EXHIBIT 10.22
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 27,
1999, by and between DATAWATCH CORPORATION, a Delaware corporation with its
principal place of business at 000 Xxxxxxxxxx Xxxxxx, Tower 3, 5th Floor,
Lowell, Massachusetts 01851-8100 ("Borrower") and SILICON VALLEY BANK, a
California-chartered bank ("Bank"), with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with a loan production office located at
Wellesley Office Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, doing
business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of March 16, 1999, evidenced by, among other documents, a
certain Amended and Restated Loan and Security Agreement dated as of March 16,
1999 by and among the Borrower, Personics Corporation, and the Bank (as amended
to date, the "Loan Agreement"). The Loan Agreement established in favor of the
Borrower a revolving line of credit in the maximum principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the "Revolving Line").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
2. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to
as the "Indebtedness".
3. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the "Security Documents").
4. Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
5. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. Bank hereby waives: Borrower's existing Defaults
under the Loan Agreement by virtue of Borrower's
failure to comply with the financial covenants in
Section 6.7 for the periods ending July 31, 1999,
August 31, 1999, and September 30, 1999. Bank's
waiver of Borrower's compliance of said covenants
shall apply only to the foregoing periods.
Bank's agreement to waive the above-described
compliance (i) shall not be deemed an agreement by
Bank to waive Borrower's compliance with the
above-described covenants as of any other dates, (ii)
shall not limit or impair Bank's right to demand
strict performance of these covenants as of any other
dates, and (iii) shall not limit or impair Bank's
right to demand strict performance of all other
covenants as of any date.
2. All references in the Loan Agreement to "Personics
Corporation" are deleted in each instance they appear
and all references to the Borrower in the Loan
Agreement shall now mean and refer to Datawatch
Corporation singly.
3. The Loan Agreement shall be amended by inserting the
following text immediately after the last sentence of
Section 4.1:
"Notwithstanding the foregoing, it is expressly
acknowledged and agreed that the security interest
created in this Agreement with respect to EXIM
Eligible Foreign Accounts only is subject to and
subordinate to the security interest granted to the
Bank in the EXIM Agreement with respect to such EXIM
Eligible Foreign Accounts, but only to the extent any
advances are actually made to the Borrower based upon
such EXIM Eligible Foreign Accounts."
4. The Loan Agreement shall be amended by deleting the
following text appearing as Section 6.2:
"6.2 Financial Statements, Reports, Certificates. (a)
Borrower shall deliver to Bank: (i) at such times as
outstanding Advances exist, as soon as available, but
in any event within 35 days after the end of each
month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated
operations during the period, in a form and certified
by a Responsible Officer acceptable to Bank; (ii) as
soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited
consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such
financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) at
such times as no outstanding Advances exist, within 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; (iv) 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
$100,000 or more; and (v) budgets, sales projections,
operating plans or other financial information Bank
requests; and (vi) prompt notice of any material
change in the composition of the Intellectual
Property, including any subsequent ownership right of
Borrower in or to any Copyright, Patent or Trademark
not shown in any intellectual property security
agreement between Borrower and Bank or knowledge of
an event that materially adversely affects the value
of the Intellectual Property.
(b) At such times as outstanding Advances exist and
prior to the initial Advance, within 25 days after
the last day of each month, Borrower will deliver to
Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of Exhibit C, with
aged listings of accounts payable.
(c) Borrower will deliver to Bank with the monthly
financial statements and with the quarterly 10-Q
report a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral
at Borrower's expense at such times as outstanding
Advances exist, but the audits will be conducted no
more often than annually (or every 6 months if the
aggregate outstanding Advances exceed 25% of the
Committed Revolving Line) unless an Event of Default
has occurred and is continuing."
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and inserting in lieu thereof the following:
"6.2 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as
available, but in any event within thirty five (35)
days after the end of each month during which either
Advances have been requested or are outstanding, a
company prepared consolidated balance sheet and
income statement covering Borrower's consolidated
operations during such period, in a form and
certified by a Responsible Officer of Borrower
acceptable to Bank; (b) as soon as available, but in
any event within one hundred twenty (120) days after
the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such
financial statements of an independent certified
public accounting firm acceptable to Bank; (c) within
five (5) days of filing, copies of all statements,
reports and notices sent or made available generally
by Borrower to its 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; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000)
or more; (e) such budgets, sales projections,
operating plans or other financial information as
Bank may reasonably request from time to time; and
(f) prompt notice of any material change in the
composition of the Intellectual Property, including
any subsequent ownership right of Borrower in or to
any Copyright, Patent or Trademark not shown in any
intellectual property security agreement between
Borrower and Bank or knowledge of an event that
materially adversely affects the value of the
Intellectual Property.
Within twenty five (25) days after the last day of
each month during which either Advances have been
requested or are outstanding, Borrower shall deliver
to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of
accounts receivable.
Within thirty five (35) days after the last day of
each month during which either Advances have been
requested or are outstanding, Borrower shall deliver
to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible
Officer in substantially the form of Exhibit D
hereto.
Bank shall have a right from time to time hereafter
to audit Borrower's Accounts at Borrower's expense at
any time when either Advances have been requested or
are outstanding, provided that such audits will be
conducted no more often than every six (6) months
unless an Event of Default has occurred and is
continuing."
5. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.7(a)(ii)
thereof:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of
at least $6,000,000."
and inserting in lieu thereof the following:
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"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
least (1) $4,500,000.00 commencing with the month
ending October 31, 1999 through the month ending
August 31, 2000, and (2) $5,000,000.00 commencing
with the month ending October 31, 2000 and for each
November, January, February, April, May, July,
August, and October thereafter."
6. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.7(b)(ii)
thereof:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of
at least $7,000,000."
and inserting in lieu thereof the following:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
least (1) $5,500,000.00 for each calender quarter
commencing with the calender quarter ending September
30, 1999, and (2) $6,000,000.00 commencing with the
quarter ending September 30, 2000 and for each
quarter thereafter."
7. The Loan Agreement is hereby amended by the deletion
of Section 10.1 in its entirety and the insertion of
the following in its stead:
"Unless otherwise provided in this Agreement, 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 at the beginning of this Agreement.
Either Bank or Borrower may change its notice address
by giving the other written notice.
If to Borrower: Datawatch Corporation
000 Xxxxxxxxxx Xxxxxx
Tower 3, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx
FAX: (000) 000-0000
With a copy to: Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxx
FAX: (000) 000-0000
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with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000"
8. The Loan Agreement is hereby amended by the addition
of the following text appearing as a new Section 8.9:
"8.9 CROSS DEFAULT. The occurrence of any Event of
Default under the EXIM Loan Documents."
9. The Loan Agreement is hereby amended by the deletion
of the defined term "Eligible Foreign Accounts" in
Section 13.1 thereof and in each other instance it
appears in the Loan Agreement.
10. The Loan Agreement is hereby amended by the insertion
of the following new defined terms in Section 13.1
thereof:
""EXIM Agreement: shall mean that certain
Export-Import Loan and Security Agreement dated
December 27, 1999 by and between the Borrower and the
Bank."
""EXIM Eligible Foreign Accounts shall have the
meaning set forth in the EXIM Agreement."
""EXIM Loan Documents" shall mean the EXIM Agreement
together with all documents, instruments and
agreements executed in conjunction therewith."
11. The Loan Agreement is hereby amended by the deletion
of the following defined terms in Section 13.1
thereof:
""Borrowing Base" is (a) 80% of Eligible Accounts in
which the Account debtor is a non-distributor, plus
(b) 50% of Eligible Accounts (not to exceed 40% of
the aggregate Borrowing Base) in which the Account
debtor (i) is a distributor and (ii) is approved in
writing by Bank on a case by case basis, plus (c) 60%
of Eligible Foreign Accounts (not to exceed $400,000)
each as determined by Bank from Borrower's most
recent Borrowing Base Certificate."
""Eligible Accounts" are Accounts in the ordinary
course of Borrower's business that meet all
Borrower's representations and warranties in Section
5; but Bank may change eligibility standards by
giving Borrower notice. Unless Bank agrees otherwise
in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has
not paid within 90 days (or 60 days
if account debtor is a distributor)
of invoice date;
(b) Accounts for an account debtor, 50%
or more of whose Accounts have not
been paid within 90 days (or 60 days
if account debtor is a distributor)
of invoice date;
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(c) Credit balances over 90 days from
invoice date;
(d) Accounts for an account debtor,
including Affiliates, whose total
obligations to Borrower exceed 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 except for Eligible Foreign
Accounts;
(f) Accounts for which the account
debtor is a federal, state or local
government entity or any department,
agency, or instrumentality;
(g) Accounts for which Borrower owes the
account debtor, but only up to the
amount owed (sometimes called
"contra" accounts, accounts payable,
customer deposits or credit
accounts);
(h) Accounts for demonstration or
promotional equipment, or in which
goods are consigned, sales
guaranteed, sale or return, sale on
approval, xxxx and hold, or other
terms if account debtor's payment
may be conditional;
(i) Accounts for which the account
debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor
disputes liability or makes any
claim and Bank believes there may be
a basis for dispute (but only up to
the disputed or claimed amount), or
if the Account Debtor is subject to
an Insolvency Proceeding, or becomes
insolvent, or goes out of business;
(k) Accounts for which Bank reasonably
determines collection to be
doubtful."
""Obligations" are debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or
later, including letters of credit and Exchange
Contracts and including interest accruing after
Insolvency Proceedings begin and debts, liabilities,
or obligations of Borrower assigned to Bank."
""Revolving Maturity Date" is January 30, 2000."
""Tangible Net Worth" is, on any date, the
consolidated total assets of Borrower and its
Subsidiaries minus (i) any amounts attributable to
(a) goodwill, (b) intangible items such as
unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research
and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, minus
(ii) Total Liabilities."
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and inserting in lieu thereof the following:
""Borrowing Base" is (a) 80% of Eligible Accounts in
which the Account debtor is a non-distributor, plus
(b) 50% of Eligible Accounts (not to exceed 40% of
the aggregate Borrowing Base) in which the Account
debtor (i) is a distributor and (ii) is approved in
writing by Bank on a case by case basis, each as
determined by Bank from Borrower's most recent
Borrowing Base Certificate."
""Eligible Accounts" are Accounts in the ordinary
course of Borrower's business that meet all
Borrower's representations and warranties in Section
5.2; but Bank may change eligibility standards by
giving Borrower notice. Unless Bank agrees otherwise
in writing, Eligible Accounts shall not include:
(a) Accounts that the account debtor has
not paid within ninety (90) days (or
sixty (60) days if account debtor is
a distributor) 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 (or sixty (60) days
if account debtor is a distributor)
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 (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 government
entity or any department, agency, or
instrumentality thereof;
(g) Accounts for which Borrower owes the
account debtor, but only up to the
amount owed (sometimes called
"contra" accounts, accounts payable,
customer deposits or credit
accounts);
(h) Accounts for demonstration or
promotional equipment, or in which
goods are consigned, sales
guaranteed, sale or return, sale on
approval, xxxx and hold, or other
terms if account debtor's payment
may be conditional;
(i) Accounts for which the account
debtor is Borrower's Affiliate,
officer, employee, or agent;
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(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 collection to be
doubtful."
""Obligations" are debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or
later whether under this Agreement, the EXIM Loan
Documents, or otherwise, including letters of credit
and foreign exchange contracts and including interest
accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower
assigned to Bank."
""Revolving Maturity Date" is December 27, 2000."
""Tangible Net Worth" is, on any date, the
consolidated total assets of Borrower and its
Subsidiaries minus (i) any amounts attributable to
(a) goodwill, (b) intangible items such as
unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research
and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, minus
(ii) Total Liabilities, plus (iii) Subordinated
Debt."
13. The Borrower ratifies, confirms and reaffirms, all
and singular, the terms and conditions of that
certain Collateral Assignment, Patent Mortgage and
Security Agreement dated as of November 1, 1994
between Borrower and Bank, and acknowledges, confirms
and agrees that said Collateral Assignment, Patent
Mortgage and Security Agreement shall remain in full
force and effect.
14. The Borrowing Base Certificate appearing as EXHIBIT C
to the Loan Agreement is hereby replaced with the
Borrowing Base Certificate attached as EXHIBIT A
hereto.
15. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT B hereto.
6. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand Five
Hundred Dollars ($2,500.00), which fee shall be due on the date hereof and which
shall be deemed fully earned as of the date hereof. The Borrower shall also
reimburse Lender for all legal fees and expenses incurred in connection with
this amendment to the Loan Documents and the preparation of the EXIM Loan
Documents.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
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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 Indebtedness.
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 Indebtedness.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers and endorsers of Existing
Loan Documents, unless the party is expressly released by Bank in writing. No
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement.
11. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-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 Xxxxx County, California.
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).
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This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
DATAWATCH CORPORATION SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
---------------------- ------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxxxx
-------------------- ----------------------------
Title: President and Chief Title: Senior Vice President
Executive Officer ---------------------------
-------------------
SILICON VALLEY BANK
By: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
----------------------------
Title: Assistant Vice President
---------------------------
(signed in Santa Xxxxx County, California)
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EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: Datawatch Corporation Bank: Silicon Valley Bank
Commitment Amount: $ 1,500,000.00
ACCOUNTS RECEIVABLE
12. Accounts Receivable Book Value as of $
-------- ----------------------
13. Additions (please explain on reverse) $
----------------------
14. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) Distributor Non-Distributor
----------- ---------------
12. Amounts over 90* days due $ $
---------------------- -----------------
13. Balance of 50% over 90* day accounts $ $
---------------------- -----------------
14. Concentration Limits $ $
---------------------- -----------------
15. Foreign Accounts $ $
---------------------- -----------------
16. Governmental Accounts $ $
---------------------- -----------------
17. Contra Accounts $ $
---------------------- -----------------
18. Promotion or Demo Accounts $ $
---------------------- -----------------
19. Intercompany/Employee Accounts $ $
---------------------- -----------------
20. Other (please explain on reverse) $ $
---------------------- -----------------
21. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ $
---------------------- -----------------
22. Eligible Accounts (#3 minus #13) $ $
---------------------- -----------------
23. LOAN VALUE OF ACCOUNTS (80.0% of #14
for Non-Distributor accounts plus 50.0%
of #14 for Distributor accounts**) $ $
---------------------- -----------------
*60 days if account debtor is distributor
**Loan value of accounts for account debtors which are
distributors shall not exceed 40% of aggregate borrowing base.
BALANCES
12. Maximum Loan Amount $1,500,000.00
13. Total Funds Available (Lesser of #16 or #15) $____________
14. Present balance owing on Line of Credit $____________
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15. Outstanding under Sublimits (including Letters of Credit) $____________
16. RESERVE POSITION (#17 minus #18 and #19) $____________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: ================================
BANK USE ONLY
DATAWATCH CORPORATION ================================
RECEIVED BY:____________________
DATE:___________________________
By: _______________________ REVIEWED BY:____________________
Authorized Signer COMPLIANCE STATUS: YES / NO
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EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: DATAWATCH CORPORATION
The undersigned authorized officer of DATAWATCH CORPORATION hereby
certifies that in accordance with the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
____________ with all required covenants except as noted below and (ii) all
representations and warranties 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.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements & CC Monthly within 35 days* Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10-K, 10-Q and 8-K Within 5 days after filing with SEC Yes No
A/R & BBC Monthly within 25 days* Yes No
*when Advances are outstanding or have been requested
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis
(only for months ending January, February, May, July, August, October and November)
Minimum Adjusted Quick Ratio 1.50:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $4,500,000.00** $________ Yes No
Maintain on a Quarterly Basis:
Minimum Adjusted Quick Ratio 1.75:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $5,500,000.00*** $________ Yes No
**increasing to $5,000,000.00 as of October 31, 2000 as set forth in Section
6.7(a)(ii)
***increasing to $6,000,000.00 as of September 30, 2000 as set forth in Section
6.7(b)(ii)
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COMMENTS REGARDING EXCEPTIONS: ==============================
Sincerely, BANK USE ONLY
==============================
_______________________ Date:_______________ RECEIVED BY:__________________
SIGNATURE DATE:________________
------------------------ REVIEWED BY:__________________
TITLE COMPLIANCE STATUS: YES / NO
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