Document:

exv10w8

Exhibit 10.8

SEVENTH LOAN MODIFICATION AGREEMENT

     This Seventh Loan Modification Agreement (this “Loan Modification Agreement”) is entered into
as of November __, 2010, by and among SILICON VALLEY BANK, a California corporation, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at 380 Interlocken Crescent, Suite 600, Broomfield, Colorado 80021
(“Bank”), TRUSTWAVE HOLDINGS, INC., a Delaware corporation (“Holdings”), TRUSTWAVE INTERMEDIATE,
INC., a Delaware corporation (“Intermediate”), TW VERICEPT CORPORATION, a Delaware corporation
(formerly known as “TrustWave Acquisition, Inc.”, “Vericept”) and TRUSTWAVE GOVERNMENT SOLUTIONS,
INC., a Delaware corporation (“Government Solutions” and individually and collectively, jointly and
severally, with Holdings, Intermediate and Vericept, “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 August 19, 2009, evidenced by, among other documents, a certain Amended and
Restated Loan and Security Agreement dated as of August 19, 2009 between Borrower and Bank, as
amended by a First Loan Modification Agreement dated October 19, 2009 between Borrower and Bank, as
further amended by a Consent and Second Loan Modification Agreement dated January 6, 2010 between
Borrower and Bank, as further amended by a Consent and Third Loan Modification Agreement dated
March 1, 2010 between Borrower and Bank, as further amended by a Joinder and Fourth Loan
Modification Agreement dated April 7, 2010 between Borrower and Bank, as further amended by a
Waiver and Fifth Loan Modification Agreement dated August 30, 2010 between Borrower and Bank, and
as further amended by a Sixth Loan Modification Agreement dated November __, 2010 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.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as
described in the Loan Agreement and the Intellectual Property Collateral as described in a certain
Intellectual Property Security Agreement dated August 19, 2009, by Vericept in favor of Bank (the
“IP Security Agreement and 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 as Sections 2.1.2, 2.1.3 and 2.1.4 of the Loan Agreement, in
their entirety:

     “2.1.2 Letters of Credit Sublimit.

               (a) As part of the Revolving Line, Bank shall issue or have
issued Letters of Credit for Borrower’s account. The face amount of
outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed
Two Million Five Hundred Thousand Dollars ($2,500,000), inclusive of
Credit Extensions relating to Sections 2.1.4 and 2.1.5. Such
aggregate amounts utilized hereunder shall at all times reduce the
amount otherwise available for Advances under the Revolving Line.
If, on the Revolving Line Maturity Date, there are any outstanding
Letters of Credit, then on such date Borrower shall provide to Bank
cash collateral in an amount equal to 105% of the face amount of all
such Letters of Credit plus all interest, fees, and costs due or to
become due in

 

connection therewith (as estimated by Bank in its good
faith business judgment), to secure all of the Obligations relating
to said Letters of Credit. All Letters of
Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of
Bank’s standard Application and Letter of Credit Agreement (the
“Letter of Credit Application”). Borrower agrees to execute any
further documentation in connection with the Letters of Credit as
Bank may reasonably request. Borrower further agrees to be bound by
the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Bank and opened for Borrower’s account or by
Bank’s interpretations of any Letter of Credit issued by Bank for
Borrower’s account, and Borrower understands and agrees that Bank
shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments,
or supplements thereto.

               (b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit,
and the Letter of Credit Application.

     Borrower may request that Bank issue a Letter of Credit payable
in a Foreign Currency. If a demand for payment is made under any
such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus fees and
charges in connection therewith such as wire, cable, SWIFT or similar
charges) in Dollars at the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer
to the country issuing such Foreign Currency.

     To guard against fluctuations in currency exchange rates, upon
the issuance of any Letter of Credit payable in a Foreign Currency,
Bank shall create a reserve (the “Letter of Credit Reserve”) under
the Revolving Line in an amount equal to ten percent (10%) of the
face amount of such Letter of Credit. The amount of the Letter of
Credit Reserve may be adjusted by Bank from time to time to account
for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such
Letter of Credit Reserve for as long as such Letter of Credit remains
outstanding.

     2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line,
Borrower may enter into foreign exchange contracts with Bank under
which Borrower commits to purchase from or sell to Bank a specific
amount of Foreign Currency (each, a “FX Forward Contract”) on a
specified date (the “Settlement Date”). FX Forward Contracts shall
have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%)
of each outstanding FX Forward Contract in a maximum aggregate amount
equal to Two Hundred Fifty Thousand Dollars ($250,000) (the “FX
Reserve”). The aggregate amount of FX Forward Contracts at any one
time may not exceed ten (10) times the amount of the FX Reserve and
the aggregate amount of FX Forward Contracts may not exceed Two
Million Five Hundred Thousand Dollars ($2,500,000), inclusive of
Credit Extensions relating to Sections 2.1.3, and 2.1.5.

2

 

     2.1.4 Cash Management Services Sublimit. Borrower may use up to
Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Cash
Management Services Sublimit”), inclusive of Credit Extensions
relating to
Sections 2.1.3 and 2.1.4 of the Revolving Line for Bank’s cash
management services which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services
identified in Bank’s various cash management services agreements
(collectively, the “Cash Management Services”). Any amounts Bank
pays on behalf of Borrower or any amounts that are not paid by
Borrower for any Cash Management Services will be treated as Advances
under the Revolving Line and will accrue interest at the interest
rate applicable to Advances.”

and inserting in lieu thereof the following:

     “2.1.2 Letters of Credit Sublimit.

               (a) As part of the Revolving Line, Bank shall issue or have
issued Letters of Credit for Borrower’s account. The face amount of
outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed
Five Million Dollars ($5,000,000), inclusive of Credit Extensions
relating to Sections 2.1.4 and 2.1.5. Such aggregate amounts
utilized hereunder shall at all times reduce the amount otherwise
available for Advances under the Revolving Line. If, on the
Revolving Line Maturity Date, there are any outstanding Letters of
Credit, then on such date Borrower shall provide to Bank cash
collateral in an amount equal to 105% of the face amount of all such
Letters of Credit plus all interest, fees, and costs due or to become
due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to said
Letters of Credit. All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank’s standard Application
and Letter of Credit Agreement (the “Letter of Credit Application”).
Borrower agrees to execute any further documentation in connection
with the Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of
the issuer of any Letters of Credit guarantied by Bank and opened for
Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower
understands and agrees that Bank shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters
of Credit or any modifications, amendments, or supplements thereto.

               (b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit,
and the Letter of Credit Application.

     Borrower may request that Bank issue a Letter of Credit payable
in a Foreign Currency. If a demand for payment is made under any
such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus fees and
charges in connection therewith such as wire, cable, SWIFT or similar
charges) in Dollars at the then-prevailing

3

 

rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer
to the country issuing such Foreign Currency.

     To guard against fluctuations in currency exchange rates, upon
the issuance of any Letter of Credit payable in a Foreign Currency,
Bank shall
create a reserve (the “Letter of Credit Reserve”) under the
Revolving Line in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of the Letter of Credit
Reserve may be adjusted by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds under
the Revolving Line shall be reduced by the amount of such Letter of
Credit Reserve for as long as such Letter of Credit remains
outstanding.

     2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line,
Borrower may enter into foreign exchange contracts with Bank under
which Borrower commits to purchase from or sell to Bank a specific
amount of Foreign Currency (each, a “FX Forward Contract”) on a
specified date (the “Settlement Date”). FX Forward Contracts shall
have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%)
of each outstanding FX Forward Contract in a maximum aggregate amount
equal to Five Hundred Thousand Dollars ($500,000) (the “FX Reserve”).
The aggregate amount of FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve and the aggregate
amount of FX Forward Contracts may not exceed Five Million Dollars
($5,000,000), inclusive of Credit Extensions relating to Sections
2.1.3, and 2.1.5.

     2.1.4 Cash Management Services Sublimit. Borrower may use up to
Five Million Dollars ($5,000,000) (the “Cash Management Services
Sublimit”), inclusive of Credit Extensions relating to Sections 2.1.3
and 2.1.4 of the Revolving Line for Bank’s cash management services
which may include merchant services, direct deposit of payroll,
business credit card, and check cashing services identified in Bank’s
various cash management services agreements (collectively, the “Cash
Management Services”). Any amounts Bank pays on behalf of Borrower
or any amounts that are not paid by Borrower for any Cash Management
Services will be treated as Advances under the Revolving Line and
will accrue interest at the interest rate applicable to Advances.”

	 	2.	 	The Loan Agreement shall be amended by deleting the following,
appearing as Sections 6.7(a), (b) and (c) thereof, in its entirety:

     ““(a) Liquidity. Commencing with December 31, 2009 and
as of the last day of each month thereafter, Borrower’s unrestricted
and unencumbered cash and Cash Equivalents maintained with Bank and
Bank’s Affiliates, of at least Ten Million Dollars ($10,000,000).

     (b) Intentionally Omitted.

     (c) Intentionally Omitted.”

and inserting in lieu thereof the following:

4

 

     “(a) Adjusted Quick Ratio. A ratio of Quick Assets to
Current Liabilities minus the current portion of Deferred Revenue of
at least 1.25 to 1.00, tested monthly.

     (b) EBITDA. Borrower shall achieve EBITDA, tested
quarterly, of: (i) at least Five Hundred Thousand Dollars ($500,000)
for the fiscal quarter ending December 31, 2010, (ii) at least Zero
Dollars ($0) for the fiscal quarter ending March 31, 2011, (iii) at
least One Million Dollars ($1,000,000) for the fiscal quarter ending
June 30, 2011, (iv) at least One Million Five Hundred Thousand
Dollars ($1,500,000) for the fiscal quarter ending September 30,
2011, and (v) at least One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) for the fiscal quarter ending December 31, 2011.

     (c) Capital Expenditures. Borrower shall not permit its
capital expenditures (as determined in accordance with GAAP, but
excluding capital expenditures financed with the proceeds of
Advances) to exceed $4,250,000 in any fiscal year.”

	 	3.	 	The Loan Agreement shall be amended by deleting the following
definitions appearing in Section 13.1 of the Loan Agreement, in their entirety:

     ““EBITDA” shall mean, with respect to a specified period, (a)
Net Income, plus (b) Interest Expense, plus (c) to the extent
deducted in the calculation of Net Income, depreciation expense and
amortization expense, plus (d) income tax expense, plus (e) severance
expense actually incurred in connection with the acquisition of TW
Vericept in an aggregate amount not to exceed $250,000.

     “Quick Assets” is, on any date, Borrower’s unrestricted cash and
Cash Equivalents maintained at Bank, plus net Eligible Accounts.

     “Revolving Line” is an Advance or Advances in aggregate amount
of up to Ten Million Dollars ($10,000,000) outstanding at any time;
provided, however, that on and after November __,
2010 to and until (i) Bank has received and approved, in form and
substance satisfactory to Bank in its sole discretion, Borrower’s
financial projections for 2011 and thereafter and (ii) Bank and
Borrower have entered into a further amendment to this Agreement
providing for revisions of the covenants set forth in Section 6.7
hereof in form and substance satisfactory to Bank in its sole
discretion, no Advance or Advances shall be available under the
Revolving Line and the “Revolving Line” shall be deemed to be zero
($0.00).

     “Revolving Line Maturity Date” is November 30, 2010.”

and inserting in lieu thereof the following:

     ““EBITDA” shall mean, with respect to a specified period, (a)
Net Income, plus (b) Interest Expense, plus (c) to the extent
deducted in the calculation of Net Income, depreciation expense and
amortization expense, plus (d) income tax expense, plus (e) non-cash
items reducing Net Income (excluding

5

 

any such non-cash item to the
extent it represents an accrual or reserve for cash items in any
future period or amortization of a prepaid cash item that was paid in
a prior period or is actually converted to a cash item within
one-year), including, stock-based compensation of officers and
directors of Borrower.

     “Quick Assets” is, on any date, Borrower’s unrestricted cash and
Cash Equivalents maintained at Bank, plus Borrower’s accounts
receivable.

     “Revolving Line” is an Advance or Advances in aggregate amount
of up to Twenty Million Dollars ($20,000,000) outstanding at any
time.

     “Revolving Line Maturity Date” is November 30, 2011.”

	 	4.	 	The Compliance Certificate appearing as Exhibit C to
the Loan Agreement is hereby replaced with the Compliance Certificate attached
as Exhibit A hereto.

4. REPRESENTATION AND WARRANTIES. To induce Bank to enter into this Loan Modification
Agreement, Borrower hereby represents and warrants to Bank as follows: (a) the representations and
warranties of Borrower contained in the Existing Loan Documents are true, accurate and complete in
all material respects as of the date hereof (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and correct as of such date), and
(b) no Event of Default has occurred and is continuing and (b) Borrower has the power and authority
to execute and deliver this Loan Modification Agreement.

5. FEES AND EXPENSES. Borrower shall pay to Bank a modification fee equal to Fifty
Thousand Dollars ($50,000.00), which fee shall be due on the date hereof and shall be deemed fully
earned as of the date hereof. Borrower shall also reimburse Bank for all reasonable legal fees and
expenses incurred in connection with the Existing Loan Documents and this amendment thereto.

6. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Vericept hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of the IP Security Agreement,
and acknowledges, confirms and agrees that the IP Security Agreement contains an accurate and
complete listing of all Intellectual Property Collateral as defined in the IP Security Agreement,
and shall remain in full force and effect.

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

6

 

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. CONFIDENTIALITY. Bank may use confidential information for the development of
databases, reporting purposes, and market analysis, so long as such confidential information is
aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower.
The provisions of the immediately preceding sentence shall survive the termination of the Loan
Agreement.

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

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS LOAN MODIFICATION AGREEMENT, THE LOAN AGREEMENT 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 LOAN MODIFICATION AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

13. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it
shall have been executed by Borrower and Bank.

[The
remainder of this page is intentionally left blank — Signature
Pages to Follow]

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     This Seventh Loan Modification Agreement is executed as of the date first written above.

	 	 	 	 	 	 	 

	 
	BORROWER:	 	BANK:
	
TRUSTWAVE HOLDINGS, INC.	 	SILICON VALLEY BANK
	 
	By: 	/s/ Robert McCullen	 	By: 	 
	 	Name: 	 Robert McCullen	 	 	Name: 	 
	 	Title:	 Chief Executive Officer	 	 	Title:	 
	 
	TRUSTWAVE INTERMEDIATE, INC.	 	 	 	 
	 
	By: 	 /s/ Robert J. McCullen	 	 	 	 
	 	Name: 	 Robert J. McCullen	 	 	 	 
	 	Title:	 Chief Executive Officer	 	 	 	 
	 
	TW VERICEPT CORPORATION	 	 	 	 
	 
	By: 	 /s/ Robert J. McCullen	 	 	 	 
	 	Name: 	 Robert J. McCullen	 	 	 	 
	 	Title:	 Chief Executive Officer	 	 	 	 
	 
	 
	TRUSTWAVE GOVERNMENT SOLUTIONS,
INC.	 	 	 	 
	 
	By: 	 /s/ Robert J. McCullen	 	 	 	 
	 	Name: 	 Robert J. McCullen	 	 	 	 
	 	Title:	 Chief Executive Officer	 	 	 	 

 

     The undersigned, TRUSTWAVE LIMITED, a company registered in England & Wales, ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain Deed of Guarantee
in favor of Bank dated September 25, 2008 (the “Guarantee”) and acknowledges, confirms and agrees
that the Guarantee 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 therewith.

					
	 	

TRUSTWAVE LIMITED

 	 
	 	By:  	/s/ Robert J. McCullen
 	 
	 	 	Name:  	Robert J. McCullen 	 
	 	 	Title:  	Chief Executive Officer and President 	 
	 

     The undersigned, TRUSTWAVE HOLDINGS LIMITED, a company registered in England & Wales,
ratifies, confirms and reaffirms, all and singular, the terms and conditions of a certain Deed of
Guarantee in favor of Bank dated November 27, 2007 (the “Guarantee”) and acknowledges, confirms and
agrees that the Guarantee 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 therewith.

					
	 	

TRUSTWAVE HOLDINGS LIMITED

 	 
	 	By:  	/s/ Robert J. McCullen
 	 
	 	 	Name:  	Robert J. McCullen 	 
	 	 	Title:  	Chief Executive Officer and President 	 

 

	 	 	 	 	 

EXHIBIT A TO SEVENTH LOAN MODIFICATION AGREEMENT

EXHIBIT C

COMPLIANCE CERTIFICATE

	 	 	 	 	 	 	 

	TO:

	 	SILICON VALLEY BANK
	 	Date:	 	 
	 

	 	 	 	 	 	 
	FROM:

	 	TRUSTWAVE HOLDINGS, INC.

TRUSTWAVE INTERMEDIATE, INC.

TW VERICEPT CORPORATION

TRUSTWAVE GOVERNMENT SOLUTIONS, INC.	 	 	 	 

     The undersigned authorized officers of TRUSTWAVE HOLDINGS, INC., TRUSTWAVE INTERMEDIATE, INC.,
TW VERICEPT CORPORATION and TRUSTWAVE GOVERNMENT SOLUTIONS, INC. (individually and collectively,
jointly and severally, the “Borrower”) certify that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete
compliance for the period ending _______________ with all required covenants except as noted below,
(2) there are no Events of Default, (3) all representations and warranties in the Agreement are
true and correct in all material respects on this date except as noted below; provided, however,
that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that
those representations and warranties expressly referring to a specific date shall be true, accurate
and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries,
has timely filed all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as
otherwise permitted pursuant to the terms of Section 5.8 of the Agreement, and (5) no Liens have
been levied or claims made against Borrower relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank. Attached are the required
documents supporting the certification. The undersigned certify that these are prepared in
accordance with generally GAAP consistently applied from one period to the next except as explained
in an accompanying letter or footnotes. The undersigned acknowledge that no borrowings may be
requested at any time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date this certificate is
delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given
them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Monthly consolidated and consolidating financial statements
with Compliance Certificate

	 	Monthly within 30 days
	 	Yes    No
	 
	 	 	 	 
	Annual financial statement (CPA Audited)

	 	FYE within 150 days
	 	Yes    No
	 
	 	 	 	 
	Board Approved Projections

	 	Annually, within 30 days
after year end
	 	Yes    No
	 
	 	 	 	 
	Borrowing Base Certificate (together with A/R & A/P Agings,
and deferred revenue report)

	 	Monthly within 30 days
	 	Yes    No
	 
	 	 	 	 
	Audit

	 	Annually
	 	Yes    No

	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Maintain:
	 	 	 	 	 	 
	(a) Adjusted Quick Ratio (tested monthly)
	 	1.25:1.0	 	_____:1.0	 	Yes      No
	(b) EBITDA* (tested quarterly)
	 	$_________	 	$________	 	Yes     No
	(c) Capital Expenditures (annually)
	 	$4,250,000	 	$_________	 	Yes     No

 

			
	*	 	As set forth in section 6.7(b) of the Loan Agreement.

 

          The following financial covenant analyses and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate.

          The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)

 

 

 

 

 

	 	 	 	 	 	 	 

	TRUSTWAVE HOLDINGS, INC.	 	BANK USE ONLY
	 
	 	 	 	 	Received
By: 

	By: 	 	 	 	        authorized signer
	 	Name: 	 	 	 	 
	 	Title:	 	 	Date: 	 
	 	 	 	 	
Verified: 	 
	 	 	 	 	 	authorized signer
	 	 	 	 	
Date:	 
	 	 	 	 	
Compliance Status: Yes       No
	 
	TRUSTWAVE GOVERNMENT SOLUTIONS, INC.	 	 	 	 
	 
	By: 	 	 	 	 	 
	 	Name: 	 	 	 	 	 
	 	Title: 	 	 	 	 	 
	 
	TRUSTWAVE INTERMEDIATE, INC.	 	 	 	 
	 
	By: 	 	 	 	 	 
	 	Name: 	 	 	 	 	 
	 	Title: 	 	 	 	 	 
	 
	TW VERICEPT CORPORATION	 	 	 	 
	 
	By: 	 	 	 	 	 
	 	Name: 	 	 	 	 	 
	 	Title: 	 	 	 	 	 

 

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated: ____________________

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan
Agreement shall control.

	I.	 	Adjusted Quick Ratio (Section 6.7(a))

	 	 	 	 	 

	A.	 	Borrower’s unrestricted cash and Cash Equivalents maintained at Bank
	 	$ ____________
	B.	 	Net Eligible Accounts
	 	$ ____________
	C.	 	Quick Assets (the sum of lines A and B)
	 	$ ____________
	D.	 	Obligations and liabilities of Borrower to Bank
	 	$ ____________
	E.	 	Borrower’s Total Liabilities that mature within one (1) year
	 	$ ____________
	F.	 	Current Liabilities (the sum of Line D and Line E)
	 	$ ____________
	G.	 	Current portion of Deferred Revenue
	 	$ ____________
	H.	 	Line F minus Line G
	 	$ ____________
	I.	 	Adjusted Quick Ratio, Line C divided by Line H
	 	________________

Is line I equal to or greater than 1.25:1:00?

Compliance:

	 	 	 

	_______ No, not in compliance

	 	_______ Yes, in compliance

	II.	 	EBITDA (Section 6.7(b))

			
	Required:	 	See chart below

Actual:

	 	 	 	 	 	 	 	 	 

	 	A.	 	 	Net Income
	 	$	____________	 
	 	B.	 	 	Interest Expense
	 	$	____________	 
	 	C.	 	 	To the extent deducted in the determination of Net Income
	 	 	 	 
	 	 	 	 	1. Depreciation expense
	 	$	____________	 
	 	 	 	 	2. Amortization expense
	 	$	____________	 
	 	 	 	 	3. Sum of Items 1 and 2
	 	$	____________	 
	 	D.	 	 	Income tax expense
	 	$	____________	 
	 	E.	 	 	non-cash items
	 	$	____________	 
	 	F.	 	 	EBITDA (Line A plus Line B plus Line C(3) plus Line D plus Line E)
	 	$	____________	 

 

Is line F equal to or greater than $__________? (see chart below)

Required:

Minimum cumulative EBITDA at the end of each period noted below in the following amounts:

	 	 	 	 	 
	Date	 	EBITDA	 
	Quarter ending December 31, 2010
	 	$	500,000	 
	Quarter ending March 31, 2011
	 	$	0	 
	Quarter ending June 30, 2011
	 	$	1,000,000	 
	Quarter ending September 30, 2011
	 	$	1,500,000	 
	Quarter ending December 31, 2011
	 	$	1,750,000	 

Compliance:

	 	 	 

	_______ No, not in compliance

	 	_______ Yes, in complianceexv10w9

Exhibit 10.9

Trustwave Confidential Information

TRUSTWAVE HOLDINGS, INC.

STOCK INCENTIVE PLAN

(As of January 25, 2011)

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Trustwave Confidential Information

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 

	ARTICLE I	 	 	1	 
	 	 	 	 
	 	 	 	 
	DEFINITIONS	 	 	1	 
	1.01.	 	 	Acceleration Date
	 	 	1	 
	1.02.	 	 	Affiliate
	 	 	1	 
	1.03.	 	 	Agreement
	 	 	1	 
	1.04.	 	 	Board
	 	 	1	 
	1.05.	 	 	Cause
	 	 	1	 
	1.06.	 	 	Change in Control
	 	 	1	 
	1.07.	 	 	Code
	 	 	2	 
	1.08.	 	 	Company
	 	 	2	 
	1.09.	 	 	Consultant
	 	 	2	 
	1.10.	 	 	Control Change Date
	 	 	2	 
	1.11.	 	 	Director
	 	 	2	 
	1.12.	 	 	Disability
	 	 	2	 
	1.13.	 	 	Employee
	 	 	2	 
	1.14.	 	 	Exchange Act
	 	 	2	 
	1.15.	 	 	Fair Market Value
	 	 	2	 
	1.16.	 	 	Incentive Stock Option
	 	 	3	 
	1.17.	 	 	Nonqualified Stock Option
	 	 	3	 
	1.18.	 	 	Option
	 	 	3	 
	1.19.	 	 	Participant
	 	 	3	 
	1.20.	 	 	Plan
	 	 	3	 
	1.21.	 	 	Securities
Act.
	 	 	3	 
	1.22.	 	 	Share
	 	 	3	 
	1.23.	 	 	Stock
	 	 	4	 
	1.24.	 	 	Stock Award
	 	 	4	 
	1.25.	 	 	Ten Percent Shareholder
	 	 	4	 
	 	 	 	 
	 	 	 	 
	ARTICLE II THE PLAN	 	 	4	 
	 	 	 	 
	 	 	 	 
	2.01.	 	 	Purpose and Scope
	 	 	4	 
	2.02.	 	 	Effective Date and Duration of Plan
	 	 	4	 
	 	 	 	 
	 	 	 	 
	ARTICLE III ADMINISTRATION	 	 	4	 
	 	 	 	 
	 	 	 	 
	3.01.	 	 	Administration
	 	 	4	 
	3.02.	 	 	Grants to Foreign Nationals
	 	 	5	 

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	ARTICLE IV ELIGIBILITY FOR GRANTS AND AWARDS	 	 	5	 
	 	 	 	 
	 	 	 	 
	4.01.	 	 	Eligibility
	 	 	5	 
	4.02.	 	 	Grants and Awards
	 	 	5	 
	 	 	 	 
	 	 	 	 
	ARTICLE V STOCK SUBJECT TO PLAN	 	 	6	 
	 	 	 	 
	 	 	 	 
	5.01.	 	 	Stock Subject to Plan
	 	 	6	 
	5.02.	 	 	Reallocation of Shares
	 	 	6	 
	 	 	 	 
	 	 	 	 
	ARTICLE VI OPTIONS	 	 	6	 
	 	 	 	 
	 	 	 	 
	6.01.	 	 	Award
	 	 	6	 
	6.02.	 	 	Option Price
	 	 	6	 
	6.03.	 	 	Vesting
	 	 	6	 
	6.05.	 	 	Nontransferability
	 	 	7	 
	6.06.	 	 	Employment Status
	 	 	7	 
	6.07.	 	 	Change of Control
	 	 	7	 
	6.08.	 	 	Exercise
	 	 	8	 
	6.09.	 	 	Payment
	 	 	8	 
	6.10.	 	 	Tax Withholding Requirements
	 	 	8	 
	6.11.	 	 	Shareholder Rights
	 	 	8	 
	6.12.	 	 	Disposition of Stock
	 	 	9	 
	 	 	 	 
	 	 	 	 
	ARTICLE VII STOCK AWARDS	 	 	9	 
	 	 	 	 
	 	 	 	 
	7.01.	 	 	Award
	 	 	9	 
	7.02.	 	 	Vesting
	 	 	9	 
	7.03.	 	 	Employment Status
	 	 	9	 
	7.04.	 	 	Change in Control
	 	 	9	 
	7.05.	 	 	Shareholder Rights
	 	 	9	 
	 	 	 	 
	 	 	 	 
	ARTICLE VIII ADJUSTMENT UPON CHANGE IN STOCK	 	 	10	 
	 	 	 	 
	 	 	 	 
	8.01.	 	 	Adjustments
	 	 	10	 
	 	 	 	 
	 	 	 	 
	ARTICLE IX OTHER PROVISIONS FOR GRANTS AND AWARDS	 	 	10	 
	 	 	 	 
	 	 	 	 
	9.01.	 	 	Resale Restrictions
	 	 	10	 
	9.02.	 	 	Buy Back and Cancellation Rights
	 	 	11	 
	9.03.	 	 	Substitutions and Assumptions
	 	 	11	 
	9.04.	 	 	Withdrawal
	 	 	11	 
	9.05.	 	 	Compliance with Applicable Laws and Certificate of Incorporation
	 	 	11	 

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	9.06.	 	 	Termination of Employment
	 	 	12	 
	9.07.	 	 	Transferable Options or Stock Awards
	 	 	13	 
	 	 	 	 
	 	 	 	 
	ARTICLE X	 	 	13	 
	 	 	 	 
	 	 	 	 
	COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES	 	 	13	 
	 	 	 	 
	 	 	 	 
	10.01.	 	 	Registration, Listing and Qualification of Stock
	 	 	13	 
	 	 	 	 
	 	 	 	 
	ARTICLE XI AMENDMENT AND TERMINATION	 	 	14	 
	 	 	 	 
	 	 	 	 
	11.01.	 	 	Amendment
	 	 	14	 
	11.02.	 	 	Termination
	 	 	14	 
	 	 	 	 
	 	 	 	 
	ARTICLE XII GENERAL PROVISIONS	 	 	15	 
	 	 	 	 
	 	 	 	 
	12.01.	 	 	Effect on Employment and Service
	 	 	15	 
	12.02.	 	 	Unfunded Plan
	 	 	15	 
	12.03.	 	 	Rules of Construction
	 	 	15	 
	12.04.	 	 	Certain Reduction of Parachute Payments
	 	 	15	 
	12.05.	 	 	Costs and Expenses
	 	 	16	 
	12.06.	 	 	Government Regulations
	 	 	16	 
	12.07.	 	 	Proceeds from Sale of Stock
	 	 	16	 
	12.08.	 	 	Governing Law
	 	 	16	 
	12.09.	 	 	Invalidity
	 	 	16	 

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TRUSTWAVE HOLDINGS, INC.

STOCK INCENTIVE PLAN

ARTICLE I

DEFINITIONS

     1.01. Acceleration Date means the earlier of (i) the date that the Board approves a
transaction or series of transactions which, if consummated, would result in a Change in Control or
(ii) the date that an agreement is entered into with respect to a transaction or series of
transactions which, if consummated, would result in a Change in Control.

     1.02. Affiliate means any “subsidiary” or “parent” corporation (within the meaning of
Section 424 of the Code) of the Company.

     1.03. Agreement means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and conditions of a Stock Award
or an Option granted to such Participant.

     1.04. Board means the Board of Directors of the Company.

     1.05. Cause means (i) dishonesty; (ii) gross negligence or willful misconduct; (iii)
fraudulent or unethical conduct; (iv) unreasonable neglect or refusal to perform the Participant’s
material duties; (v) Participant’s unauthorized use for his or her own benefit or transfer to a
third-party of any confidential or proprietary information of the Company or any Affiliate, (vi) a
breach of the material terms of Participant’s employment or other agreement with the Company (or
Affiliate); (vii) a material violation of the established policies of the Company (or Affiliate);
(viii) conduct constituting a felony or other crime involving moral turpitude; or (ix) willful or
malicious conduct which causes injury to the Company’s (or an Affiliate’s) business or reputation
or otherwise adversely affects the interests of the Company or an Affiliate.

     1.06. Change in Control means the earliest date on which: (i) there shall be a
change in the ownership or control of the Company effected through either the acquisition, directly
or indirectly, by any person or group of persons acting in concert (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under control with the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty (50%) percent of the combined voting power of the Company’s
outstanding securities pursuant to a tender or exchange offer made directly to the Company’s
stockholders or otherwise, who do not own fifty percent (50%) on the date this Plan
is adopted; (ii) there is a consolidation or merger of the Company with another entity (other
than

Trustwave Holdings, Inc. Stock Incentive Plan (25 January 11)

 

 

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an entity that directly or indirectly controls, is controlled by, or is under control with the
Company) in which the Company’s shareholders (determined as of the date of the consolidation or
merger) own (directly or indirectly) less than fifty percent (50%) of the shares of the surviving
entity; (iii) the liquidation or dissolution of the Company; or (iv) the sale or other disposition
of all or substantially all of the assets of the Company to another person or entity (other than an
entity or person that directly or indirectly controls, is controlled by, or is under control with
the Company).

     1.07. Code means the Internal Revenue Code of 1986, as amended from time to time.

     1.08. Company means TrustWave Holdings, Inc., and any successor to such corporation,
whether by merger, consolidation, liquidation or otherwise.

     1.09. Consultant means any person engaged by the Company (or any Affiliate) as a
non-Employee service provider pursuant to the terms of a written contract or otherwise, and, for
purposes of this Plan, includes a Director.

     1.10. Control Change Date means the date on which a Change in Control occurs. If a
Change in Control occurs on account of a series of transactions, the “Control Change Date” is the
date of the last of such transactions.

     1.11. Director means a member of the Board or the board of directors of any
Affiliate.

     1.12. Disability means all permanent and total disability as defined in Section
22(e)(3) of the Code.

     1.13. Employee means all persons employed as an employee by the Company or any
Affiliate, including officers, whether full-time or part-time.

     1.14. Exchange Act means the Securities Exchange Act of 1934, as amended, and in
effect.

     1.15. Fair Market Value means, on any given date, the current fair market value of a
share of Stock as determined pursuant to subsection (i) or (ii) below.

	 	(i)	 	While the Company is a Non-Public Company, Fair
Market Value shall be determined by the Board using any
reasonable method in good faith.

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	 	(ii)	 	While the Company is a Public Company, Fair
Market Value shall be determined as follows: if the Stock is
not listed on an established stock exchange, Fair Market Value
shall be the average of the final bid and asked quotations for
the date of determination on the over-the-counter market in
which Stock is traded or, if applicable, the “closing” Per
Share price as reported by the National Association of
Securities Dealers, Inc. If Stock is listed on an established
stock exchange or exchanges, Fair Market Value shall be deemed
to be the highest Per Share closing price reported on that
exchange or exchanges. In any case, if no sale of Stock is
made on any stock exchange or over-the-counter market on that
date, then Fair Market Value shall be determined as of the next
preceding trading day on which there was a sale.

For purposes of this Plan, the term “Public Company” means a company that either (a) has
registered any securities under the Securities Act, as amended or the Exchange Act, or (b) is
subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act; and the term
“Non-Public Company” means a company that is not a Public Company.

     1.16. Incentive Stock Option means any Option granted under this Plan that is
intended to qualify as an “incentive stock option” under Section 422 of the Code.

     1.17. Nonqualified Stock Option means any Option granted under this Plan that is not
intended to qualify as an “incentive stock option” under Section 422 of the Code.

     1.18. Option means an Option that entitles the holder to purchase from the Company a
stated number of Shares at the price set forth in an Agreement.

     1.19. Participant means an Employee, Director or Consultant who is selected by the
Board in accordance with Article IV to receive a Stock Award, an Option, or a combination thereof.

     1.20. Plan means the TrustWave Holdings, Inc. Stock Incentive Plan, formerly known as
the 2001 TrustWave Corporation Stock Incentive Plan, as amended April 2004, as amended from time to
time.

     1.21. Securities Act. The Securities Act of 1933, as amended and in effect.

     1.22. Share means one share of Stock, as adjusted in accordance with Section 9.03.

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     1.23. Stock means the common stock, $0.0001 par value, of the Company (voting or
nonvoting).

     1.24. Stock Award means Stock awarded to a Participant under Article VII.

     1.25. Ten Percent Shareholder means an individual who owns more than ten percent of
the total combined voting power of all classes of stock of the Company or an Affiliate as described
in Section 422(b)(6) of the Code.

ARTICLE II

THE PLAN

     2.01. Purpose and Scope.

          (a) The Plan is intended to assist the Company and its Affiliates in recruiting and retaining
individuals with ability and initiative by enabling such persons to participate in the future
success of the Company and its Affiliates and to associate their interests with those of the
Company and its shareholders.

          (b) The Plan is intended to permit the grant of (i) both Incentive Stock Options and
Nonqualified Stock Options, and (ii) Stock Awards; provided, that Incentive Stock Options may only
be granted to Employees.

          (c) No Option that is intended to be an Incentive Stock Option shall be invalid for failure to
qualify as such and the Company shall honor any such Option as a Nonqualified Stock Option.

     2.02. Effective Date and Duration of Plan. This Plan is effective for a 10-year
period beginning on the date on which the Plan is adopted by the Board, provided that any Option
grants or other awards that are made under the Plan prior to the termination date shall continue in
effect in accordance with the terms of the Agreement after that date.

ARTICLE III

ADMINISTRATION

     3.01. Administration.

          (a) The Plan shall be administered by the Board. The Board shall have authority to grant
Stock Awards and Options upon such terms (not inconsistent with the

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provisions of this Plan), as the Board may consider appropriate. Such terms may include
conditions (in addition to those contained in this Plan) on the exercisability of all or any part
of an Option or on the transferability or forfeitability of a Stock Award. Notwithstanding any
such condition, the Board may, in its sole discretion, accelerate the time at which any Option may
be exercised, or the time at which a Stock Award may become transferable or nonforfeitable.

          (b) The Board shall have complete authority to interpret all provisions of this Plan; to
prescribe the terms of any Agreement; to adopt, amend, and rescind rules and regulations pertaining
to the administration of the Plan; and to make all other determinations necessary or advisable for
the administration of this Plan. The express grant in the Plan of any specific power to the Board
shall not be construed as limiting any power or authority of the Board under the Plan. Any
decision made, or action taken, by the Board in connection with the administration of this Plan
shall be final and conclusive. Neither the Board nor any Employee or Director shall be liable for
any act done in good faith with respect to this Plan or any Agreement, Option or Stock Award.

          (c) The Board, in its discretion, may delegate all or part of its authority and duties under
the Plan to (i) one or more committees consisting of such persons as it may designate or (ii)
officers of the Company (other than those individuals who are subject to the reporting and other
provisions of Section 16 of the Exchange Act). The Board may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of the Board’s
delegate or delegates that were consistent with the terms of the Plan.

     3.02. Grants to Foreign Nationals. The Board may grant Options or make other awards
under the Plan to eligible individuals who are foreign nationals on such additional or different
terms and conditions as may, in the sole judgment of the Board, be necessary or appropriate to
comply with the provisions of any applicable laws of a foreign country.

ARTICLE IV

ELIGIBILITY FOR GRANTS AND AWARDS

     4.01. Eligibility. Any Employee, Consultant or Director is eligible to participate
in this Plan. The Board shall have full discretionary authority to determine the persons who shall
participate in the Plan, the grants or awards that will be made to each Participant, and the time
or times at which such grants or awards will be made.

     4.02. Grants and Awards.

          (a) The making of any grant or award under this Plan shall be entirely in the discretion of
the Board and nothing in the Plan shall be construed as giving any Employee, Director, Consultant
or other person any right to participate under this Plan or to receive any grant or award.

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          (b) The Board may, in its sole discretion, accept the cancellation of outstanding grants or
awards in return for the grant of new grants or awards for the same or different number of shares
(if applicable) and under the same or different terms and conditions.

ARTICLE V

STOCK SUBJECT TO PLAN

     5.01. Stock Subject to Plan. Subject to the provisions of Article VIII, the maximum
number of Shares for which Options and Stock Awards may be granted pursuant to this Plan is
27,665,957. The Shares that may be issued or delivered under the Plan may, as determined by the
Board from time to time in its sole discretion, be authorized but unissued Shares, reacquired
Shares or both.

     5.02. Reallocation of Shares. If an Option is terminated, in whole or in part, for
any reason other than its exercise, the number of Shares allocated to the Option that is terminated
may be reallocated to other Options or Stock Awards to be granted under this Plan. If a Stock
Award is forfeited, in whole or in part, for any reason, the number of Shares allocated to the
forfeited Stock Award may be reallocated to other Options or Stock Awards to be granted under this
Plan.

ARTICLE VI

OPTIONS

     6.01. Award. In accordance with the provisions of Article IV, the Board shall (i)
designate each individual to whom an Option is to be granted, (ii) specify the number of shares of
Stock covered by each such grant and (iii) establish such other terms and conditions as it may deem
appropriate for each Option consistent with the Plan. The terms and conditions of any Option
granted under the Plan shall be set forth in an Agreement.

     6.02. Option Price. The purchase price of Shares subject to an Option shall be
determined by the Board (in its sole discretion) on the date of grant, but shall, in the case of an
Incentive Stock Option, not be less than the Fair Market Value of such Shares on the grant date.
If an Incentive Stock Option is granted to an individual who on the date of grant is a Ten Percent
Shareholder, the purchase price of the Shares subject to such Option shall not be less than 110% of
the Fair Market Value on the date the Option is granted.

     6.03. Vesting. Except as otherwise provided in the applicable Agreement or by the
Board, a Participant shall be entitled to exercise an Option only as follows: (i) twenty-five
percent (25%) of the Shares subject to the Option shall vest and become exercisable on the first

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anniversary of the date the Option is granted and (ii) one-twelfth of the remaining
seventy-five percent (75%) of the Shares subject to the Option (or six and twenty-five hundredths
percent (6.25%)) shall vest and become exercisable on the first quarterly anniversary of the first
anniversary of the date the Option is granted and on each successive quarterly anniversary
thereafter.

     6.04. Maximum Option Period. The maximum period during which an Option may be
exercised shall be determined by the Board in its sole discretion, except that no Incentive Stock
Option shall be exercisable for a period of more than ten years from the date such Option was
granted; provided, that the maximum period in which an Option may be exercised shall be five years
in the case of an Incentive Stock Option granted to an individual who on the date of grant is a Ten
Percent Shareholder.

     6.05. Nontransferability. Except as provided in Section 9.07, each Option granted
under this Plan shall be nontransferable except by will or by the laws of descent and distribution
and during the lifetime of the Participant to whom the Option is granted, the Option may be
exercised only by the Participant (or the Participant’s personal representative). No right or
interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation,
or liability of such Participant.

     6.06. Employment Status. For purposes of any Option that may be exercised only during
employment or within a specified period of time after termination of employment, the Board shall
have the discretion to determine to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed interruptions of
continuous employment. Any unexercised options shall be exercisable on or after a Participant’s
termination of employment only as provided in Section 9.06.

     6.07. Change of Control.

         (a) At or after an Acceleration Date, the Board may take any one or more of the following
actions with respect to one or more of the outstanding Options:

	 	(i)	 	provide that such Options shall be assumed, or
equivalent Options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), provided that
any such Options substituted for incentive stock options shall
satisfy, in the determination of the Board, the requirements of
Code section 424(a);
	 
	 	(ii)	 	provide that such Options shall terminate upon
consummation of the Change of Control and each Participant
shall receive, in exchange therefor, a cash payment equal to
the amount (if any) by which (A) the per share consideration to
be paid for each outstanding Share in (or other applicable per
share value for)

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	 	 	 	the Change of Control multiplied by the number of Shares subject
to such outstanding Options, exceeds (B) the aggregate exercise
price of such Options.

          (b) Except as otherwise provided in the applicable Agreement, all outstanding Options
previously granted under the Plan shall be exercisable, in whole or in part, on that date and shall
remain exercisable thereafter in accordance with the terms of this Plan and the applicable
Agreement (unless the Change in Control is not consummated, in which case, this Section 6.07(b)
shall cease to apply and any acceleration of vesting provided hereunder shall be disregarded).

     6.08. Exercise. Subject to the other provisions of this Plan and the applicable
Agreement, an Option may be exercised in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Board may establish in its sole discretion;
provided, however, that Incentive Stock Options (granted under the Plan and all plans of the
Company and its Affiliates) may not be first exercisable in a calendar year for stock having a Fair
Market Value (determined as of the date an Option is granted) exceeding $100,000. An Option
granted under this Plan may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised. A partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.

     6.09. Payment. Except as otherwise provided in the Agreement or by the Board, payment
of the Option price shall be made in cash or a cash equivalent acceptable to the Board. If the
Agreement provides, payment of all or part of the Option price may be made by surrendering Shares
to the Company. If Stock is used to pay all or part of the Option price, the sum of the cash and
cash equivalent and the Fair Market Value (determined as of the day preceding the date of exercise)
of the Shares surrendered must not be less than the Option price of the shares for which the Option
is being exercised.

     6.10. Tax Withholding Requirements. To the extent required by applicable federal,
state, local or foreign law, a Participant shall make arrangements satisfactory to the Company for
the satisfaction of any required statutory federal, state and/or local withholding tax obligations
that arise by reason of an Option exercise or any sale of Shares, which obligations may, as
authorized by the Board, consist of any consideration and method of payment allowable under Section
6.09. Any tax withholding obligations that arise by reason of an Option exercise may be satisfied
by the Company’s withholding of Shares subject to the Option but only in an amount equal to the
minimum prescribed statutory withholding amount.

     6.11. Shareholder Rights. No Participant shall have any rights as a shareholder to
Shares subject to his Option until the date the certificates for the Shares for which an Option has
been exercised have been issued to the Participant.

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     6.12. Disposition of Stock. A Participant shall notify the Company of any sale or
other disposition of Stock acquired pursuant to an Incentive Stock Option if such sale or
disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the
issuance of the Stock to the Participant. Such notice shall be in writing and directed to the
Secretary of the Company.

ARTICLE VII

STOCK AWARDS

     7.01. Award. In accordance with the provisions of Article IV, the Board shall (i)
designate each individual to whom a Stock Award is to be made, (ii) specify the number of Shares
covered by each such award and (iii) establish such other terms and conditions as it may deem
appropriate for each award. The terms and conditions of any Stock Award under the Plan shall be
set forth in an Agreement.

     7.02. Vesting. Except as otherwise provided by the Board, a Participant’s rights in a
Stock Award shall be forfeitable or otherwise restricted for such period of time and subject to
such other conditions as may be set forth in the Agreement.

     7.03. Employment Status. In the event that the terms of any Stock Award provide that
shares may become transferable and nonforfeitable thereunder only after completion of a specified
period of employment, the Board shall have the discretion to determine to what extent leaves of
absence for governmental or military service, illness, temporary disability, or other reasons shall
not be deemed interruptions of continuous employment. Notwithstanding the foregoing, except as
otherwise provided in the applicable Agreement or by the Board, any nonvested Stock Award shall be
forfeited by a Participant as of the date the Participant terminates all employment with the
Company and all Affiliates.

     7.04. Change in Control. Except as otherwise provided in the Agreement, each
outstanding Stock Award shall be transferable and nonforfeitable as of a Control Change Date
(unless the Change in Control is not consummated, in which case, this Section 7.04 shall cease to
apply and any acceleration of vesting provided hereunder shall be disregarded).

     7.05. Shareholder Rights. During the period that the Shares granted pursuant to a
Stock Award are forfeitable, a Participant shall have all rights of a shareholder with respect to
such Shares (unless and until forfeited), including the right to receive dividends and vote the
Shares; provided, however, that during such period (i) a Participant may not (except as provided in
Section 9.07) sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of Shares granted
pursuant to a Stock Award, (ii) the Company shall retain custody of the certificates evidencing
Shares granted pursuant to a Stock Award, and (iii) the Participant shall deliver to the

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Company a stock power (endorsed in blank) or such other actions as may be required by the
Board with respect to each Stock Award. The preceding limitations shall cease to apply as of the
date the Shares subject to the Stock Award become transferable and cease to be forfeitable.

ARTICLE VIII

ADJUSTMENT UPON CHANGE IN STOCK

     8.01. Adjustments.

          (a) The maximum number of shares as to which Options and Stock Awards may be granted under
this Plan and the terms of any outstanding Stock Awards and Options shall be proportionately (or
otherwise equitably) adjusted as the Board shall determine in its sole discretion in the event that
(a) the Company (i) effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of Stock or (ii) engages in a transaction involving the Stock to which Section 424
of the Code applies or (b) there occurs any other event which, in the judgment of the Board
necessitates such action. Any determination made under this Article VIII by the Board shall be
final and conclusive.

          (b) Neither (i) the issuance by the Company of shares of stock of any class (or securities
convertible into shares of stock of any class) for cash, property, labor or services, (ii) the
direct sale of (or the exercise of rights or warrants to subscribe for) such Shares or other
securities, nor (iii) the conversion of shares or obligations of the Company convertible into such
shares or other securities, shall affect (and no adjustment by reason thereof shall be made as to)
the maximum number of Shares that may be granted under the Plan or the terms of any outstanding
Stock Awards or Options.

          (c) The Board may make Stock Awards and may grant Options in substitution for performance
shares, phantom shares, stock awards, stock options, or other similar awards held by an individual
who becomes an employee of the Company or an Affiliate in connection with a transaction described
in the first paragraph of this Article VIII. Notwithstanding any provision of the Plan, the terms
of any such substituted Stock Award or Option, grant shall be as the Board, in its discretion,
determines is appropriate.

ARTICLE IX

OTHER PROVISIONS FOR GRANTS AND AWARDS

     9.01. Resale Restrictions. So long as the Company is a Non-Public Company, a
Participant may not sell, transfer, encumber or otherwise dispose of any Shares which he acquired
pursuant to an Option or Stock Award granted under this Plan without the prior written consent of
the Company. The decision to grant or deny such consent (and any terms or conditions for giving
such consent) shall be solely within the discretion of the Board (or its

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delegate). Notwithstanding the foregoing, any Shares subject to an unexercised Option may not
be sold, transferred, encumbered or otherwise disposed of by a Participant at any time.

     9.02. Buy Back and Cancellation Rights.

          (a) For so long as the Company is a Non-Public Company, the Company shall have the option to
purchase at any time all or part of any Shares acquired pursuant to an Option or Stock Award
granted under this Plan (including those Shares that have been sold or otherwise transferred by the
Participant) at the per share Fair Market Value determined as of the date the Company exercises
such option. Notice of such election shall be provided to the shareholder in writing and payment
shall be made in cash as soon as feasible after the date of the election; provided that, payment
may, as determined by the Company in its sole discretion, be made in installments over a period of
not more than one (1) year.

          (b) The Company may, in its sole discretion and without the consent of the Participant, elect
at any time to cancel any Option or Stock Award granted under the Plan. In the event of such an
election, the Company shall pay the Participant: (i) in the case of an Option, the excess of the
aggregate Fair Market Value of his vested (but not exercised) Shares subject to the Option as of
the date of such election over the aggregate exercise price for such Shares, or (ii) in the case of
a Stock Award, the aggregate Fair Market Value of the Shares subject to such Award as of the date
of the election. Notice of such an election shall be provided to the Participant in writing and
payment shall be made in cash as soon as feasible after the date of the election; provided that,
payment may, as determined by the Company in its sole discretion, be made in installments over a
period of not more than one (1) year.

     9.03. Substitutions and Assumptions. The Board shall have the right to substitute or
assume options, share grants and other similar stock awards in connection with a share combination,
share exchange, merger, consolidation, reorganization, or like corporate transaction which affects
the number or nature of the Shares. The number of shares reserved pursuant to Section 5.01 may be
increased without further action by the stockholders by the corresponding number of options or
other awards assumed and, in the case of a substitution, by the net increase in the number of
shares subject to options and awards before and after the substitution. All fractional shares or
other securities which result from such substitution shall be eliminated and not carried forward to
any subsequent substitution.

     9.04. Withdrawal. A Participant may at any time elect in writing to abandon an Option
grant or any other outstanding award under the Plan.

     9.05. Compliance with Applicable Laws and Certificate of Incorporation.

          (a) The Company shall have the right to place appropriate legends upon the certificate for any
shares issued pursuant to this Plan and take such other acts as it may deem

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necessary or appropriate to ensure that the issuance of Stock complies with applicable
provisions of state and federal securities law.

          (b) The Company shall not be obligated to issue shares under any Option or other award under
this Plan that would violate any law, rule or regulation. Each Participant may be required to make
representations and warranties, enter into restrictive agreements, or take such other actions as
may be deemed necessary or appropriate by the Company to ensure compliance with applicable law and
the Company’s Certificate of Incorporation and By-laws.

     9.06. Termination of Employment.

          (a) Termination of Employment or Consulting Relationship. Except as provided in
paragraphs (b), (c) and (d) below or the Agreement or by the Board, in the event a Participant
ceases to be an Employee or Consultant, all rights of a Participant as to any vested Options shall
expire as of the date the Participant ceases to be an Employee or Consultant. To the extent that
the Participant was not entitled to exercise the Option as of the date of he or she ceases to be an
Employee or Consultant, or if the Participant does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall automatically terminate at that time.

          A Participant shall not be treated as having ceased to be an Employee or Consultant under the
Plan in the event of Participant’s change of status from an Employee to a Consultant or from a
Consultant to an Employee; provided, however, that in the event of a Participant’s change of status
from an Employee to a Consultant, any Incentive Stock Option granted to such Employee shall
automatically cease to be treated for tax purposes as an Incentive Stock Option and shall be
treated for tax purposes as a Nonqualified Stock Option on the day three months and one day
following such change of status.

          (b) Disability of Participant. In the event a Participant ceases to be an Employee or
Consultant due to Disability, the Participant may (to the extent provided by the Board or in the
applicable Agreement), but only within twelve (12) months from the date of his or her termination
(and in no event later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise any unexercised Options to the extent he or she otherwise was entitled
to exercise the Option at the date of such termination. To the extent that the Participant was not
entitled to exercise the Option at the date of his or her termination as an Employee or Consultant,
or if the Participant does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall automatically terminate at that time.

          (c) Death of Participant. In the event that a Participant dies while an Employee or
Consultant, any unexercised Options held by the Participant may (to the extent provided by the
Board or in the applicable Agreement) be exercised at any time within twelve (12) months following
the date of death (but in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement) by the Participant’s estate or by any person who acquired the right
to exercise the Option by bequest or inheritance (the “Option Beneficiary”), but only to the extent
that the Participant was entitled to exercise the Option on the
date of death. To the extent that, at the time of death, the Participant was not entitled to

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exercise the Option, or if the Option Beneficiary does not exercise the Option within the time
specified herein, the Option shall automatically terminate at that time.

          (d) Termination for Cause. In the event that a Participant’s status as an Employee or
Consultant is terminated for Cause, all of his or her unexercised Options shall automatically
terminate as of the date he or she ceases to be an Employee or Consultant.

          (e) Confidentiality and Non-Competition. Notwithstanding any other provision of this
Plan, an Option may not be exercised on or after the date that (and any Shares acquired pursuant to
an Option or other award under the Plan, or the profit therefrom, shall be forfeited by a
Participant upon such terms and conditions as the Company may establish in its sole discretion if)
the Participant engages in any conduct that violates any non-competition, confidentiality or
non-solicitation provisions (i) under his employment or other agreement with the Company (or any
Affiliate) or (ii) that are otherwise applicable to Participant’s employment with the Company (or
any Affiliate).

     9.07. Transferable Options or Stock Awards. Notwithstanding any other provision of the
Plan, the Board may, in its sole discretion, permit a Nonqualified Stock Option or Stock Award to
be transferred by a Participant to the Participant’s children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a partnership in which such family members are the
only partners, on such terms and conditions as may be permitted under Section 16 of the Exchange
Act (to the extent applicable) or otherwise established by the Board. The holder of such Option or
award transferred pursuant to this Section shall be bound by the same terms and conditions that
governed the Option or award during the period that they were held by the Participant; provided,
however that such transferee may not transfer Option or award except by will or the laws of descent
and distribution.

ARTICLE X

COMPLIANCE WITH LAW

AND APPROVAL OF REGULATORY BODIES

     10.01. Registration, Listing and Qualification of Stock.

          (a) No Option shall be exercisable, no Stock shall be issued, no certificates for Shares shall
be delivered, and no payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the rules of all domestic
stock exchanges on which the Company’s shares may be listed. The Company shall have the right to
rely on an opinion of its counsel as to such compliance. Any share certificate issued to evidence
Stock when a Stock Award is granted or for which an Option is exercised may bear such legends and
statements as the Board may deem advisable to assure compliance with federal and state laws and
regulations. No Option shall be exercisable, no Stock
Award shall be granted, no Stock shall be issued, no certificate for shares

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shall be
delivered, and no payment shall be made under this Plan until the Company has obtained such consent
or approval as the Board may deem advisable from regulatory bodies having jurisdiction over such
matters.

          (b) Any person exercising an Option or receiving Stock under any other award under the Plan
shall make such representations, warranties and agreements and furnish such information as the
Board or the Company may request to assure compliance with the foregoing or any other applicable
legal requirements.

ARTICLE XI

AMENDMENT AND TERMINATION

     11.01. Amendment.

          (a) The Board shall have the right to amend the Plan at any time and from time to time;
provided, that no such amendment of the Plan shall, without stockholder approval, be effective if
stockholder approval of the amendment is required at such time to qualify for any available
exemption from Section 16 of the Exchange Act or by any other applicable law, regulation, rule or
order.

          (b) No amendment may be made that would cause an Option or other award not to qualify for
exemption under Section 16 of the Exchange Act.

          (c) No amendment of the Plan shall, without the written consent of a Participant adversely
affect the rights of the Participant with respect to an Option or other award made under the Plan
prior to the date of the amendment or termination (except to the extent necessary to comply with
any applicable law, regulation, rule or order).

          (d) Notwithstanding anything herein or in any Agreement to the contrary, the Board shall have
the power to amend the Plan in any manner deemed necessary or advisable for Options or any other
awards made under the Plan to qualify for any exemption provided under Section 16 of the Exchange
Act and any such amendment shall, to the extent deemed necessary or advisable by the Board, be
applicable to any outstanding Options or other award previously issued under the Plan. In the
event of such an amendment to the Plan, the holder of any Option or other award shall, upon request
of the Board and as a condition for exercising of such Option, obtaining such other award, execute
a conforming amendment in the form prescribed by the Board to the Agreement within such reasonable
period of time as the Board shall specify in such request.

     11.02. Termination. The Board shall have the right to terminate the Plan at any time;
provided, that no such termination shall, except as otherwise provided in any Agreement, terminate
any outstanding Option or other award previously granted under the Plan or adversely

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affect the rights of such Participant without his or her written consent. No new Options or
other award may be granted under the Plan on or after the date of termination.

ARTICLE XII

GENERAL PROVISIONS

     12.01. Effect on Employment and Service. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part thereof), shall
confer upon any individual any right to continue in the employ or service of the Company or an
Affiliate or in any way affect any right and power of the Company or an Affiliate to terminate the
employment or service of any individual at any time with or without assigning a reason therefor.

     12.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be unfunded,
and the Company shall not be required to segregate any assets that may at any time be represented
by grants under this Plan. Any liability of the Company to any person with respect to any grant
under this Plan shall be based solely upon any contractual obligations that may be created pursuant
to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company. Except for the Board’s reservation of a
sufficient number of authorized Shares to the extent required by law to meet the requirements of
the Plan, the Company shall not be required to establish any special or separate fund or to make
any other segregation of assets to assure payment of any grant under the Plan.

     12.03. Rules of Construction. Headings are given to the articles and sections of this
Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or
other provision of law shall be construed to refer to any amendment to or successor of such
provision of law.

     12.04. Certain Reduction of Parachute Payments. Any benefit, payment, accelerated
vesting or other right under this Plan may constitute a “parachute payment” (as defined in Code
section 280G(b)(2)(A), but without regard to Code section 280G(b)(2)(A)(ii)), with respect to a
Participant and the Participant may incur a liability under Code section 4999. In that event,
except as otherwise provided by the Board or in the Agreement, the Company shall reduce any such
parachute payments, if, and only to the extent that a reduction will allow the Participant to
receive a greater “net after-tax amount” than such Participant would receive absent a reduction.
For purposes of this Plan, “net after-tax amount” means the amount of any parachute payments, as
applicable, net of taxes imposed under Code sections 1, 3101(b) and 4999 and any State or local
income taxes applicable to the Participant as in effect on the date of the first payment under this
Plan Agreement. The determination of the net after-tax amount shall be calculated by applying the
foregoing taxes on income of the same character as the parachute payments or capped parachute
payments, as applicable, at the top marginal rates in effect for the year in

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which
the determination is made. “Capped parachute payments” means the largest amount of parachute
payments that may be paid without liability under Code section 4999.

     12.05. Costs and Expenses. Except as otherwise provided by the Board, all costs and
expenses of administering the Plan shall be paid by the Company.

     12.06. Government Regulations. The rights of Participants and the obligations of the
Company hereunder shall be subject to all applicable laws, rules, and regulations and to such
approvals as may be required by any governmental agency.

     12.07. Proceeds from Sale of Stock. Proceeds from the purchase of Shares by a
Participant may be used by the Company for any business purpose.

     12.08. Governing Law. This Plan shall be governed by and construed in accordance with
the laws of the State of Delaware, to the extent applicable.

     12.09. Invalidity. If any provision of the Plan shall be held invalid or unlawful for
any reason, such event shall not affect or render invalid or unenforceable the remaining provisions
of the Plan.

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