                           entirety, and inserting in lieu thereof the
                           following:

                                    "2.2 OVERADVANCES. If Borrower's Obligations
                           under Sections 2.1.1, 2.1.11, 2.1.12, and 2.1.13
                           exceed the lesser of either (i) the Committed
                           Revolving Line or (ii) the Borrowing Base, Borrower
                           must immediately pay in cash to Bank the excess."

                  5.       The Loan Agreement shall be amended by deleting the
                           following text appearing in Section 2.3 thereof,
                           entitled "Interest Rate; Payments":

                                    "(i) Advances outstanding under the
                                    Committed Revolving Line shall accrue
                                    interest at a per annum rate equal to the
                                    aggregate of the Bank's Prime Rate, plus one
                                    quarter of one percent (0.25%)."

                           and inserting in lieu thereof the following:

                                    "(i) Advances outstanding under the
                                    Committed Revolving Line shall accrue
                                    interest at a per annum rate equal to the
                                    aggregate of the Prime Rate, plus one
                                    quarter of one percent (0.25%).
                                    Notwithstanding the foregoing, commencing on
                                    the 2004 Closing Date, Advances outstanding
                                    under the Committed Revolving Line shall
                                    accrue interest at a per annum rate equal to
                                    the Prime Rate."

                  6.       The Loan Agreement shall be amended by inserting
                           after subsection (c) of Section 2.4 thereof, entitled
                           "Fees", the following new subsections (d) and (e):

                                             "(d) Unused Facility Fee. In the
                                    event, in any calendar quarter (or portion
                                    thereof at the beginning and end of the term
                                    hereof), the average daily principal balance
                                    of the Advances (made pursuant to Section
                                    2.1.1 only) outstanding during the quarter
                                    is less than the maximum amount of the
                                    Committed Revolving Line, Borrower shall pay
                                    Bank an unused line fee in an amount equal
                                    to 0.25% per annum on the difference between
                                    the maximum amount of the Committed
                                    Revolving Line and the average daily
                                    principal balance of the Advances (made
                                    pursuant to Section 2.1.1 only) outstanding
                                    during the quarter, which unused line fee
                                    shall be computed and paid quarterly, in
                                    arrears, on the first day of the following
                                    quarter; and

                                            (e) Letter of Credit Fee. The
                                    Borrower shall pay the Bank's customary fees
                                    and expenses for the issuance and renewal of
                                    Letters of Credit, including, without
                                    limitation, a Letter of Credit Fee of one
                                    and one half of one percent (1.5%) per annum
                                    of the face amount of each standby Letter of
                                    Credit issued, upon the issuance or renewal
                                    of such standby Letter of Credit by the
                                    Bank."

                  7.       The Loan Agreement shall be amended by deleting the
                           following text appearing in subsection (a) of Section
                           6.2 thereof, entitled "Financial Statements, Reports,
                           Certificates":

                                    "(i) as soon as available, but no later than
                                    thirty (30) days after the last day of each
                                    month, a company prepared consolidated and
                                    consolidating balance sheet

<PAGE>

                                    and income statement covering Borrower's
                                    consolidated operations during the period
                                    certified by a Responsible Officer and in a
                                    form reasonably acceptable to Bank;"

                           and inserting in lieu thereof the following:

                                    "(i) as soon as available, but no later than
                                    thirty (30) days after the last day of each
                                    month, a company prepared consolidated and
                                    consolidating 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. Notwithstanding the
                                    foregoing, such balance sheet and income
                                    statement for January 2004 and February
                                    2004, shall be delivered to Bank no later
                                    than April 15, 2004;"

                  8.       The Loan Agreement shall be amended by deleting the
                           following text appearing in subsection (a) of Section
                           6.2 thereof, entitled "Financial Statements, Reports,
                           Certificates":

                                    "(iii) as soon as available, but no later
                                    than thirty (30) days after the last day of
                                    Borrower's fiscal year, financial
                                    projections, approved by the Borrower's
                                    Board of Directors, for the then current
                                    fiscal year;"

                           and inserting in lieu thereof the following:

                                    "(iii) as soon as available, but no later
                                    than forty-five (45) days after the last day
                                    of Borrower's fiscal year, financial
                                    projections, approved by the Borrower's
                                    Board of Directors, for the then current
                                    fiscal year;"

                  9.       The Loan Agreement shall be amended by deleting the
                           following text appearing in subsection (c) of Section
                           6.2 thereof, entitled "Financial Statements, Reports,
                           Certificates":

                                             "(c) Within thirty (30) days after
                                    the last day of each month, Borrower shall
                                    deliver to Bank with the monthly financial
                                    statements a Compliance Certificate signed
                                    by a Responsible Officer in the form of
                                    EXHIBIT D."

                           and inserting in lieu thereof the following:

                                             "(c) Within thirty (30) days after
                                    the last day of each month, Borrower shall
                                    deliver to Bank with the monthly financial
                                    statements a Compliance Certificate signed
                                    by a Responsible Officer in the form of
                                    EXHIBIT D. Notwithstanding the foregoing,
                                    such Compliance Certificate for January 2004
                                    and February 2004, shall be delivered to
                                    Bank no later than April 15, 2004."

                  10.      The Loan Agreement shall be amended by deleting
                           Section 6.5 thereof, entitled "Primary Accounts", in
                           its entirety, and inserting in lieu thereof the
                           following:

                                             "6.5 PRIMARY ACCOUNTS. In order to
                                    permit the Bank to monitor the Borrower's
                                    financial performance and condition,
                                    Borrower shall maintain its primary
                                    depository and domestic operating accounts
                                    with Bank, and a majority of the Borrower's
                                    cash or securities in excess of that amount
                                    used for

<PAGE>

                                    Borrower's operations shall be maintained or
                                    administered through the Bank. Additionally,
                                    a majority of Borrower's and Borrower's
                                    Subsidiaries' cash and securities, in the
                                    aggregate, shall be maintained and
                                    administered through the Bank.
                                    Notwithstanding the foregoing, after the
                                    occurrence of an Initial Public Offering,
                                    Borrower shall maintain its primary
                                    depository and domestic operating accounts
                                    with Bank, and some portion of the
                                    Borrower's cash or securities in excess of
                                    that amount used for Borrower's operations
                                    shall be maintained or administered through
                                    the Bank. Additionally, a majority of
                                    Borrower's and Borrower's Subsidiaries' cash
                                    and securities, in the aggregate, shall be
                                    maintained and administered in domestic bank
                                    accounts. Borrower shall identify to Bank,
                                    in writing, of any bank or securities
                                    account opened by Borrower with any
                                    institution other than Bank. The provisions
                                    of this paragraph shall not apply to deposit
                                    accounts exclusively used for payroll,
                                    payroll taxes and other employee wage and
                                    benefit payments to or for the benefit of
                                    the Borrower's employees."

                  11.      The Loan Agreement shall be amended by deleting
                           Section 6.6 thereof, entitled "Adjusted Quick Ratio",
                           in its entirety and inserting in lieu thereof the
                           following:

                                             "6.6     ADJUSTED QUICK RATIO.
                                    Borrower shall maintain at all times, to be
                                    tested as of the last day of each month, a
                                    ratio of Quick Assets to Current Liabilities
                                    minus Deferred Revenue of not less than: (a)
                                    1.25 to 1.0, prior to the occurrence of the
                                    Initial Public Offering, and (b) 1.75 to 1.0
                                    after the occurrence of the Initial Public
                                    Offering."

                  12.      The Loan Agreement shall be amended by deleting
                           Section 6.7 thereof, entitled "Revenue", in its
                           entirety and inserting in lieu thereof the following:

                                             "6.7     REVENUE. Borrower shall
                                    maintain, as of the last day of each
                                    quarter, net revenues of not less than: (i)
                                    Fifteen Million Dollars ($15,000,000.00) for
                                    the first quarter of Borrower's fiscal year
                                    2004, (ii) Fifteen Million Five Hundred
                                    Thousand Dollars ($15,500,000.00) for the
                                    second quarter of Borrower's fiscal year
                                    2004, (iii) Sixteen Million Dollars
                                    ($16,000,000.00) for the third quarter of
                                    Borrower's fiscal year 2004, and (iv)
                                    Sixteen Million Five Hundred Thousand
                                    Dollars ($16,500,000.00) for the fourth
                                    quarter of Borrower's fiscal year 2004.
                                    Commencing with the first quarter of
                                    Borrower's fiscal year 2005, and for each
                                    quarter thereafter, the Borrower shall
                                    maintain net revenues at an amount not less
                                    than the greater of: (a) Sixteen Million
                                    Five Hundred Thousand Dollars
                                    ($16,500,000.00), or (b) eighty percent
                                    (80%) of the plan for minimum quarterly net
                                    revenues approved by the Borrower's Board of
                                    Directors."

                  13.      The Loan Agreement shall be amended by deleting
                           Section 6.8 thereof, entitled "Profitability", in its
                           entirety.

                  14.      The Loan Agreement shall be amended by deleting the
                           following definitions appearing in Section 13.1
                           thereof:

                                    ""CREDIT EXTENSION" is each Advance,
                                    Equipment Advance, Term Loan No. 1, Term
                                    Loan No. 2, Term Loan No. 3, Term Loan No.
                                    4, Term Loan No. 5, or any other extension
                                    of credit by Bank for Borrower's benefit.

                                    "COMMITTED REVOLVING LINE" is an Advance or
                                    Advances of up to $2,500,000.00.
<PAGE>
                           "EQUIPMENT ADVANCE" is an advance or advances to
                           Borrower from Bank under Committed Equipment Line No.
                           1, Committed Equipment Line No. 2, and/or Committed
                           Equipment Line No. 3, as applicable.

                           "INTELLECTUAL PROPERTY" is:

                                    (a) copyrights, trademarks, patents, and
                                    mask works including amendments, renewals,
                                    extensions and all licenses or other rights
                                    to use and all license fees and royalties
                                    from the use;

                                    (b) Any trade secrets and any Intellectual
                                    Property rights in computer software and
                                    computer software products now or later
                                    existing, created, acquired or held;

                                    (c) All design rights which may be available
                                    to Borrower now or later created, acquired
                                    or held;

                                    (d) Any claims for damages (past, present or
                                    future) for infringement of any of the
                                    rights above, with the right, but not the
                                    obligation, to sue and collect damages for
                                    use or infringement of the intellectual
                                    property rights above.

                                    All proceeds and products of the foregoing,
                                    including all insurance, indemnity or
                                    warranty payments.

                           "OTHER EQUIPMENT" is leasehold improvements,
                           intangible property such as computer software and
                           software licenses, equipment specifically designed or
                           manufactured for Borrower, other intangible property,
                           limited use property and other similar property and
                           soft costs approved by the Bank, including sales tax,
                           freight and installation expenses. Unless otherwise
                           agreed to by Bank, not more than 25% of the proceeds
                           of Committed Equipment Line No. 1, Committed
                           Equipment Line No. 2, and Committed Equipment Line
                           No. 3 shall be used to finance Other Equipment.

                           "REVOLVING MATURITY DATE" is March 31, 2004."

                  and inserting in lieu thereof the following:

                           ""CREDIT EXTENSION" is each Advance, Equipment
                           Advance, Term Loan No. 1, Term Loan No. 2, Term Loan
                           No. 3, Term Loan No. 4, Term Loan No. 5, Letter of
                           Credit, F/X Forward Contract, or any other extension
                           of credit by Bank for Borrower's benefit.

                           "COMMITTED REVOLVING LINE" is an Advance or Advances
                           of up to $5,000,000.00.

                           "EQUIPMENT ADVANCE" is an advance or advances to
                           Borrower from Bank under Committed Equipment Line No.
                           1, Committed Equipment Line No. 2, Committed
                           Equipment Line No. 3, Committed Equipment Line No. 4
                           and/or Committed Equipment Line No. 5, as applicable.

                           "INTELLECTUAL PROPERTY" is any copyright rights,
                           copyright applications, copyright registrations and
                           like protections in each work of authorship and

<PAGE>

                           derivative work, whether published or unpublished,
                           now owned or later acquired; any patents, trademarks,
                           service marks and applications therefor; any trade
                           secret rights, including any rights to unpatented
                           inventions, now owned or hereafter acquired.

                           "OTHER EQUIPMENT" is leasehold improvements,
                           intangible property such as computer software and
                           software licenses, equipment specifically designed or
                           manufactured for Borrower, other intangible property,
                           limited use property and other similar property and
                           soft costs approved by the Bank, including sales tax,
                           freight and installation expenses. Unless otherwise
                           agreed to by Bank, not more than 25% of the proceeds
                           of Committed Equipment Line No. 1, Committed
                           Equipment Line No. 2, and Committed Equipment Line
                           No. 3 shall be used to finance Other Equipment.
                           Unless otherwise agreed to by Bank, not more than 35%
                           of the proceeds of Committed Equipment Line No. 4,
                           and Committed Equipment Line No. 5 shall be used to
                           finance Other Equipment.

                           "REVOLVING MATURITY DATE" is March 31, 2006."

         15.      The Loan Agreement shall be amended by inserting the following
                  definitions, in alphabetical order, in Section 13.1 thereof:
                           ""2004 CLOSING DATE" is April 27, 2004.
                           "CASH MANAGEMENT SERVICES" are defined in Section
                           2.1.13.

                           "COMMITTED EQUIPMENT LINE NO. 4" is an Equipment
                           Advance or Equipment Advances of up to Four Million
                           Five Hundred Thousand Dollars ($4,500,000.00).

                           "COMMITTED EQUIPMENT LINE NO. 5" is an Equipment
                           Advance or Equipment Advances of up to Four Million
                           Five Hundred Thousand Dollars ($4,500,000.00) less
                           the aggregate amount of Equipment Advances made
                           pursuant to Committed Equipment Line No. 4.

                           "EQUIPMENT AVAILABILITY END DATE NO. 4" is September
                           30, 2004.

                           "EQUIPMENT AVAILABILITY END DATE NO. 5" is March 31,
                           2005.

                           "FX FORWARD CONTRACT" is defined in Section 2.1.12.

                           "FX RESERVE" is defined in Section 2.1.12.

                           "INITIAL PUBLIC OFFERING" is the completion of
                           Borrower's initial underwritten public offering and
                           sale of its securities pursuant to an effective
                           registration statement under the Securities Act of
                           1933, as amended.

                           "LETTER OF CREDIT" means a letter of credit or
                           similar undertaking issued by Bank pursuant to
                           Section 2.1.11.

                           "LETTER OF CREDIT RESERVE" has the meaning set forth
                           in Section 2.1.11."

         16.      The Loan Agreement shall be amended by deleting the
                  definitions of "Intellectual Property Security Agreement" and
                  "Net Income" appearing in Section 13.1 thereof.

<PAGE>

         17.      EXHIBIT A to the Loan Agreement is hereby replaced with
                  EXHIBIT A attached hereto.

         18.      The Compliance Certificate appearing as EXHIBIT D to the Loan
                  Agreement is hereby replaced with the Compliance Certificate
                  attached as EXHIBIT B hereto.

     B. Termination of Intellectual Property Security Agreement.

                  1.       Borrower and Bank hereby agree that the certain
                           Second Amended and Restated Intellectual Property
                           Agreement, dated March 31, 2003, by and between
                           Borrower and Bank is hereby terminated.

4. FEES. Borrower shall pay to Bank: (a) a fully-earned, non-refundable fee for
the availability of Committed Equipment Line No. 4 and Committed Equipment Line
No. 5 (the "2004 Committed Equipment Line Fee") of Eighteen Thousand Dollars
($18,000.00), due and payable the earlier of (i) the Equipment Availability End
Date No. 5, (ii) the termination of either Committed Equipment Line No. 4 or
Committed Equipment Line No. 5, or (iii) an Event of Default. Notwithstanding
the foregoing, the Bank hereby agrees to waive the 2004 Committed Equipment Line
Fee if at any time the aggregate amount of Equipment Advances made under
Committed Equipment Line No. 4 or Committed Equipment Line No. 5 exceeds Three
Million One Hundred Fifty Thousand Dollars ($3,150,000.00). The Borrower shall
also reimburse Bank for all legal fees and expenses incurred in connection with
this amendment to the Existing Loan Documents.

5. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Amended and Restated Perfection Certificate dated as of March 31, 2003
between Borrower and Bank, and acknowledges, confirms and agrees the disclosures
and information above Borrower provided to Bank in the Perfection Certificate
has not changed, as of the date hereof.

6. RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Amended
and Restated Negative Pledge Agreement dated as of March 31, 2003 between
Borrower and Bank (the "Negative Pledge Agreement"), and acknowledges, confirms
and agrees that said Negative Pledge Agreement shall remain in full force and
effect.

7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral. Upon termination of the Loan Agreement and satisfaction of
the Obligations, Bank shall release its security interest in all Collateral, and
shall execute all documents and take all actions reasonably requested by
Borrower in connection therewith.

8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

10. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing

<PAGE>

Loan Documents remain unchanged and in full force and effect. Bank's agreement
to modifications to the existing Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers of Existing Loan Documents, unless the party
is expressly released by Bank in writing. No maker will be released by virtue of
this Loan Modification Agreement.

12. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

            [The remainder of this page is intentionally left blank]

<PAGE>

         This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                             BANK:
PHASE FORWARD INCORPORATED            SILICON VALLEY BANK, doing business as
                                      SILICON VALLEY EAST

By: /s/ John J. Schickling            By: /s/ Michael Tramack
   ________________________________      ___________________________________

Name:   John J. Schickling            Name:   Michael Tramack
     ______________________________        _________________________________

Title:  Senior VP & CFO               Title:  Vice President
      _____________________________         ________________________________

                                      SILICON VALLEY BANK

                                      By:___________________________________

                                      Name:_________________________________

                                      Title:________________________________
                                      (signed in Santa Clara County, California)

         The undersigned, PHASE FORWARD SECURITIES CORPORATION, ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Unlimited Guaranty dated May 3, 1999 (the "Guaranty") and acknowledges, confirms
and agrees that the Guaranty shall remain in full force and effect and shall in
no way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith.

                                PHASE FORWARD SECURITIES CORPORATION

                                By: /s/ John J. Schickling
                                    _________________________________________
                                Name:   John J. Schickling
                                Title:  Treasurer

<PAGE>
                       FOURTH LOAN MODIFICATION AGREEMENT

      This Fourth Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of February 27, 2004, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and PHASE FORWARD INCORPORATED, a Delaware corporation ("Borrower").

1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of April 17, 2003,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of April 17, 2002 between Borrower and Bank, as
amended by a certain First Loan Modification Agreement dated as of December 24,
2002, as further amended by a certain Second Loan Modification Agreement dated
as of February 28, 2003, and as further amended by a certain Third Loan
Modification Agreement dated as of March 31, 2003 (as amended, the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.

2.    DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

      Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.    DESCRIPTION OF CHANGE IN TERMS.

      A.    Modifications to Loan Agreement.

            1.    The Loan Agreement shall be amended by deleting the
                  definitions of "Revolving Maturity Date" and "Equipment
                  Availability End Date No. 3" appearing in Section 13.1
                  thereof, and inserting in lieu thereof the following:

                        ""REVOLVING MATURITY DATE" is March 31, 2004.

                        "EQUIPMENT AVAILABILITY END DATE NO. 3" is March
                        31,2004."

      B.    Waivers.

            1.    Bank hereby waives Borrower's existing default under the Loan
                  Agreement by virtue of Borrower's failure to comply with the
                  financial covenant set forth in Section 6.7 thereof as of the
                  quarter ended December 31, 2003. Bank's waiver of Borrower's
                  compliance of said financial covenant shall apply only to the
                  foregoing specific period.

4.    FEES. The Borrower shall reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

5.    RATIFICATION OP NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Amended and Restated Negative Pledge Agreement dated as of March 31, 2003
between Borrower and Bank (the "Negative Pledge Agreement"), and acknowledges,
confirms and agrees that said Negative Pledge Agreement shall remain in full
force and effect.

<PAGE>

6.    AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to File financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral. Upon termination of the Loan Agreement and satisfaction of
the Obligations, Bank shall release its security interest in all Collateral, and
shall execute all documents and take all actions reasonably requested by
Borrower in connection therewith.

7.    CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

8.    RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

9.    NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

10.   CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

11.   COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
<PAGE>

      This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                           BANK:
PHASE FORWARD INCORPORATED          SILICON VALLEY BANK, doing business as
                                    SILICON VALLEY EAST

By: /s/ William G. Porter           By: /s/ Jack Gaziano
    --------------------------          ----------------------------------------
Name: William G. Porter             Name: Jack Gaziano
Title: Vice President, Finance      Title: SVP
       Phase Forward Incorporated
                                    SILICON VALLEY BANK

                                    By: /s/ Maggie Garcia
                                        ----------------------------------------
                                    Name: Maggie Garcia
                                    Title: AVP
                                      (Signed in Santa Clara County, California)

      The undersigned, PHASE FORWARD SECURITIES CORPORATION, ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated May 3, 1999 (the "Guaranty") and acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith.

                                    PHASE FORWARD SECURITIES CORPORATION

                                    By: /s/ John J. Schickling
                                        ----------------------------------------
                                    Name: John J. Schickling
                                    Title: Treasurer

<PAGE>

                        THIRD LOAN MODIFICATION AGREEMENT

      This Third Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of March 31, 2003, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200,2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and PHASE FORWARD INCORPORATED, a Delaware corporation with its
principal place of business at 1440 Main Street, Waltham, Massachusetts 02451
("Borrower").

1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among Other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of April 17, 2002,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of April 17, 2002, between Borrower and Bank, as
amended by a certain First Loan Modification Agreement dated as of December
24, 2002, and as further amended by a certain Second Loan Modification Agreement
dated as of February 28, 2003 (as amended, the "Loan Agreement"). Capitalized
terms used but not otherwise defined herein shall have the same meaning as in
the Loan Agreement.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank Shall be
referred to as the "Obligations".

2.    DESCRIPTION OF COLLATERAL- Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.    DESCRIPTION OF CHANGE IN TERMS.

      A.    Modifications to Loan Agreement.

            1.    Section 2.1.2 of the Loan Agreement shall be retitled as "2002
                  Equipment Advances".

            2.    The Loan Agreement shall be amended by inserting after Section
                  2.1.8 thereof the following new section 2.1.9 entitled "2003
                  Equipment Advances":

                        "2.1.9 2003 EQUIPMENT ADVANCES.

                              (a)   From the 2003 Closing Date through Equipment
                        Availability End Date No. 3, Bank shall make Equipment
                        Advances to Borrower in an aggregate amount not
                        exceeding Committed Equipment Line No. 3. Except as
                        provided below, the Equipment Advances may Only be used
                        to finance Eligible Equipment purchased within ninety
                        (90) days (determined based upon the applicable invoice
                        date of such Eligible Equipment) of each Equipment
                        Advance request. Notwithstanding the foregoing,
                        Equipment Advances shall be permitted to finance
                        Eligible Equipment purchased On or after December 1,
                        2002 (determined based upon the applicable invoice date
                        of such Eligible Equipment) provided that such Equipment
                        Advance requests are submitted to Bank within thirty
                        (30) days after the 2003 Closing Date. Equipment
                        Advances shall not exceed one hundred percent (100%) of
                        the invoice amount of such Eligible Equipment, excluding
                        taxes, shipping, warranty charges, freight discounts and
                        installation expense relating to such Equipment, unless
                        such costs constitute Other Equipment. Each Equipment
                        Advance must be for a minimum amount of $100,000,00.

                              (b)   Interest accrues on all Equipment Advances
                        under Committed Equipment Line No.3 from the date of
                        each such Equipment Advance at the per annum rate equal
                        to the aggregate of the Bank's Prime Rate plus one
                        percent

<PAGE>

                        (1.0%), and shall be payable monthly on the Payment Date
                        of each month commencing with the initial Payment Date
                        following each such Equipment Advance. Each Equipment
                        Advance under Committed Equipment Line No. 3 shall be
                        payable in (i) thirty-six (36) equal monthly
                        installments of principal, plus (ii) monthly payments of
                        accrued interest, beginning on the first Payment Date
                        following such Equipment Advance and continuing on each
                        Payment Date thereafter through the Equipment Maturity
                        Date applicable to such Equipment Advance. Equipment
                        Advances when repaid may not be reborrowed.

                              (c)   To obtain an Equipment Advance, Borrower
                        must notify Bank (the notice is irrevocable) by
                        facsimile no later than 3:00 p.m. Eastern time one (1)
                        Business Day before the day on which the Equipment
                        Advance is to be made. The notice in the form of EXHIBIT
                        B (Payment/Advance Form) must be signed by a Responsible
                        Officer or designee and include a copy of the invoice
                        for the Equipment being financed."

            3.    The Loan Agreement shall be amended by deleting the following
                  text appearing in Section 2.3 thereof, entitled "Interest
                  Rate; Payments":

                        "(i) Advances outstanding under the Committed Revolving
                        Line shall accrue interest at a per annum rate equal to
                        the aggregate of the Bank's Prime Rate, plus one half of
                        one percent (0.50%)"

                  and inserting in lieu thereof the following:

                        "(i) Advances outstanding under the Committed Revolving
                        Line shall accrue interest at a per annum rate equal to
                        the aggregate of the Bank's Prime Rate, plus one quarter
                        of one percent (0.25%)"

            4.    The Loan Agreement shall be amended by deleting Section 6.6
                  thereof, entitled "Adjusted Quick Ratio", in its entirety and
                  inserting in lieu thereof the following:

                              "6.6  ADJUSTED QUICK RATIO. Borrower shall
                        maintain at all times, to be tested as of the last day
                        of each month, a ratio of Quick Assets to Current
                        Liabilities minus Deferred Revenue of not less then: (a)
                        1.60 to 1.0 through the month ending May 31, 2003, and
                        (b) 1.75 to 1.0 for each month thereafter."

            5.    The Loan Agreement shall be amended by deleting Section 6.7
                  thereof, entitled "Revenue", in its entirety and inserting in
                  lieu thereof the following:

                              "6.7  REVENUE. Borrower shall maintain, as of the
                        last day Of each quarter, net revenues of not less than:
                        (i) Thirteen Million Five Hundred Thousand Dollars
                        ($13,500,000.00) for the first quarter of Borrower's
                        fiscal year 2003, (ii) Thirteen Million Five Hundred
                        Thousand Dollars ($13,500,000.00) for the second quarter
                        of Borrower's fiscal year 2003, (iii) Fourteen Million
                        Five Hundred Thousand Dollars ($14,500,000.00) for the
                        third quarter of Borrower's fiscal year 2003, and (iv)
                        Sixteen Million Dollars ($16,000,000.00) for the fourth
                        quarter of Borrower's fiscal year 2003. Commencing with
                        the first quarter of Borrower's fiscal year 2004, and
                        for each quarter thereafter, the Borrower shall maintain
                        net revenues at an amount not less than the greater of:
                        (a) Sixteen Million Dollars ($16,000,000.00), or (b)
                        eighty percent (80%) of the plan for minimum quarterly
                        net revenues approved by the Borrower's Board of
                        Directors."

            6.    The Loan Agreement shall be amended by deleting Section 6.8
                  thereof, entitled "Profitability", in its entirety and
                  inserting in lieu thereof the following:

<PAGE>

                              "6.8  PROFITABILITY. Upon the termination of the
                        Intellectual Property Security Agreement, Borrower shall
                        have Net Income of not less than One Dollar ($1.00) for
                        each fiscal quarter."

            7.    The Loan Agreement shall be amended by deleting the following
                  definition appearing in Section 13.1 thereof:

                        ""EQUIPMENT ADVANCE" is an advance Or advances to
                        Borrower from Bank Under Committed Equipment Line No. 1
                        and/or Committed Equipment Line No. 2, as applicable.

                        "EQUIPMENT MATURITY DATE" is, with respect to each
                        Equipment Advance under Committed Equipment Line No. 1
                        and Committed Equipment Line No. 2, the thirty-sixth
                        (36th) Payment Date following each such Equipment
                        Advance.

                        "OTHER EQUIPMENT" is leasehold improvements, intangible
                        property such as computer software and software
                        licenses, equipment specifically designed or
                        manufactured for Borrower, other intangible property,
                        limited use property and Other similar property and soft
                        Costs approved by the Bank, including sales tax, freight
                        and installation expenses. Unless otherwise agreed to by
                        Bank, not more than 25% of the proceeds of Committed
                        Equipment Line No. 1 and Committed Equipment Line No. 2
                        shall be used to finance Other Equipment.

                        "REVOLVING MATURITY DATE" is March 15, 2003."

                  and inserting in lieu thereof the following:

                        ""EQUIPMENT ADVANCE" is an advance or advances to
                        Borrower from Bank under Committed Equipment Line No. 1,
                        Committed Equipment Line No. 2, and/or Committed
                        Equipment Line No. 3, as applicable.

                        "EQUIPMENT MATURITY DATE" is, with respect to each
                        Equipment Advance under Committed Equipment Line No. 1,
                        Committed Equipment Line No. 2, and Committed Equipment
                        Line No. 3, the thirty-sixth (36th) Payment Date
                        following each such Equipment Advance.

                        "OTHER EQUIPMENT" is leasehold improvements, intangible
                        property such as computer software and software
                        licenses, equipment specifically designed or
                        manufactured for Borrower, other intangible property,
                        limited use property and other similar property and soft
                        costs approved by the Bank, including sales tax, freight
                        and installation expenses. Unless otherwise agreed to by
                        Bank, not more than 25% of the proceeds of Committed
                        Equipment Line No- 1, Committed Equipment Line No. 2,
                        and Committed Equipment Line No. 3 shall be used to
                        finance Other Equipment.

                        "REVOLVING MATURITY DATE" is March 14, 2004."

            8.    The Loan Agreement shall be amended by inserting the following
                  definitions, in alphabetical order, in Section 13.1 thereof:

                        ""2003 CLOSING DATE" is March 31, 2003.

                        "COMMITTED EQUIPMENT LINE NO. 3" is a Equipment Advance
                        or Equipment

<PAGE>

                        Advances Of up to Four Million Five Hundred Thousand
                        Dollars ((Dollar)4,500,000.00).

                        "EQUIPMENT AVAILABILITY END DATE NO. 3" is December
                        31, 2003.

                        "INTELLECTUAL PROPERTY SECURITY AGREEMENT" is that
                        certain Second Amended and Restated Intellectual
                        Property Agreement, dated March 31, 2003, by and between
                        Borrower and Bank.

                        "NET INCOME" is net income, according to GAAP, excluding
                        non-cash impairment write-downs of goodwill."

            9.    The Compliance Certificate appearing as EXHIBIT D to the Loan
                  Agreement is hereby replaced with the Compliance Certificate
                  attached as EXHIBIT A hereto.

4.    FEES. Borrower shall pay to Bank: (a) a loan modification fee equal to Ten
Thousand Dollars ($10,000.00) which fee shall be due on the date hereof and
shall be deemed fully earned as of the date hereof, and (b) a fully-earned,
non-refundable fee for the availability of Committed Equipment Line No. 3 (the
"2003 Committed Equipment Line Fee") of Eighteen Thousand Dollars ($18,000,00),
due and payable the earlier of (i) the Equipment Availability End Date No. 3 or
(ii) the termination of Committed Equipment Line No. 3. Notwithstanding the
foregoing, the Bank hereby agrees to waive the 2003 Committed Equipment Line Fee
if at any time me aggregate amount of Equipment Advances made under Committed
Equipment Line No. 3 exceed Three Million Three Hundred Seventy Five Thousand
Dollars ($3,375,000.00). The Bomber shall also reimburse Bank for all legal fees
and expenses incurred in connection with this amendment to the Existing Loan
Documents.

5.    ADDITIONAL COVENANTS. Borrower shall not, without providing the Bank with
thirty (30) days prior written notice: (i) relocate its chief executive office,
or add any new offices or business locations (with assets of greater than Fifty
Thousand Dollars ($50,000) individually and Two Hundred Thousand Dollars
($200,000) in the aggregate), or (ii) change its jurisdiction of organization,
or (iii) change its organizational structure or type, or (iv) change its legal
name, or (v) change any organizational number (if any) assigned by its
jurisdiction of organization. In addition, except for (i) certain Collateral
maintained at an IBM data center, and (ii) licenses or transfers under joint -or
funded - development agreements, "work for hire" agreements or similar
agreements pursuant to which Borrower collaborates with customers or third
parties on product development and service offerings, the Borrower hereby
certifies that no Collateral is in the possession of any third party bailee
(such as at a warehouse), except as set forth in the Schedule to the Loan
Agreement. In the event that Borrower, after the date hereof, intends to store
or otherwise deliver the Collateral to such a bailee, then Borrower shall first
receive, the prior written consent of Bank and such bailee must acknowledge in
writing that the bailee is holding Such Collateral for the benefit of Bank.

6.    AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral, Upon termination of the Loan Agreement and satisfaction of
the Obligations, Bank shall release its security interest in all Collateral, and
shall execute all documents and take all actions reasonably requested by
Borrower in connection therewith.

7.    CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

8.    RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

9.    NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.

10.   CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents.

<PAGE>

Except as expressly modified pursuant to this Loan Modification Agreement, the
terms of the Existing Loan Documents remain unchanged and in full force and
effect. Bank's agreement to modifications to the existing Obligations pursuant
to this Loan Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Obligations. It is the
intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker will be released by virtue of this Loan Modification
Agreement.

11.   RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower and the guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as security
for all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and the guarantor regardless of the
adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
OR THE GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.   JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the exclusive jurisdiction of any state or federal
court of competent jurisdiction in the Commonwealth of Massachusetts in any
action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.

13.   COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

            [The remainder of this page is intentionally left blank]

<PAGE>

      This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                           BANK:

PHASE FORWARD INCORPORATED          SILICON VALLEY BANK, doing business as
                                    SILICON VALLEY EAST

By: /s/ Ari Buchler                 By: /s/ Michael J Tromack
    --------------------------          ----------------------------------------

Name: Ari Buchler                   Name: Michael J Tromack

Title: Vice President and General   Title: Vice President
       Counsel
       Phase Forward Incorporated   SILICON VALLEY BANK

                                    By: /s/ MICHELLE D. GIANNINI
                                        ----------------------------------------

                                    Name: MICHELLE D. GIANNINI

                                    Title: ASST. VICE PRES.
                                      (signed in Santa Clara County, California)

      The undersigned, PHASE FORWARD SECURITIES CORPORATION, ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated May 3, 1999 (the "Guaranty") and acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith.

                                    PHASE FORWARD SECURITIES CORPORATION

                                    By: /s/ John J. Schickling
                                        ----------------------------------------
                                    Name: John J. Schickling
                                    Title: Treasurer

<PAGE>

                       SECOND LOAN MODIFICATION AGREEMENT

      This Second Loan Modification Agreement (this "Loan Modification
Agreement') is entered into us of February 28, 2003, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and PHASE FORWARD INCORPORATED, a Delaware corporation with its
principal place of business at 1440 Main Street, Waltham, Massachusetts 02451
("Borrower").

1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of April 17, 2002,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of April 17, 2002, between Borrower and Bank, as
amended by a certain First Loan Modification Agreement dated as of December
24,2002 (as amended, the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".

2.    DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing of securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.    DESCRIPTION OF CHANGE IN TERMS.

      A.    Modifications to Loan Agreement.

            1.    The Loan Agreement shall be amended by deleting the following
                  definition appearing in Section 13.1 thereof:

                        ""REVOLVING MATURITY DATE" is January 7, 2003."

                  and inserting in lieu thereof the following:

                        ""REVOLVING MATURITY DATE" is March 15, 2003."

      B.    Waiver. Bank hereby waives Borrower's existing default under the
      Loan Agreement by virtue of Borrower's failure to comply with the
      financial requirements set forth in Section 6.7 thereof as of the quarter
      ending December 31, 2002. Bank's waiver of Borrower's compliance of said
      affirmative covenant shall apply only to the foregoing specific period.

4.    FEES. The Borrower shall reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

5.    RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT AND NEGATIVE
PLEDGE AGREEMENT. Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Amended and Restated
Intellectual Property Security Agreement dated as of April 17,2002 between
Borrower and Bank, and acknowledges, confirms and agrees that said Amended and
Restated Intellectual Property Security Agreement shall remain in full force and
effect. Notwithstanding the foregoing, Borrower will deliver to Bank, on or
before March 15, 2003, any required updates to the listing of Intellectual
Property Collateral as defined in said Amended and Restated Intellectual
Property Security Agreement. Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a certain Negative Pledge
Agreement dated as of October 14, 1997 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

<PAGE>

6.    ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE. Borrower
shall not, without providing the Bank with thirty (30) days prior written
notice: (i) relocate its chief executive office, or add any new offices or
business locations (with assets of greater than Fifty Thousand Dollars ($50,000)
individually and Two Hundred Thousand Dollars ($200,000) in the aggregate), or
(ii) change its jurisdiction of organization, or (iii) change its organizational
structure or type, of (iv) change its legal name, or (v) change any
organizational number (if any) assigned by its jurisdiction of organization. In
addition, the Borrower hereby certifies that no Collateral is in the possession
of any third party bailee (such as at a warehouse), except as set forth in the
Schedule to the Loan Agreement. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower shall first receive, the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. Borrower will deliver to Bank on or before March 15,
2003, any required updates to the terms and disclosures contained in a certain
Perfection Certificate dated as of May 21, 2001 between Borrower and Bank, and
acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate has not adversely changed, as of
the date hereof.

7.    AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.

8.    CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. The Borrower
affirms and reaffirms that notwithstanding the terms of the Security Documents
to the contrary, (i) that the definition of "Code", "UCC" or "Uniform Commercial
Code" as set forth in the Security Documents shall be deemed to mean and refer
to "the Uniform Commercial Code as adopted by The Commonwealth of Massachusetts
(presently, Mass. Gen. Laws. Ch. 106), as may be amended and in effect from time
to time and (ii) the Collateral is intended to include all assets of the
Borrower. In connection therewith, the Collateral shall include, without
limitation, the following categories of assets as defined in the Code: goods
(including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables, and license fees), chattel paper (whether
tangible or electronic), deposit accounts, letter-of-credit rights (whether or
not the letter of credit is evidenced by a writing), commercial tort claims,
securities and all other investment property, general intangibles (including
payment intangibles and software), supporting obligations and any and all
proceeds of any thereof wherever located, whether now owned or hereafter
acquired. The Borrower hereby grants to the Bank a first perfected and
continuing security interest in the Collateral, whether now owned, or now due,
in which the Borrower has an interest or the power to transfer rights, or
hereafter acquired, arising, or to become due, or in which the Borrower obtains
an interest, or the power to transfer rights, with the exception of any
Collateral excluded as provided in the Loan Documents.

9.    CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

10.   RATIFICATION OF LOAN-DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

11.   NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.

12.   CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations, Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

13.   RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower and any guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as

<PAGE>

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

14.   JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the exclusive jurisdiction of any state or federal
court of competent jurisdiction in the Commonwealth of Massachusetts in any
action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the count of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR, PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.

15.   COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank (provided,
however, in no event shall this Loan Modification Agreement become effective
until signed by an officer of Bank in California).

            [The remainder of this page is intentionally left blank]
<PAGE>

      This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                            BANK:

PHASE FORWARD INCORPORATED           SILICON VALLEY BANK, doing business as
                                     SILICON VALLEY EAST

By: /s/ William G. Porter            By: /s/ Michael Tromack
    ----------------------------         ---------------------------------------

Name: William G. Porter              Name: Michael Tromack

Title: Vice President, Finance       Title: Vice President
       Phase Forward Incorporated

                                     SILICON VALLEY BANK

                                     By: /s/ Maggie Garcia
                                         ---------------------------------------

                                     Name: Maggie Garcia

                                     Title: AVP
                                      (signed in Santa Clara County, California)

      The undersigned, PHASE FORWARD SECURITIES CORPORATION, ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated May 3, 1999 (the "Guaranty") and acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith.

                                     PHASE FORWARD SECURITIES CORPORATION

                                     By: /s/ John J. Schickling
                                         ---------------------------------------
                                     Name: John J. Schickling
                                     Title: Treasurer

<PAGE>

                        FIRST LOAN MODIFICATION AGREEMENT

      This First Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of December 24, 2002, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and PHASE FORWARD INCORPORATED, a Delaware corporation with its
principal place of business at 1440 Main Street, Waltham, Massachusetts 02451
("Borrower").

1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of April 17, 2002,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of April 17, 2002, between Borrower and Bank (as
amended, the "Loan Agreement"). Capitalized terms used but not otherwise defined
herein shall have the same meaning as in the Loan Agreement.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".

2.    DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.    DESCRIPTION OF CHANGE IN TERMS.

      A.    Modifications to Loan Agreement.

            1.    The Loan Agreement shall be amended by deleting the following
                  definition appearing in Section 13.1 thereof:

                        ""COMMITTED EQUIPMENT LINE NO. 2" is an Equipment
                        Advance or Equipment Advances of up to One Million Seven
                        Hundred Fifty Thousand Dollars ($1,750,000.00).
                        Notwithstanding the foregoing, the Committed Equipment
                        Line No. 2 shall only be available to Borrower on and
                        after April 1, 2002 and provided that no Event of
                        Default has occurred through March 31, 2002."

                  and inserting in lieu thereof the following:

                        ""COMMITTED EQUIPMENT LINE NO. 2" is an Equipment
                        Advance or Equipment Advances of up to Two Million Seven
                        Hundred Fifty Thousand Dollars ($2,750,000.00).
                        Notwithstanding the foregoing, the Committed Equipment
                        Line No. 2 shall only be available to Borrower on and
                        after April 1, 2002 and provided that no Event of
                        Default has occurred through March 31, 2002."

4.    FEES. The Borrower shall reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

5.    RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT AND NEGATIVE
PLEDGE AGREEMENT. Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Intellectual Property Security
Agreement dated as of April 17, 2002 between Borrower and Bank and acknowledges,
confirms and agrees that said Intellectual Property Security Agreement shall
remain in full force and effect. Notwithstanding the foregoing, Borrower will
deliver to Bank, on or before January 31, 2003, any required updates to the
listing of Intellectual Property Collateral as defined in said Intellectual
Property Security Agreement. Borrower hereby ratifies, Confirms and reaffirms,
all and singular, the terms and conditions of a certain Negative Pledge
Agreement dated us of October 14, 1997 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative

<PAGE>

Pledge Agreement shall remain in full force and effect.

6.    ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE. Borrower
shall not, without providing the Bank with thirty (30) days prior written
notice: (i) relocate its chief executive office, or add any new offices or
business locations (with assets of greater than Fifty Thousand Dollars ($50,000)
individually and Two Hundred Thousand Dollars ($200,000) in the aggregate), or
(ii) change its jurisdiction of organization, or (iii) change its organizational
structure or type, or (iv) change its legal name, or (v) change any
organizational number (if any) assigned by its jurisdiction of organization. In
addition, the Borrower hereby certifies that no Collateral is in the possession
of any third party bailee (such as at a warehouse), except as set forth in the
Schedule to the Loan Agreement. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower shall firstreceive, the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. Borrower will deliver to Bank on or before January 31,
2003, any required updates to the terms and disclosures contained in a certain
Perfection Certificate dated as of May 21, 2001 between Borrower and Bank, and
acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate has not adversely changed, as of
the date hereof.

7.    AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.

8.    CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. The Borrower
affirms and reaffirms that notwithstanding the terms of the Security Documents
to the contrary, (i) that the definition of "Code", "UCC" or "Uniform Commercial
Code" as set forth in the Security Documents shall be deemed to mean and refer
to "the Uniform Commercial Code as adopted by The Commonwealth of Massachusetts
(presently, Mass. Gen. Laws. Ch. 106), as may be amended and in effect from time
to time and (ii) the Collateral is intended to include all assets of the
Borrower. In connection therewith, the Collateral shall include, without
limitation, the following categories of assets as defined in the Code: goods
(including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables, and license fees), chattel paper (whether
tangible or electronic), deposit accounts, letter-of-credit rights (whether or
not the letter of credit is evidenced by a writing), commercial tort claims,
securities and all other investment property, general intangibles (including
payment intangibles and software), supporting obligations and any and all
proceeds of any thereof, wherever located, whether now owned or hereafter
acquired. The Borrower hereby grants to the Bank a first perfected and
continuing security interest in the Collateral, whether now owned, or now due,
in which the Borrower has an interest or the power to transfer rights, or
hereafter acquired, arising, or to become due, or in which the Borrower obtains
an interest, or the power to transfer rights, with the exception of any
Collateral excluded as provided in the Loan Documents.

9.    CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

10.   RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

11.   NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.

12.   CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and affect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations, it is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

<PAGE>

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

14.   JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the exclusive jurisdiction of any state or federal
court of competent jurisdiction in the Commonwealth of Massachusetts in any
action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.

15.   COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

            [The remainder of this page is intentionally left blank]

<PAGE>

      This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                            BANK:

PHASE FORWARD INCORPORATED           SILICON VALLEY BANK, doing business as
                                     SILICON VALLEY EAST

By: /s/ William G. Porter            By: /s/ Pamela Aldsworth
    ----------------------------         ---------------------------------------

Name: William G. Porter              Name: Pamela Aldsworth

Title: Vice President, Finance       Title: SVP
       Phase Forward Incorporated

                                     SILICON VALLEY BANK

                                     By: /s/ Maggie Garcia
                                         ---------------------------------------

                                     Name: Maggie Garcia

                                     Title: AVP
                                      (signed in Santa Clara County, California)

      The undersigned, PHASE FORWARD SECURITIES CORPORATION, ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated May 3, 1999 (the "Guaranty") and acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith.

                                     PHASE FORWARD SECURITIES CORPORATION

                                     By: /s/ John J. Schickling
                                         ---------------------------------------
                                     Name: John J. Schickling
                                     Title: Treasurer
<PAGE>

             SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

         This SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of April 17, 2002, to be effective as of March 31, 2002,
between SILICON VALLEY BANK, a California chartered bank, with its principal
place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a
loan production office located at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462, doing business under the name
"Silicon Valley East" ("Bank") and PHASE FORWARD INCORPORATED, a Delaware
corporation with its principal place of business at 1440 Main Street, Waltham,
Massachusetts 02451 ("Borrower"), which amends and restates a certain Amended
and Restated Loan and Security Agreement between Borrower and Bank dated August
4, 2000 (as amended from time to time), provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank. The parties agree as follows:

         1        ACCOUNTING AND OTHER TERMS

         Accounting terms not defined in this Agreement shall be construed
following GAAP, Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.

         2        LOAN AND TERMS OF PAYMENT

         2.1      PROMISE TO PAY. Borrower hereby unconditionally promises to
pay Bank the unpaid principal amount of all Credit Extensions and interest on
the unpaid principal amount of the Credit Extensions as and when due in
accordance with this Agreement.

         2.1.1    REVOLVING ADVANCES.

                  (a)      Bank shall make Advances not exceeding (i) the
Committed Revolving Line or the Borrowing Base, whichever is less, and minus
(ii) the aggregate outstanding Advances hereunder. Amounts borrowed under this
Section may be repaid and reborrowed during the term of this Agreement.

                  (b)      To obtain an Advance, Borrower must notify Bank by
facsimile or telephone by 3:00 p.m. Eastern time on the Business Day the Advance
is to be made. If such notification is by telephone, Borrower must promptly
confirm the notification by delivering to Bank a completed Payment/Advance Form
in the form attached as EXHIBIT B. Bank shall credit Advances to Borrower's
deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower shall indemnify Bank for any loss
Bank suffers due to such reliance.

                  (c)      The Committed Revolving Line terminates on the
Revolving Maturity Date, when the principal amount of all Advances and the
unpaid interest thereon, shall be immediately payable.

         2.1.2    EQUIPMENT ADVANCES.

                  (a)      (i) From the Closing Date through Equipment
Availability End Date No. 1, Bank shall make Equipment Advances to Borrower in
an aggregate amount not exceeding the Committed Equipment Line No. 1. Provided
that no Event of Default has occurred through March 31, 2002, from April 1, 2002
through Equipment Availability End Date No. 2, Bank shall make Equipment
Advances to Borrower in an aggregate amount not exceeding the Committed
Equipment Line No, 2. Except as provided below, the Equipment Advances may only
be used to finance Eligible Equipment purchased within ninety (90) days
(determined based upon the applicable invoice date of such Eligible Equipment)
of each Equipment Advance request. Notwithstanding the foregoing, Equipment
Advances shall be permitted to finance Eligible Equipment purchased on or after
August 1, 2001 (determined based upon the applicable

<PAGE>

invoice date of such Eligible Equipment) provided that such Equipment Advance
requests are submitted to Bank within twenty (20) days after the Closing Date.
Equipment Advances shall not exceed one hundred percent (100%) of the invoice
amount of such Eligible Equipment, excluding taxes, shipping, warranty charges,
freight discounts and installation expense relating to such Equipment, unless
such costs constitute Other Equipment. Each Equipment Advance must be for a
minimum amount of $100,000.00.

                  (b)      Interest accrues on all Equipment Advances under
Committed Equipment Line No. 1 and Committed Equipment Line No. 2 from the date
of each such Equipment Advance at the per annum rate described in Section
2.3(a), and shall be payable monthly on the Payment Date of each month
commencing with the initial Payment Date following each such Equipment Advance.
Each Equipment Advance under Committed Equipment Line No. 1 and Committed
Equipment Line No. 2 shall be payable in (i) thirty-six (36) equal monthly
installments of principal, plus (ii) monthly payments of accrued interest,
beginning on the first Payment Date following such Equipment Advance and
continuing on each Payment Date thereafter through the Equipment Maturity Date
applicable to such Equipment Advance, Equipment Advances when repaid may not be
reborrowed.

                  (c)      To obtain an Equipment Advance, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern
time one (1) Business Day before the day on which the Equipment Advance is to be
made. The notice in the form of EXHIBIT B (Payment/Advance Form) must be signed
by a Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.

         2.1.3    TERM LOAN NO. 1.

                  (a)      Bank loaned to Borrower an amount equal to Term Loan
No. 1.

                  (b)      Borrower shall pay to Bank: (i) seventeen (17) equal
monthly installments of principal in the amount of One Hundred Eleven Thousand
One Hundred Eleven and 11/100 Dollars ($111,111.11) plus (ii) all accrued
interest (the "Term Loan No. 1 Payment"). Each Term Loan No. 1 Payment is
payable on the first (1st) day of each month commencing April 1, 2002.
Borrower's final Term Loan No. 1 Payment, due on August 1, 2003, shall include
all outstanding Term Loan No. 1 principal and accrued interest.

                  (c)      The Term Loan No. 1 accrues interest in accordance
with Section 2.3(a).

         2.1.4    TERM LOAN NO. 2.

                  (a)      Bank loaned to Borrower an amount equal to Term Loan
No. 2.

                  (b)      Borrower shall pay to Bank: (i) eighteen (18) equal
monthly installments of principal in the amount of Thirty Four Thousand One
Hundred Thirty Two and 91/100 Dollars ($34,132.91) plus (ii) all accrued
interest (the "Term Loan No. 2 Payment"). Each Term Loan No, 2 Payment is
payable on the first (1st) day of each month commencing April 1, 2002.
Borrower's final Term Loan No. 2 Payment, due on September 1, 2003, shall
include all outstanding Term Loan No. 2 principal and accrued interest.

                  (c)      The Term Loan No. 2 accrues interest in accordance
with Section 2.3(a).

         2.1.5    TERM LOAN NO. 3.

                  (a)      Bank loaned to Borrower an amount equal to Term Loan
No. 3.

                  (b)      Borrower shall pay to Bank: (i) twelve (12) equal
monthly installments of principal in the amount of Twenty One Thousand Four
Hundred Twenty Three Dollars ($21,423.00) plus (ii) all accrued interest (the
"Term Loan No. 3 Payment"). Each Term Loan No. 3 Payment is payable on the first
(1st) day of each month commencing April 1, 2002. Borrower's final Term Loan No.
3 Payment, due on March 1, 2003, shall include all outstanding Term Loan No. 3
principal and accrued interest.

                  (c)      The Term Loan No. 3 accrues interest in accordance
with Section 2.3(a).

<PAGE>

         2.1.6    TERM LOAN NO. 4.

                  (a)      Bank loaned to Borrower an amount equal to Term Loan
No. 4.

                  (b)      Borrower shall pay to Bank: (i) two (2) equal monthly
installments of principal in the amount of Twenty Seven Thousand Seven Hundred
Seventy Seven and 78/100 Dollars ($27,777.78) plus (ii) all accrued interest
(the "Term Loan No. 4 Payment"). Each Term Loan No. 4 Payment is payable on the
twentieth (20th) day of each month commencing April 20, 2002. Borrower's final
Terra Loan No. 4 Payment, due on May 20, 2002, shall include all outstanding
Term Loan No. 4 principal and accrued interest.

                  (c)      The Term Loan No. 4 accrues interest in accordance
with Section 2.3(a).

         2.1.7    TERM. LOAN NO. 5.

                  (a)      Bank loaned to Borrower an amount equal to Term Loan
No. 5.

                  (b)      Borrower shall pay to Bank: (i) twenty three (23)
equal monthly installments of principal in the amount of Thirty Three Thousand
Three Hundred Thirty Three and 33/100 Dollars ($33,333.33) plus (ii) all accrued
interest (the "Term Loan No. 5 Payment"). Each Term Loan No. 5 Payment is
payable on the twenty second (22nd) day of each month commencing April 22, 2002.
Borrower's final Term Loan No. 5 Payment, due on February 22, 2004, shall
include all outstanding Term Loan No. 5 principal and accrued interest.

                  (c)      The Term Loan No. 5 accrues interest in accordance
with Section 2.3(a).

         2.1.8    UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend
the undisbursed portion of the Credit Extensions shall terminate if there has
been a material adverse change in the general affairs, results of operation, or
condition (financial or otherwise) of Borrower, whether or not arising from
transactions in the ordinary course of business, or there has been any material
adverse deviation by Borrower from the most recent business plan of Borrower
presented to and accepted by Bank prior to the execution of this Agreement.

         2.2      OVERADVANCES. If Borrower's Obligations under Section 2.1.1
exceed the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base, Borrower must immediately pay in cash to Bank the excess.

         2.3      INTEREST RATE; PAYMENTS.

                  (a)      Interest Rate. Credit Extensions shall accrue
interest, on the average daily balance thereof, in accordance with the
following: (i) Advances outstanding under the Committed Revolving Line shall
accrue interest at a per annum rate equal to the aggregate of the Bank's Prime
Rate, plus one half of one percent (0.50%), (ii) Equipment Advances under
Committed Equipment Line No. 1 and Committed Equipment Line No. 2 shall accrue
interest at a per annum rate equal to the aggregate of the Bank's Prime Rate,
plus one percent (1.0%), (iii) Term Loan No. 1 shall accrue interest at a per
annum rate equal to the aggregate of the Bank's Prime Rate, plus one half of one
percent (0.50%), (iv) Term Loan No. 2 shall accrue interest at a per annum rate
equal to the aggregate of the Bank's Prime Rate, plus three quarters of one
percent (0.75%), (v) Term Loan No. 3 shall accrue interest at a per annum rate
equal to the aggregate of the Bank's Prime Rate, plus three quarters of one
percent (0.75%), (vi) Term Loan No. 4 shall accrue interest at a per annum rate
equal to the aggregate of the Bank's Prime Rate, plus one percent (1.0%), and
(vii) Term Loan No. 5 shall accrue interest at a per annum rate equal to the
aggregate of the Bank's Prime Rate, plus one percent (1.0%). During the
existence of an Event of Default, Obligations shall bear interest at five
percent (5.0%) above the rate effective immediately before the Event of Default.
The interest rate shall increase or decrease when the Prime Rate changes.
Interest is computed on the basis of a 360 day year for the actual number of
days elapsed.

                  (b)      Payments. Interest is payable on the Payment Date of
each month, except as expressly described in this Agreement. Bank may debit any
of Borrower's deposit accounts including Account Number 3300070652 for principal
and interest payments or any amounts Borrower owes Bank. Bank shall promptly
notify

<PAGE>

Borrower when it debits Borrower's accounts. These debits are not a set-off.
Payments received after 12:00 noon Eastern time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue.

         2.4      FEES. Borrower shall pay to Bank:

                  (a)      Committed Revolving Line Fee. A fully earned,
non-refundable Committed Revolving Line fee of Ten Thousand Dollars ($10,000.00)
due and payable on the Closing Date; and

                  (b)      Committed Equipment Line Fee. A fully earned,
non-refundable fee for the availability of Committed Equipment Line No. 1 and
Committed Equipment Line No. 2 (collectively, the "Committed Equipment Line
Fee") of Fourteen Thousand Dollars ($14,000.00), due and payable the earlier of
(i) the Equipment Availability End Date No. 2 or (ii) the termination of
Committed Equipment Line No. 1 or Committed Equipment Line No. 2.
Notwithstanding the foregoing, the Bank hereby agrees to waive the Committed
Equipment Line Fee if at any time the aggregate amount of Equipment Advances
made under Committed Equipment Line No. 1 and Committed Equipment Line No. 2
exceed Two Million Six Hundred Twenty-Five Thousand Dollars ($2,625,000.00); and

                  (c)      Bank Expenses. All Bank Expenses (including
reasonable attorneys' fees and expenses incurred through and after the Closing
Date) when due.

         2.5      ADDITIONAL COSTS. If any new law or regulation increases
Bank's costs or reduces its income for any loan, Borrower shall pay the increase
in cost or reduction in income or additional expense; provided, however, that
Borrower shall not be liable for any amount attributable to any period before
180 days prior to the date Bank notifies Borrower of such increased costs. Bank
agrees that it shall allocate any increased costs among its customers similarly
affected in good faith and in a manner consistent with Bank's customary
practice.

         3        CONDITIONS OF LOANS

         3.1      CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. THE
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
Satisfactory to Bank, the following:

                  (a)      this Agreement;

                  (b)      a certificate of the Secretary of each Borrower with
         respect to articles, bylaws, incumbency and resolutions authorizing the
         execution and delivery of this Agreement;

                  (c)      an Amended and Restated Intellectual Property
         Security Agreement by Borrower;

                  (d)      ratification of guaranty;

                  (e)      Agency Account Control Agreement;

                  (f)      payment of the fees and Bank Expenses then due
         specified in Section 2.4 hereof;

                  (g)      Certificates of Foreign Qualification (if applicable)
         of Borrower;

                  (h)      Certificates of Good Standing/Legal Existence of
         Borrower and Guarantor; and

                  (i)      such other documents, and completion of such other
         matters, as Bank may reasonably deem necessary or appropriate.

<PAGE>

         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)      timely receipt of any Payment/Advance Form; and

                  (b)      the representations and warranties in Section 5 shall
be materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true.

         4        CREATION OF SECURITY INTEREST

         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, and pledges and assigns to the Bank, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower warrants and represents that, except as
set forth in the Schedule, the security interest granted herein shall be a first
priority security interest in the Collateral. Bank may place a "hold" on any
deposit account pledged as Collateral.

Except as disclosed on the Schedule, Borrower is not a party to, nor is bound
by, any material license or other material agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property. Without written notice from Borrower to Bank, Borrower
shall not enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Borrower's business or financial
condition. Borrower shall take such steps as Bank requests to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for all such
licenses or contract rights to be deemed "Collateral" and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future.

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

If the Amended and Restated Intellectual Property Security Agreement of even
date between Borrower and Bank is ever terminated in accordance with its terms,
each of the Borrower and Bank hereby acknowledge and agree that the Intellectual
Property Collateral hereunder shall be released except that Bank's Collateral
shall continue to include all of Borrower's accounts, license and royalty fees
and other revenues, proceeds, or income arising out of or relating to any of the
Intellectual Property.

         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 any of the foregoing would not
reasonably be expected to cause a Material Adverse Change. In connection with
this Agreement, the Borrower delivered to the Bank a certificate signed by the
Borrower and entitled "Perfection Certificate". The Borrower represents and
warrants to the Bank that: (a) the Borrower's exact legal name is that indicated
on the Perfection Certificate and on the signature page hereof; and (b) the
Borrower is an organization of the type, and is organized in the jurisdiction,
set forth in the Perfection Certificate; and (c) the Perfection Certificate

<PAGE>

accurately sets forth the Borrower's organizational identification number or
accurately states that the Borrower has none; and (d) the Perfection Certificate
accurately sets forth the Borrower's place of business, or, if more than one,
its chief executive office as well as the Borrower's mailing address if
different, and (e) all other information set forth on the Perfection Certificate
pertaining to the Borrower is accurate and complete. If the Borrower does not
now have an organizational identification number, but later obtains it, Borrower
shall forthwith notify the Bank or 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 cause a Material Adverse Change.

         5.2      COLLATERAL. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. Borrower has no other deposit account, other than
the deposit accounts with Bank and deposit accounts described in the Perfection
Certificate delivered to the Bank in connection herewith. The Accounts are bona
fide, existing obligations, and the service or property has been performed (or
will be performed within ninety (90) days) or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the account
debtor. The Collateral is not in the possession of any third party bailee (such
as a warehouse). In the event that Borrower, after the date hereof, intends to
store or otherwise deliver any portion of the Collateral to a bailee, then
Borrower will first receive the written consent of Bank and such bailee must
acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any account debtor whose accounts are an Eligible Account in any
Borrowing Base Certificate.

         5.3      LITIGATION. Except as shown in the Schedule, there are no
actions or proceedings pending or, to the knowledge of Borrower's Responsible
Officers, threatened by or against Borrower or any Subsidiary in which an
adverse decision could cause a Material Adverse Change.

         5.4      NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All
consolidated financial statements for Borrower and any Subsidiary delivered to
Bank fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

         5.5      SOLVENCY. Borrower is able to pay its debts (including trade
debts) as 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 Board of Governors), Borrower has materially complied in all material
respects with the Federal Fair Labor Standards Act, Borrower has not violated
any laws, ordinances or rules, the violation of which could reasonably be
expected to cause a Material Adverse Change. None of Borrower's or any
Subsidiary's properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower's knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP. Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do any of the foregoing 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 of any Person other than Phase Forward
Europe Limited (United Kingdom), Phase Forward Securities Corporation (a
Massachusetts corporation), Domain Manufacturing Corporation (a Delaware
corporation), Domain Solutions International Holdings, Inc. (a Delaware
corporation), Phase Forward Pvt. Limited (Australia), Domain Manufacturing
SARL(France), Phase Forward S.A. (France), Clinsoft Ltd. (United Kingdom),
Domain Manufacturing UK Ltd (United Kingdom), Clinsoft Deutschland GmbH
(Germany), Phase Forward Japan KK (Japan), Domain Manufacturing

<PAGE>

Singapore Pte. Ltd (Singapore), Phase Forward Canada Limited (Canada), and
Clinsoft AB (Sweden), and 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
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.

         6        AFFIRMATIVE COVENANTS

         Borrower shall do all of the following:

         6.1      GOVERNMENT COMPLIANCE. Except as set forth on the Schedule,
Borrower shall maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower's business or operations. Borrower
shall comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or be expected to
cause a Material Adverse Change.

         6.2      FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

                  (a)      Borrower shall 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 and consolidating 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 one hundred twenty (120) days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) as soon as
available, but no later than thirty (30) days after the last day of Borrower's
fiscal year, financial projections, approved by the Borrower's Board of
Directors, for the then current fiscal year; (iv) within five (5) days of
filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (v) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000.00) or
more in the aggregate; and (vi) budgets, sales projections, operating plans or
other financial information reasonably requested by Bank.

                  (b)      Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of EXHIBIT C, with aged listings of accounts
receivable.

                  (c)      Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D.

                  (d)      Allow Bank to audit Borrower's Collateral at
Borrower's expense. Such audits shall be conducted no more often than once every
twelve(l2) months unless an Event of Default has occurred and is continuing.

         6.3      TAXES. Borrower shall 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.

         6.4      INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, standard for Borrower's industry. Insurance
policies shall be in a form, with companies, and in amounts that are reasonably
satisfactory to Bank. All property policies shall have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show the Bank as an additional insured and all policies shall

<PAGE>

provide that the insurer must give Bank at least twenty (20) days notice before
canceling its policy. At Bank's request, Borrower shall deliver certified copies
of policies and evidence of all premium payments. Proceeds payable under any
policy shall, at Bank's option, be payable to Bank on account of the
Obligations. If Borrower fails to obtain insurance as required under this
Section or to pay any amount or furnish any required proof of payment to third
persons and the Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section, and take any action under the
policies Bank deems prudent.

         6.5      PRIMARY ACCOUNTS. In order to permit the Bank to monitor the
Borrower's financial performance and condition, Borrower shall maintain its
primary depository and domestic operating accounts with Bank, and a majority of
the Borrower's cash or securities in excess of that amount used for Borrower's
operations shall be maintained or administered through the Bank. Additionally, a
majority of Borrower's and Borrower's Subsidiaries' cash and securities, in the
aggregate, shall be maintained and administered through the Bank, Borrower shall
identify to Bank, in writing, of any bank or securities account opened by
Borrower with any institution other than Bank. The provisions of this paragraph
shall not apply to deposit accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of the
Borrower's employees.

         6.6      ADJUSTED QUICK RATIO. Borrower shall maintain at all times, to
be tested as of the last day of each month, a ratio of Quick Assets to Current
Liabilities minus Deferred Revenue of not less than: (a) 1.25 to 1.0 through the
month ending November 30, 2002, and (b) 1.50 to 1.0 for each month thereafter.
Notwithstanding the forgoing, in the event that Borrower raises at least Twenty
Five Million Dollars ($25,000,000.00): (i) in equity issued after January 25,
2002 or (ii) in Subordinated Debt (as defined herein) entered into after January
25, 2002, the Borrower shall maintain at all times, to be tested as of the last
day of each month, a ratio of Quick Assets to Current Liabilities minus Deferred
Revenue of not less than 1.50 to 1.0.

         6.7      REVENUE. Borrower shall maintain, as of the last day of each
quarter, net revenues of not less than; (i) Eleven Million Two Hundred Fifty
Thousand Dollars ($11,250,000.00) for the Fourth Quarter of Fiscal Year 2001,
(ii) Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) for the First
Quarter of Fiscal Year 2002, (iii) Thirteen Million Seven Hundred Fifty Thousand
Dollars ($ 13,750,000.00) for the Second Quarter of Fiscal Year 2002. (iv)
Fifteen Million Dollars ($ 15,000,000.00) for the Third Quarter of Fiscal Year
2002, and (v) Sixteen Million Five Hundred Thousand Dollars ($ 16,500,000.00)
for the Fourth Quarter of Fiscal Year 2002. Commencing with the First Quarter of
Fiscal Year 2003, and for each quarter thereafter, the Borrower shall maintain
net revenues at an amount not less than the greater of: (a) Sixteen Million Five
Hundred Thousand Dollars ($ 16,500,000.00), or (b) eighty percent (80%) of the
plan for minimum quarterly net revenues approved by the Borrower's Board of
Directors.

         6.8      PROFITABILITY. Commencing with the fiscal quarter ending
September 30, 2002, Borrower shall have a consolidated net income, plus
depreciation, plus amortization and plus any other non-cash writedown of
intangible assets (as a result of new accounting rules on intangible assets) of
not less than One Dollar ($ 1.00) for each fiscal quarter.

         6.9      FURTHER ASSURANCES. B 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 do any of the following without the Bank's prior
written consent;

         7.1      DISPOSITIONS. Except as set forth in the Schedule, 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 Transfer (i) of Inventory in the ordinary course of
business; (ii) of non-exclusive licenses and similar arrangements for the use of
the property of Borrower or its Subsidiaries in the ordinary course of business;
or (iii) of worn-out or obsolete Equipment.

         7.2      CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS
LOCATIONS. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or have a

<PAGE>

material change in its ownership (other than by the sale of Borrower's equity
securities in a public offering or to venture capital investors so long as
Borrower identifies to Bank in writing the venture capital or other
institutional investors prior to the closing of the investment). Borrower shall
provide immediate written notice to the Bank of any change in a Responsible
Officer of the Borrower from that person occupying such position as of the date
of this Agreement. Borrower shall not, without at least thirty (30) days prior
written notice to Bark: (i) relocate its chief executive office, or add any new
offices or business locations (with assets of greater than Fifty Thousand
Dollars ($50,000) individually and Two Hundred Thousand Dollars ($200,000) in
the aggregate), or (ii) change its jurisdiction of organization, or (iii) change
its organizational structure or type, or (iv) change its legal name, or (v)
change any organizational number (if any) assigned by its jurisdiction of
organization.

         7.3      MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person except that
such merger, consolidation or acquisition may occur without the written consent
of the Bank where: (A) any such transaction is between Borrower and any of its
Subsidiaries and Borrower is the surviving legal entity, or among any of
Borrower's affiliates (except where such affiliate is a Guarantor of the
Obligations hereunder), or (b)(i) no Event of Default has occurred and is
continuing or would exist after giving effect to the transactions, and (ii) such
merger, consolidation or acquisition is in the same or similar line of business
as the Borrower, and (iii) the purchase price for all such mergers,
consolidations and acquisitions (inclusive of any indebtedness of the acquired
company assumed by the Borrower in connection with the transaction) is not
greater than an aggregate amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00), and (iv) the Borrower is the surviving legal entity, and (v) no
indebtedness (either direct or contingent) is assumed by the Borrower in
connection with such merger, consolidation or acquisition with the exception of
indebtedness (1) in such amounts which when added to the purchase price shall
not exceed the limits set forth in clause (iii) of this Section 7.3 and (2)
which consists only of trade payables of the acquired company.

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

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

         7.6      DISTRIBUTIONS: INVESTMENTS. Except as set forth on the
Schedule, (i) 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 (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock, except for repurchases
of stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements in an aggregate amount not to exceed $250,000
in the aggregate in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases.

         7.7      TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or
permit any material transaction with any Affiliate, except transactions that are
in the ordinary course of Borrower's business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.

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

         7.9      COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company", under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation

<PAGE>

could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

         8        EVENTS OF DEFAULT

         Any one of the following is an Event of Default:

         8.1      PAYMENT DEFAULT. Borrower fails to pay any of the Obligations
within three (3) days after their due date. During the additional period the
failure to cure the default is not an Event of Default (but no Credit Extension
shall be made during the cure period);

         8.2      COVENANT DEFAULT. Borrower does nor perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrower and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within twenty (20) days after it occurs, or if the default cannot be cured
within twenty (20) days or cannot be cured after Borrower's attempts in the
twenty (20) day period, and the default may be cured within a reasonable time,
then Borrower shall have additional time, (of not more than thirty (30) days),
unless otherwise agreed to in writing by the Bank, to attempt to cure the
default. Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain. During the additional period
the failure to cure the default is not an Event of Default (but no Credit
Extensions shall be made during the cure period);

         8.3      MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;

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

         8.5      INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower
begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made before any Insolvency Proceeding is dismissed);

         8.6      OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a parry with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate or that could result in a Material
Adverse Change;

         8.7      JUDGMENTS. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Five Hundred
Thousand Dollars ($500,000) in the aggregate shall be rendered against Borrower
and shall remain unsatisfied and unstayed for a period of ten (10) days
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment);

         8.8      MISREPRESENTATIONS. If Borrower or any Person acting for
Borrower makes any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document.

         8.9      GUARANTY. (i) Any guaranty of any Obligations terminates or
ceases for any reason to be in full force; or (ii) any Guarantor does not
perform any obligation under any guaranty of the Obligations; or (iii) any
material misrepresentation or material misstatement exists now or later in any
warranty or representation in any guaranty of the

<PAGE>

Obligations or in any certificate delivered to Rank in connection with the
guaranty; or (iv) any circumstance described in Section 7, or Sections 8.4, 8.5
or 8.7 occurs to any Guarantor, or (v) the death, liquidation, winding up,
termination of existence, or insolvency of any Guarantor.

         9        BANKS, RIGHTS AND REMEDIES

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

                  (a)      Declare all Obligations immediately due and payable
         (but if an Event of Default described in Section 8.5 occurs all
         Obligations are immediately due and payable without any action by
         Bank);

                  (b)      Stop advancing money or extending credit for
         Borrower's benefit under this Agreement or under any other agreement
         between Borrower and Bank;

                  (c)      Settle or adjust disputes and claims directly with
         account debtors for amounts, on terms and in any order that Bank
         considers advisable;

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

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

                  (f)      Ship, reclaim, recover, store, finish, maintain,
         repair, prepare for sale, advertise for sale, and sell the Collateral.
         Bank is granted a non-exclusive, royalty-free license or other right to
         use, without charge, Borrower's labels, patents, copyrights, mask
         works, rights of use of any name, trade secrets, trade names,
         trademarks, service marks, and advertising matter, or any similar
         property as it pertains to the Collateral, in completing production of,
         advertising for sale, and selling any Collateral and, in connection
         with Bank's exercise of its rights under this Section, Borrower's
         rights under all licenses and all franchise agreements inure to Bank's
         benefit; and

                  (g)      Dispose of the Collateral according to the Code.

         9.2      POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank
as its lawful attorney-in-fact, to be effective during the existence of an Event
of Default, to; (i) endorse Borrower's name on any checks or other forms of
payment or security; (ii) sign Borrower's name on any invoice or bill of lading
for any Account or drafts against account debtors; (iii) settle and adjust
disputes and claims about the Accounts directly with account debtors, for
amounts and on terms Bank determines reasonable; (iv) make, settle, and adjust
all claims under Borrower's insurance policies; and (v) transfer the Collateral
into the name of Bank or a third party as the Code permits. Borrower hereby
appoints Bank as its lawful attorney-in-fact to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank's foregoing appointment as Borrower's
attorney in fact, and all of Bank's rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.

         9.3      ACCOUNTS COLLECTION. In the event that an Event of Default
occurs and is continuing, Bank may notify any Person owing Borrower money of
Bank's security interest in the funds and verify and/or collect the amount of
the Account. After the occurrence of an Event of Default, any amounts received
by Borrower shall be held in trust by

<PAGE>

Borrower for Bank, and, if requested by Bank, Borrower shall immediately deliver
such receipts to Bank in the form received from the account debtor, with proper
endorsements for deposit.

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

         9.5      BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies
with reasonable banking practices regarding the safekeeping of collateral, the
Bank shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or(d) any act or default of any carrier, warehouseman,
bailee, or other person. Borrower bears all risk of loss, damage or destruction
of the Collateral.

         9.6      REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.

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

         10       NOTICES

         All notices or demands by any party to this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed below. Either Bank or
Borrower may change its notice address by giving the other written notice.

                  If to Borrower: Phase Forward Incorporated
                                  1440 Main Street
                                  Waltham, Massachusetts 02451
                                  Attn: Mr. William G. Porter, Vice President of
                                  Finance
                                  FAX: (781) 902-4391

                  With a copy to: Phase Forward Incorporated
                                  1440 Main Street
                                  Waltham, Massachusetts 02451
                                  Attn: D. Ari Buchler, Vice President and
                                  General Counsel
                                  FAX: (781) 902-4391

                  If to Bank:     Silicon Valley Bank
                                  One Newton Executive Park, Suite 200
                                  2221 Washington Street
                                  Newton, Massachusetts 02462
                                  Attn: Mr. Michael Tramack
                                  Fax: (617) 969-5962

<PAGE>

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

         11       CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

         Massachusetts law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Massachusetts; provided,
however, that if for any reason Bank cannot avail itself of such courts in the
Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and
venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

         12       GENERAL PROVISIONS

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

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

         12.3     CONFIRMATIONS AND RATIFICATIONS BY BORROWER. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and disclosures
contained in a certain Perfection Certificate dated as of May 21, 2001 between
Borrower and Bank, and acknowledges, confirms and agrees that the disclosures
and information Borrower provided to Bank in the Perfection Certificate has not
changed, as of the date of this Agreement. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of October 14, 1997 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

         12.4     SUBROGATION AND SIMILAR RIGHTS. Notwithstanding any other
provision of this Agreement or other related document, Borrower irrevocably
waives all rights that it may have at law or in equity (including, without
limitation, any law subrogating the Borrower to the rights of another Person
under the Loan Documents) to seek contribution, indemnification or any other
form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by the Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise and all rights that it might have to benefit
from, or to participate in, any security for the Obligations as a result of any
payment made by the Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any

<PAGE>

payment is made to Borrower in contravention of this Section. Borrower shall
hold such payment in trust for Bank and such payment shall be promptly delivered
to Bank for application to the Obligations, whether matured or unmatured.

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

         12.6     TIME OF ESSENCE. Time is of the essence for the performance of
all Obligations in this Agreement.

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

         12.8     AMENDMENTS IN WRITING; INTEGRATION. All amendments to this
Agreement must be in writing signed by both Bank and Borrower. This Agreement
and the Loan Documents represent the entire agreement about this subject matter,
and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

         12.9     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.

         12.10    SURVIVAL. All covenants, representations and warranties made
in this Agreement continue in full force while any Obligations remain
outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall
survive until the statute of limitations with respect to such claim or cause of
action shall have run.

         12.11    CONFIDENTIALITY. In handling any confidential information,
Bank shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (i) to
Bank's subsidiaries or affiliates in connection with their business with
Borrower; (ii) to prospective transferees or purchasers of any interest in the
Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts in obtaining such prospective transferee's or purchaser's agreement to
the terms of this provision); (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit;
and (v) as Bank considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank's possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

         13       DEFINITIONS

         13.1     DEFINITIONS.

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

<PAGE>

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

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

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

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

         "BORROWING BASE" is 80% of Eligible Accounts, as determined by Bank
from Borrower's moat recent Borrowing Base Certificate; provided, however, that
Bank may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.

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

         "CLOSING DATE" is the date of this Agreement.

         "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.

         "COLLATERAL" is any and all properties, rights and assets of the
Borrower granted by the Borrower to Bank or arising under the Code, now, or in
the future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on EXHIBIT A.

         "COMMITTED EQUIPMENT LINE NO. 1" is an Equipment Advance or Equipment
Advances of up to One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00).

         "COMMITTED EQUIPMENT LINE NO. 2" is an Equipment Advance or Equipment
Advances of up to One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00). Notwithstanding the foregoing, the Committed Equipment Line No.
2 shall only be available to Borrower on and after April 1, 2002 and provided
that no Event of Default has occurred through March 31, 2002.

         "COMMITTED REVOLVING LINE" is an Advance or Advances of up to
$2,500,000.00.

         "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

         "CREDIT EXTENSION" is each Advance, Equipment Advance, Term Loan No. 1,
Term Loan No. 2, Term Loan No. 3, Term Loan No. 4, Term Loan No. 5, or any other
extension of credit by Bank for Borrower's benefit.

<PAGE>

         "CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, plus, without duplication, all
obligations and liabilities of Borrower to Bank.

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

         "ELIGIBLE ACCOUNTS" are billed Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.2. Unless Bank agrees otherwise in writing, Eligible Accounts shall
not include:

                  (a)      Accounts that the account debtor has not paid within
         ninety (90) days of invoice date;

                  (b)      Accounts for an account debtor, fifty percent (50%)
         or more of whose Accounts have not been paid within ninety (90) days of
         invoice date;

                  (c)      Credit balances over ninety (90) days from invoice
         date;

                  (d)      Accounts for an account debtor, including Affiliates,
         whose total obligations to Borrower exceed twenty-five percent (25%) of
         all Accounts, for the amounts that exceed that percentage, unless Bank
         approves in writing;

                  (e)      Accounts for which the account debtor does not have
         its principal place of business in the United States;

                  (f)      Accounts for which the account debtor is a federal,
         state or local government entity or any department, agency, or
         instrumentality thereof;

                  (g)      Accounts for which Borrower owes the account debtor,
         but only up to the amount owed (sometimes called "contra" accounts,
         accounts payable, customer deposits or credit accounts);

                  (h)      Accounts for demonstration or promotional equipment,
         or in which goods are consigned, sales guaranteed, sale or return, sale
         on approval, bill and hold, or other terms if account debtor's payment
         may be conditional;

                  (i)      Accounts for which the account debtor is Borrower's
         Affiliate, officer, employee, or agent;

                  (j)      Accounts in which the account debtor disputes
         liability or makes any claim and Bank believes there may be a basis for
         dispute (but only up to the disputed or claimed amount), or if the
         Account Debtor is subject to an Insolvency Proceeding, or becomes
         insolvent, or goes out of business;

                  (k)      Accounts for which Bank reasonably determines after
         inquiry and consultation with Borrower collection to be doubtful.

         "ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, subject to the
limitations set forth herein, and (b) Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is reasonably
acceptable to Bank in all respects.

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

         "EQUIPMENT ADVANCE" is an advance or advances to Borrower from Bank
under Committed Equipment Line No. 1 and/or Committed Equipment Line No. 2, as
applicable.

         "EQUIPMENT AVAILABILITY END DATE NO. 1" is June 30, 2002.

<PAGE>

         "EQUIPMENT AVAILABILITY END DATE NO. 2" is December 31, 2002.

         "EQUIPMENT MATURITY DATE" is, with respect to each Equipment Advance
under Committed Equipment Line No. 1 and Committed Equipment Line No. 2, the
thirty-sixth (36th) Payment Date following each such Equipment Advance.

         "ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.

         "GAAP" is generally accepted accounting principles.

         "GUARANTOR" is any present or future guarantor of the Obligations,
including Phase Forward Securities Corporation.

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

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

         "INTELLECTUAL PROPERTY" is:

                  (a)      copyrights, trademarks, patents, and mask works
         including amendments, renewals, extensions and all licenses or other
         rights to use and all license fees and royalties from the use;

                  (b)      Any trade secrets and any Intellectual Property
         rights in computer software and computer software products now or later
         existing, created, acquired or held;

                  (c)      All design rights which may be available to Borrower
         now or later created, acquired or held;

                  (d)      Any claims for damages (past, present or future) for
         infringement of any of the rights above, with the right, but not the
         obligation, to sue and collect damages for use or infringement of the
         intellectual property rights above.

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

         "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.

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

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

<PAGE>

         "MATERIAL ADVERSE CHANGE" is a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

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

         "OTHER EQUIPMENT" is leasehold improvements, intangible property such
as computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by the Bank, including sales tax,
freight and installation expenses. Unless otherwise agreed to by Bank, not more
than 25% of the proceeds of Committed Equipment Line No. 1 and Committed
Equipment Line No. 2 shall be used to finance Other Equipment.

         "PAYMENT DATE" is the first calendar day of each month.

         "PERMITTED INDEBTEDNESS" is:

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

                  (b)      Indebtedness existing on the Closing Date and shown
         on the Schedule;

                  (c)      Subordinated Debt;

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

                  (e)      Indebtedness secured by Permitted Liens.

         "PERMITTED INVESTMENTS" are:

                  (a)      Investments shown on the Investments Schedule and
         existing on the Closing Date; and

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

                  (c)      any Investments in accordance with Borrower's
         investment policy, as amended from time to time, provided that a copy
         of such investment policy (and any such amendment thereto) has been
         delivered to Bank.

         "PERMITTED LIENS" are:

                  (a)      Liens existing on the Closing Date and shown on the
         Schedule or arising under this Agreement or other Loan Documents;

                  (b)      Liens for taxes, fees, assessments or other
         government charges or 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;

                  (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;

<PAGE>

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

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

         "PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.

         "QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments which are in accordance with Borrower's investment policy (a copy of
which has been delivered to the Bank).

         "RESPONSIBLE OFFICER" is each of the Chief Executive Officer,
President, Chief Financial Officer and Vice President of Finance of Borrower.

         "REVOLVING MATURITY DATE" is January 7, 2003.

         "SCHEDULE" is any attached schedule of exceptions.

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

         "SUBSIDIARY" of any Person is any corporation, partnership, limited
liability company, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

         "TERM LOAN NO. 1" means a loan with a current principal balance of One
Million Eight Hundred Eighty Eight Thousand Eight Hundred Eighty Eight and
91/100 Dollars ($1,888,888.91).

         "TERM LOAN NO. 1 PAYMENT" is defined in Section 2.1.3.

         "TERM LOAN NO. 2" means a loan with a current principal balance of Six
Hundred Fourteen Thousand Three Hundred Ninety Two and 47/100 Dollars
($614,392.47).

         "TERM LOAN NO. 2 PAYMENT" is defined in Section 2.1.4.

         "TERM LOAN NO. 3" means a loan with a current principal balance of Two
Hundred Fifty Seven Thousand Sixty Four and 95/100 Dollars (257,064.95).

         "TERM LOAN NO. 3 PAYMENT" is defined in Section 2.1.5.

         "TERM LOAN NO, 4" means a loan with a current principal balance of
Fifty Five Thousand Five Hundred Fifty Five and 48/100 ($55,555.48).

         "TERM LOAN NO. 4 PAYMENT" is defined in Section 2.1.6.

         "TERM LOAN NO. 5" means a loan with a current principal balance of
Seven Hundred Sixty Six Thousand Six Hundred Sixty Six and 69/100 Dollars
($766,666.69).

         "TERM LOAN NO. 5 PAYMENT" is defined in Section 2.1.7.

<PAGE>

         "TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.

            [the remainder of this page is intentionally left blank]

<PAGE>

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

BORROWER:

PHASE FORWARD INCORPORATED

By /s/ William G. Porter
   ----------------------------------
Name: William G. PORTER
Title: Vice President, Finance
       Phase Forward Incorporated

BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST

By /s/ [ILLEGIBLE]
   -----------------------------------
Name: [ILLEGIBLE]
Title: Vice President

SILICON VALLEY BANK

By /s/ Maggie Garcia
   -----------------------------------
Name: Maggie Garcia
TITLE: Loan Admin. Team Leader
       (Signed in Santa Clara County,
                California)

<PAGE>

                                    EXHIBIT A

         The Collateral consists of all right, title and interest of Borrower in
and to the following:

         All goods, equipment, inventory, contract rights or rights to payment
of money, leases, license agreements, franchise agreements, general intangibles
(including payment intangibles), accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and

         Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks
(specifically excluding any "intent to use" applications), service marks and
applications therefor; trade styles, trade names, any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; and

         All Borrower's books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

<PAGE>

                                    EXHIBIT B

                        LOAN PAYMENT/ADVANCE REQUEST FORM
                 DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.

Fax To: (617) 969-5965                          Date:___________________________

LOAN PAYMENT:

                     Sample documents Client Name (Borrower)

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

Principal $_________________and/or Interest $_____________________________

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

AUTHORIZED SIGNATURE:                              Phone Number:
================================================================================
LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.

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

Amount of Advance $_________________

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

AUTHORIZED SIGNATURE:                              Phone Number:
================================================================================
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 3:00PM, E.S.T.

Beneficiary Name:____________________    Amount of Wire: $___________________
Beneficiary Bank:____________________    Account Number:_____________________
City and Sate: ______________________
Beneficiary Bank Transit (ABA) #:_____   Beneficiary Bank Code (Swift, Sort,
                                         Chip, etc.):

                                               (FOR INTERNATIONAL WIRE ONLY)

Intermediary Bank:_____________________      Transit (ABA) #:___________________
For Further Credit to:__________________________________________________________
Special Instruction:____________________________________________________________

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

Authorized Signature:__________________      2nd Signature (If Required): ______

Print Name/Title:______________________      Print Name/Title:__________________

Telephone # ___________________________      Telephone #________________________

<PAGE>

                                    EXHIBIT C
                           BORROWING BASE CERTIFICATE

Borrower: Phase Forward Incorporated                  Bank: Silicon Valley Bank

Commitment Amount: $2,500,000.00

ACCOUNTS RECEIVABLE

1.    Accounts Receivable Book Value as of________________        $_____________
2.    Additions (please explain on reverse)                       $_____________
3.    TOTAL ACCOUNTS RECEIVABLE                                   $_____________

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4.    Amounts over 90 days due                                    $_____________
5.    Balance of 50% over 90 day accounts                         $_____________
6.    Credit balances over 90 days                                $_____________
7.    Concentration Limits                                        $_____________
8.    Foreign Accounts                                            $_____________
9.    Governmental Accounts                                       $_____________
10.   Contra Accounts                                             $_____________
11.   Promotion or Demo Accounts                                  $_____________
12.   Intercompany/Employee Accounts                              $_____________
13.   Other (please explain on reverse)                           $_____________
14.   TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                        $_____________
15.   Eligible Accounts (#3 minus #14)                            $_____________
16.   LOAN VALUE OF ACCOUNTS (80% of #15)                         $_____________

BALANCES
17.   Maximum Loan Amount                                         $_____________
18.   Total Funds Available (Lesser of #17 and #16)               $_____________
19.   Present balance owing on Line of Credit                     $_____________
20.   RESERVE POSITION (#18 minus #19)                            $_____________

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

COMMENTS:                                               BANK USE ONLY

By:_________________________                   Received by:_____________________
       Authorized Signer                                     AUTHORIZED SIGNER

                                               Date: ___________________________

                                               Verified:________________________
                                                             AUTHORIZED SIGNER

                                               DATE:____________________________

<PAGE>

                                    EXHIBIT D
                             COMPLIANCE CERTIFICATE

TO:          SILICON VALLEY BANK
FROM:        PHASE FORWARD INCORPORATED

         The undersigned authorized officer of PHASE FORWARD INCORPORATED hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (as amended, 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 of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.

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

<TABLE>
<CAPTION>
     REPORTING COVENANT                  REQUIRED                       COMPLIES
     ------------------                  --------                       --------
<S>                             <C>                                     <C>
Financial Statements with CC    Monthly within 30 days                   Yes No
Annual FS (CPA Audited)         FYE within 120 days                      Yes No
Annual Projections              Within 30 days of prior FYE              Yes No
BBC & A/R Agings                Monthly within 30 days                   Yes No
</TABLE>

<TABLE>
<CAPTION>
     FINANCIAL COVENANT                REQUIRED              ACTUAL     COMPLIES
     ------------------                --------              ------     --------
<S>                             <C>                          <C>        <C>
Minimum Adjusted Quick Ratio    1.25:1.0 thru 11/30/02**     __:1.0      Yes No
    (tested monthly)            1.50:1.0 thereafter          __:1.0      Yes No
**AQR shall be 1.50:1.0 if Borrower raises 25,000,000.00 in equity or sub-debt

Minimum Net Revenue             $11,250,000 for Q4'01        $_____      Yes No
    (tested quarterly)          $12,500,000 for Q1'02        $_____      Yes No
                                $13,750,000 for Q2'02        $_____      Yes No
                                $15,000,000 for Q3'02        $_____      Yes No
                                $16,500,000 for Q4'02
                                $16,500,000 or 80% of Board  $_____      Yes No
                                  approved plan, thereafter

Minimum Profitability
    (tested quarterly           $1,00                        $_____      Yes No
    beginning 9/30/02)
</TABLE>

                                                          BANK USE ONLY

COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,                                      Received by: ___________________
                                                              AUTHORIZED SIGNER

___________________________
SIGNATURE                                       Date:__________________________

___________________________
TITLE                                           Verified:_______________________
___________________________                                   AUTHORIZED SIGNER
DATE

                                                Date: _______________________

<PAGE>

                                    SCHEDULE

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