Exhibit 10.01
 
TWELFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
 
This Amendment, dated as of April 2, 2007, is made by and among SANZ INC.,
formerly known as Storage Area Networks, Inc., a Colorado corporation (“SANZ” or
a “Borrower”), SOLUNET STORAGE, INC., a Delaware corporation (“Solunet” or a
“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting
through its WELLS FARGO BUSINESS CREDIT operating division.
 
Recitals
 
The Borrowers and the Lender are parties to a Credit and Security Agreement
dated as of May 31, 2001, as amended by (i) the First Amendment to Credit and
Security Agreement and Waiver of Defaults dated as of January 17, 2002; (ii) the
Second Amendment to Credit and Security Agreement dated as of July 1, 2002;
(iii) the Third Amendment to Credit and Security Agreement dated as of August
15, 2002; (iv) the Fourth Amendment to Credit and Security Agreement and Waiver
of Defaults dated as of March 31, 2003; (v) the Fifth Amendment to Credit and
Security Agreement and Waiver of Defaults dated as of September 22, 2003; (vi)
the Sixth Amendment to Credit and Security Agreement dated as of February 12,
2004; (vii) the Seventh Amendment to Credit and Security Agreement and Waiver of
Defaults dated as of September 3, 2004; (viii) the Eighth Amendment to Credit
and Security Agreement and Waiver of Defaults dated as of October 29, 2004; (ix)
the Ninth Amendment to Credit and Security Agreement and Waiver of Defaults
dated as of March 29, 2005; (x) the Tenth Amendment to Credit and Security
Agreement and Waiver of Defaults dated as of November 11, 2005; and (xi) the
Eleventh Amendment to Credit and Security Agreement and Waiver of Defaults dated
as of April 17, 2006 (as so amended, the “Credit Agreement”). Capitalized terms
used in these recitals have the meanings given to them in the Credit Agreement
unless otherwise specified.
 
The Borrowers have requested that certain amendments be made to the Credit
Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:
 
1.  Defined Terms. Capitalized terms used in this Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is
amended by adding or amending as the case may be, the following definitions:
 
“Interest Rate Margin” means, effective as of April 1, 2007, three percent
(3.0%), provided, however, that, if no Event of Default then exists:
 
(i) if the Borrower’s Cash Flow for the six months ending June 30, 2007 is equal
to or greater than $550,000, then the Interest Rate Margin shall equal two and
one half percent (2.5%);
 

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(ii) if the Borrower’s Cash Flow for the nine months ending September 30, 2007
is (a) equal to or greater than $1,360,000, then the Interest Rate Margin shall
equal two percent (2.0%) and (b) equal to or greater than $550,000 but less than
$1,360,000, then the Interest Rate Margin shall equal two and one half percent
(2.5%); and
 
(iii) if the Borrower’s Cash Flow for the twelve months ending December 31, 2007
is (a) equal to or greater than $2,660,000, then the Interest Rate Margin shall
equal one percent (1.0%), (b) equal to or greater than $2,160,000 but less than
$2,660,000, then the Interest Rate Margin shall equal one and one half percent
(1.5%), (c) equal to or greater than $1,360,000 but less than $2,160,000, then
the Interest Rate Margin shall equal two percent (2.0%), and (d) equal to or
greater than $550,000 but less than $1,360,000, then the Interest Rate Margin
shall equal two and one half percent (2.5%).
 
Any increase in the Interest Rate Margin shall be effective on the first day of
the month in which the Lender receives the Borrower’s monthly financial
statements. Any decrease in the Interest Rate Margin shall be effective on the
first day of the month following the month in which the Lender receives the
Borrower’s monthly financial statements. If the Lender does not receive the
Borrower’s monthly financial statements on the date that they are due, then the
Interest Rate Margin shall equal three percent (3.0%), and shall be effective on
the first day of that month.
 
If at any time the Interest Rate Margin has been decreased and any of the
Borrower’s financial statements show that the Borrower was not entitled to such
decrease, then the Interest Rate Margin shall be increased to the Interest Rate
Margin to which the Borrower is entitled, such increase to be effective
retroactively to the date of such decrease. If at any time the Interest Rate
Margin has been decreased and an Event of Default occurs, then the Interest Rate
Margin shall equal three percent (3.0%), and shall be effective on the first day
of the month in which the Event of Default occurs.
 
“Maturity Date” means May 31, 2010.
 
2.  Section 2.7. Section 2.7 (a) of the Credit Agreement is amended and restated
to read as follows:
 
“(a) Termination and Line Reduction Fees. If the Credit Facility is terminated
for any reason as of a date other than the Maturity Date, or the Borrower
reduces the Maximum Line, the Borrower shall pay to the Lender a fee in an
amount equal to a percentage of the Maximum Line (or the reduction, as the case
may be) as follows: (i) one and one half percent (1.5%) if the termination or
reduction occurs on or before May 31, 2008; and (ii) one percent (1.0%) if the
termination or reduction occurs after May 31, 2008.”
 
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3.  Section 6.12. Section 6.12 of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“Section 6.12 Minimum Net Income. The Borrower will maintain, during each period
described below, its Net Income, determined as at the end of each quarter, at an
amount not less than the amount set forth opposite such period (numbers
appearing between “( )” are negative):
 
Period
 
Minimum Net Income
Three months ending March 31, 2007
   
($1,840,000
)
Six months ending June 30, 2007
   
($506,000
)
Nine months ending September 30, 2007
 
 
$927,000
 
Twelve months ending December 31, 2007
 
 
$400,000
 

 
If quarterly Net Income, determined as at the end of each quarter is negative,
then the Borrower shall provide the Lender evidence, in form and substance
acceptable to the Lender in its sole discretion, that it has received a cash
infusion (in the form of equity or Subordinated Debt) in an amount equal to or
greater than the absolute value of the negative quarterly Net Income, such cash
infusion to be made no later than 30 days after the monthly financial statements
for such quarter are due to the Lender, provided, however, that:
 
(a)  if year-to-date Net Income, determined as at the end of such quarter, is
positive, no such cash infusion shall be required, and
 
(b)  if quarterly Net Income and year-to-date Net Income, determined as at the
end of such quarter, are both negative, then the Borrower shall provide the
Lender evidence, in form and substance acceptable to the Lender in its sole
discretion, that it has received a cash infusion (in the form of equity or
Subordinated Debt) in an amount equal to or greater than the lesser of:
 
(i) the absolute value of the negative quarterly Net Income, and
 
(ii) the absolute value of the negative year-to-date Net Income
 
such cash infusion to be made no later than 30 days after the monthly financial
statements for such quarter are due to the Lender, provided, further, however,
that if the Borrower shall provide the Lender evidence, in form and substance
acceptable to the Lender in its sole discretion, that it has received prior cash
infusions (in the form of equity or Subordinated Debt) for such fiscal year in
an amount equal to or greater than the absolute value of the negative
year-to-date Net Income, no additional cash infusion shall be required.
 
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If the Borrower shall provide the Lender evidence, in form and substance
acceptable to the Lender in its sole discretion, that it has received the cash
infusion (in the form of equity or Subordinated Debt) in the amounts and in the
time periods required pursuant to this Section 6.12, then (i) any default under
this Section 6.12 for such quarter shall be deemed to have been automatically
waived by the Lender and (ii) any default under Section 6.13 due solely to such
negative quarterly Net Income for such quarter shall be deemed to have been
automatically waived by the Lender.”
 
4.  Section 6.13. Section 6.13 of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“Section 6.13 Minimum Book Net Worth Plus Subordinated Debt. The Borrower will
maintain, during each period described below, its Book Net Worth plus
Subordinated Debt, determined as at the end of each month, at an amount not less
than the amount set forth opposite such period:
 
Period
 
Minimum Book Net Worth Plus Subordinated Debt
March 31, 2007
 
 
$5,518,000
 
April 30, 2007
 
 
$4,833,000
 
May 31, 2007
 
 
$4,039,000
 
June 30, 2007
 
 
$6,199,000
 
July 31, 2007
 
 
$5,823,000
 
August 31, 2007
 
 
$5,332,000
 
September 30, 2007
 
 
$6,619,000
 
October 31, 2007
 
 
$6,210,000
 
November 30, 2007
 
 
$5,682,000
 
December 31, 2007 and each month thereafter
 
 
$5,595,000
 

 
5.  Section 6.14. Section 6.14 of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“Section 6.14 Minimum Average Availability. The Borrower will maintain during
each month, determined as at the end of each month, average Availability (which
calculation will be based on a trailing three-month average) during the month of
not less than $500,000, which amount may be adjusted at the sole discretion of
the Lender.”
 
6.  Section 6.15. Section 6.15 of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“Section 6.15 New Covenants. On or before November 30, 2007, the Borrower and
the Lender shall agree on new covenant levels for Sections 6.12, 6.13, 6.14,
7.4(c) and 7.10 for periods after such date. The new covenant levels will be
based on the Borrower’s projections for such periods and shall be no less
stringent than the present levels, but if the Borrower and the Lender do not
agree, the Lender may designate the required amounts in its sole discretion and
the failure by the Borrower to maintain the designated amounts shall constitute
an Event of Default.”
 
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7.  Section 7.4(c). Section 7.4(c) of the Credit Agreement is amended and
restated in its entirety to read as follows:
 
“(c) SANZ will not make any payments to Solunet other than payments reimbursing
Solunet for corporate operating expenses in the ordinary course of business,
such as payroll, lease and rent expenses, utilities, etc., which payments shall
not exceed $9,000,000 in the aggregate during SANZ’s fiscal year ending December
31, 2007, and shall be zero during any fiscal year thereafter. Before SANZ makes
any payment to Solunet otherwise permitted under this Section 7.4(c), and
immediately after making any such payment, SANZ Availability shall not be less
than $250,000 and SANZ shall have positive Book Net Worth plus Subordinated
Debt.”
 
8.  Section 7.10. Section 7.10 of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“Section 7.10 Capital Expenditures. The Borrower will not incur or contract to
incur Capital Expenditures of more than $1,400,000 in the aggregate during any
fiscal year.”
 
9.  Section 8.1. Section 8.1 (q) of the Credit Agreement is amended and restated
in its entirety to read as follows:
 
“(q) Todd A. Oseth shall cease to be the President and Chief Executive Officer
of the Borrower or Robert C. Ogden shall cease to be the Chief Financial Officer
of the Borrower, and the Borrower shall fail to employ a replacement acceptable
to the Lender, which acceptance shall not be unreasonably withheld.”
 
10.  Exhibit B. Exhibit B of the Credit Agreement is amended and restated in its
entirety and replaced with Exhibit B attached hereto.
 
11.  No Other Changes. Except as explicitly amended by this Amendment, all of
the terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance thereunder.
 
12.  Accommodation Fee. The Borrowers shall pay the Lender as of the date hereof
a fully earned, non-refundable fee in the amount of $45,000 in consideration of
the Lender’s execution and delivery of this Amendment.
 
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13.  Conditions Precedent. This Amendment shall be effective when the Lender
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:
 
(a)  The Acknowledgment and Agreement of Guarantor and the Acknowledgment and
Agreement of Subordinated Creditor set forth at the end of this Amendment, duly
executed by the Guarantor and the Subordinated Creditor.
 
(b)  Payment of the fee described in Paragraph 12.
 
(c)  Such other matters as the Lender may require.
 
14.  Representations and Warranties. Each Borrower hereby represents and
warrants to the Lender as follows:
 
(a)  Each Borrower has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this Amendment
has been duly executed and delivered by each Borrower and constitutes the legal,
valid and binding obligation of each Borrower, enforceable in accordance with
its terms.
 
(b)  The execution, delivery and performance by each Borrower of this Amendment
has been duly authorized by all necessary corporate action and does not
(i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect, having applicability to
either Borrower, or the articles of incorporation or by-laws of either Borrower,
or (iii) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
either Borrower is a party or by which either Borrower or its properties may be
bound or affected.
 
(c)  All of the representations and warranties contained in Article V of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.
 
15.  References. All references in the Credit Agreement to “this Agreement”
shall be deemed to refer to the Credit Agreement as amended hereby; and any and
all references in the Security Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended hereby.
 
16.  No Waiver. The execution of this Amendment and acceptance of any documents
related hereto shall not be deemed to be a waiver of any Default or Event of
Default under the Credit Agreement or breach, default or event of default under
any Security Document or other document held by the Lender, whether or not known
to the Lender and whether or not existing on the date of this Amendment.
 
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17.  Release. Each Borrower, and the Guarantor by signing the Acknowledgment and
Agreement of Guarantor set forth below, and the Subordinated Creditor by signing
the Acknowledgment and Agreement of Subordinated Creditor set forth below, each
hereby absolutely and unconditionally releases and forever discharges the
Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which such Borrower or such Guarantor or such Subordinated Creditor
has had, now has or has made claim to have against any such person for or by
reason of any act, omission, matter, cause or thing whatsoever arising from the
beginning of time to and including the date of this Amendment, whether such
claims, demands and causes of action are matured or unmatured or known or
unknown.
 
18.  Costs and Expenses. Each Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, each Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. Each Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by such Borrower, make a loan to
such Borrower under the Credit Agreement, or apply the proceeds of any loan, for
the purpose of paying any such fees, disbursements, costs and expenses and the
fee required under Paragraph 12 hereof.
 
19.  Joint and Several Liability. All obligations of SANZ and Solunet under this
Amendment shall be joint and several. All references to the term “Borrower”
herein shall refer to each of them separately and to both or all of them jointly
and each such Person shall be bound both severally and jointly with the other.
Each of SANZ and Solunet is responsible for all of the Borrower obligations
under this Amendment. Notices from the Lender to either Borrower shall
constitute notice to both. Directions, instructions, representations, warranties
or covenants made by either Borrower to the Lender shall be binding on both.
 
20.  Miscellaneous. This Amendment and the Acknowledgment and Agreement of
Guarantor and the Acknowledgment and Agreement of Subordinated Creditor may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original and all of which counterparts, taken
together, shall constitute one and the same instrument.
 
[The remainder of this page intentionally left blank.]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
 
WELLS FARGO BANK, NATIONAL
 
SANZ INC.
ASSOCIATION, acting through its WELLS FARGO
   
BUSINESS CREDIT operating division
   

 

           
By: /s/ Todd A. Oseth
   

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Name: Todd A. Oseth
By: /s/ Aida M. Sunglao-Canlas
   
Its: President

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Name: Aida M. Sunglao-Canlas
     
Its: Vice President
     

 

       
SOLUNET STORAGE, INC.
 
   
   
  By:   /s/ Robert C. Ogden  

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Name: Robert C. Ogden
 
Its: Chief Financial Officer

 

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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
 
The undersigned, a guarantor of the indebtedness of SANZ Inc., formerly known as
Storage Area Networks, Inc., (“SANZ”) to Wells Fargo Bank, National Association
(the “Lender”), acting through its Wells Fargo Business Credit operating
division, pursuant to a separate Guaranty dated as of May 31, 2001 (the
“Guaranty”), hereby (i) acknowledges receipt of the foregoing Amendment; (ii)
agrees and acknowledges that the Guaranty extends to the obligations of Solunet
to the Lender to the same extent, in the same manner and on the same terms as to
SANZ; (iii) consents to the terms (including without limitation the release set
forth in Paragraph 17 of the Amendment) and execution thereof; (iv) reaffirms
its obligations to the Lender pursuant to the terms of its Guaranty; and
(v) acknowledges that the Lender may amend, restate, extend, renew or otherwise
modify the Credit Agreement and any indebtedness or agreement of the Borrower,
or enter into any agreement or extend additional or other credit accommodations,
without notifying or obtaining the consent of the undersigned and without
impairing the liability of the undersigned under its Guaranty for all of the
Borrower’s present and future indebtedness to the Lender.

       
SAN HOLDINGS, INC.
 
   
   
  By:   /s/ Todd A. Oseth  

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Name: Todd A. Oseth  
Its: President

 

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ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATED CREDITOR
 
The undersigned, a subordinated creditor of SANZ Inc., formerly known as Storage
Area Networks, Inc., (the “Borrower”) to Wells Fargo Bank, National Association
(the “Lender”), acting through its Wells Fargo Business Credit operating
division, pursuant to a Subordination Agreement dated as of January 17, 2002
(the “Subordination Agreement”), hereby (i) acknowledges receipt of the
foregoing Amendment; (ii) consents to the terms (including without limitation
the release set forth in Paragraph 17 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of its
Subordination Agreement; and (iv) acknowledges that the Lender may amend,
restate, extend, renew or otherwise modify the Loan Documents and any
indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the
consent of the undersigned and without impairing the obligations of the
undersigned under its Subordination Agreement.

       
SAN HOLDINGS, INC.
 
   
   
  By:   /s/ Todd A. Oseth  

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Name: Todd A. Oseth
 
Its: President

 

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Exhibit B to Credit and Security Agreement
 
COMPLIANCE CERTIFICATE
 

To: Aida Sunglao-Canlas   Wells Fargo Business Credit     Date:
__________________, 200__     Subject: SANZ Inc. and Solunet Storage, Inc.  
Financial Statements

 
In accordance with our Credit and Security Agreement dated as of May 31, 2001
(as amended, the “Credit Agreement”), attached are the financial statements of
SANZ Inc. and Solunet Storage, Inc. (together, the “Borrower”) as of and for
________________, 200__ (the “Reporting Date”) and the year-to-date period then
ended (the “Current Financials”). All terms used in this certificate have the
meanings given in the Credit Agreement.
 
I certify that the Current Financials have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and fairly present the Borrower’s
financial condition and the results of its operations as of the date thereof.
 
Events of Default. (Check one):
 
o    The undersigned does not have knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement.
 
o  The undersigned has knowledge of the occurrence of a Default or Event of
Default under the Credit Agreement and attached hereto is a statement of the
facts with respect to thereto.
 
I hereby certify to the Lender as follows:
 
o  The Reporting Date does not mark the end of one of the Borrower’s fiscal
quarters, hence I am completing only paragraph __ below.
 
o  The Reporting Date marks the end of one of the Borrower’s fiscal quarters,
hence I am completing all paragraphs below except paragraph ___.
 
o  The Reporting Date marks the end of the Borrower’s fiscal year, hence I am
completing all paragraphs below.
 

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Financial Covenants.
 
I further hereby certify as follows:
 
1. Minimum Net Income. Pursuant to Section 6.12 of the Credit Agreement, as of
the Reporting Date the Borrower’s Net Income was $____________ which o satisfies
o does not satisfy the requirement that such amount be not less than
$_____________ on the Reporting Date as set forth in table below:
 
Period
 
Minimum Net Income
Three months ending March 31, 2007
 
 
($1,840,000
)
Six months ending June 30, 2007
 
 
($506,000
)
Nine months ending September 30, 2007
 
 
$927,000
 
Twelve months ending December 31, 2007
 
 
$400,000
 

 
2. Minimum Cash Infusion. Pursuant to Section 6.12 of the Credit Agreement, as
of the Reporting Date the Borrower has received a cash infusion in the amount of
$____________ which o satisfies o does not satisfy the requirement that such
amount be not less than $_____________ on the Reporting Date as calculated
pursuant to that Section.
 
3. Minimum Book Net Worth Plus Subordinated Debt. Pursuant to Section 6.13 of
the Credit Agreement, as of the Reporting Date, the Borrower’s Book Net Worth
plus Subordinated Debt was $____________ which o satisfies o does not satisfy
the requirement that such amount be not less than $_____________ on the
Reporting Date as set forth in table below:
 
Period
 
Minimum Book Net Worth Plus Subordinated Debt
March 31, 2007
 
 
$5,518,000
 
April 30, 2007
 
 
$4,833,000
 
May 31, 2007
 
 
$4,039,000
 
June 30, 2007
 
 
$6,199,000
 
July 31, 2007
 
 
$5,823,000
 
August 31, 2007
 
 
$5,332,000
 
September 30, 2007
 
 
$6,619,000
 
October 31, 2007
 
 
$6,210,000
 
November 30, 2007
 
 
$5,682,000
 
December 31, 2007 and each month thereafter
 
 
$5,595,000
 

 
4. Minimum Average Availability. Pursuant to Section 6.14 of the Credit
Agreement, the Borrower’s average Availability (which calculation will be based
on a trailing three-month average) for the month ending on the Reporting Date
was $____________, which o satisfies o does not satisfy the requirement that
such amount be not less than $500,000 during such period, which amount may be
adjusted at the sole discretion of the Lender.
 

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5. Payments from SANZ Inc. to Solunet Storage, Inc. Pursuant to Section 7.4(c)
of the Credit Agreement, SANZ Inc. has made the following payments to Solunet
Storage, Inc. since the last Reporting Date, and as of the Reporting Date, the
Borrower o is o is not in compliance with Section 7.4(c) of the Credit Agreement
concerning payments from SANZ Inc. to Solunet Storage, Inc.
 
[Borrower to list each payment, the SANZ Availability and SANZ’s Book Net Worth
after each payment]
 
6. Capital Expenditures. Pursuant to Section 7.10 of the Credit Agreement, for
the year-to-date period ending on the Reporting Date, the Borrower has expended
or contracted to expend during the _____________ year ended ______________,
20___, for Capital Expenditures, $__________________ in the aggregate, which
o satisfies o does not satisfy the requirement that such expenditures not exceed
$1,400,000 in the aggregate during such year.
 
7. Salaries. As of the Reporting Date, the Borrower o is o is not in compliance
with Section 7.17 of the Credit Agreement concerning salaries.
 
Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.

       
SANZ INC.
SOLUNET STORAGE, INC.
 
   
   
  By:    

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Its: Chief Financial Officer

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