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EXHIBIT 10.63

QAD INC.

LOAN AGREEMENT

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        This LOAN AGREEMENT is entered into as of April 7, 2005, by and between
COMERICA BANK ("Bank") and QAD INC. ("Borrower").

RECITALS

        Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.

AGREEMENT

        The parties agree as follows:

        1.    DEFINITIONS AND CONSTRUCTION.    

        1.1    Definitions.    As used in this Agreement, the following terms
shall have the following definitions:

        "Accounts" means all presently existing and hereafter arising accounts,
contract rights, payment intangibles, and all other forms of obligations owing
to Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and Borrower's Books
relating to any of the foregoing.

        "Advance" or "Advances" means a cash advance or cash advances under the
Revolving Line.

        "Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.

        "Applicable Margin" means, from time to time, the following percentages
per annum, based upon the ratio of Borrower's Funded Debt to Trailing Four
Quarter EBITDA (each as defined below) as determined by Bank with reference to
the most recent financial statements and Compliance Certificate delivered by the
Borrower pursuant to Section 6.2(b) hereof:

Ratio of Funded Debt to
Trailing Four Quarter
EBITDA

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  Prime Rate

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  LIBOR Rate

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  Commitment Fee

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  Less than 0.75:1.00   (0.25 )% 0.75 % 0.25 % Less than 1.25:1.00
but greater than 0.75:1.00   0.00 % 1.25 % 0.375 % Greater than 1.25:1.00   0.25
% 1.75 % 0.50 %

        Bank's determination of the Applicable Margin shall be conclusive absent
manifest error. Any change in the Applicable Margin shall be given prospective
effect only, effective on the fifth (5th) Business Day after receipt of the most
recent financial statements and Compliance Certificate, in each case with no
retroactivity or clawback; provided, however, that if Borrower shall fail timely
to deliver such financial statements and Compliance Certificate for any period,
then the Applicable Margin shall be based on the highest level set forth above
until the fifth (5th) Business Day after Borrower shall deliver such financial
statements and Compliance Certificate to Bank.

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        "Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses, whether generated in-house or by
outside counsel) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; reasonable collateral
audit fees; and Bank's reasonable attorneys' fees and expenses (whether
generated in-house or by outside counsel) incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred
before, during and after an Insolvency Proceeding, whether or not suit is
brought.

        "Borrower State" means Delaware, the state under whose laws Borrower is
organized.

        "Borrower's Books" means all of Borrower's books and records including:
ledgers; records concerning Borrower's assets or liabilities, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.

        "Borrowing Base" means an amount equal to one hundred fifty percent
(150%) of Borrower's Trailing Four Quarter EBITDA, as determined by Bank with
reference to the most recent financial statements and Compliance Certificate
delivered by Borrower.

        "Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.

        "Cash" means, as of any applicable date, in accordance with GAAP,
unrestricted cash and cash equivalents that should be included on the
consolidated balance sheet of Borrower and its Subsidiaries.

        "Change in Control" shall mean a transaction in which any "person" or
"group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such
"person" or "group" to elect a majority of the Board of Directors of Borrower,
who did not have such power before such transaction.

        "Chief Executive Office State" means California, where Borrower's chief
executive office is located.

        "Closing Date" means the date of this Agreement.

        "Code" means the California Uniform Commercial Code, as amended or
supplemented from time to time.

        "Consolidated Accounts" means all presently existing and hereafter
arising accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrower and its Subsidiaries arising out of the sale or
lease of goods (including, without limitation, the licensing of software and
other technology) or the rendering of services by Borrower and its Subsidiaries,
whether or not earned by performance, and Borrower and its Subsidiaries' books
relating to any of the foregoing.

        "Consolidated Net Income (or Deficit)" means the consolidated net income
(or deficit) of any Person and its Subsidiaries, after deduction of all
expenses, taxes, and other proper charges, determined in accordance with GAAP,
after eliminating therefrom all extraordinary nonrecurring items of income.

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        "Consolidated Total Interest Expense" means with respect to any Person
for any period, the aggregate amount of interest required to be paid or accrued
by a Person and its Subsidiaries during such period on all Indebtedness of such
Person and its Subsidiaries outstanding during all or any part of such period,
whether such interest was or is required to be reflected as an item of expense
or capitalized, including payments consisting of interest in respect of any
capitalized lease or any synthetic lease, and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.

        "Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to
(i) any indebtedness, capital lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued for the
account of that Person; and (iii) all obligations arising under any interest
rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designated to
protect a Person against fluctuation in interest rates, currency exchange rates
or commodity prices; provided, however, that the term "Contingent Obligation"
shall not include endorsements for collection or deposit in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

        "Credit Extension" means each Advance, or any other extension of credit
by Bank to or for the benefit of Borrower hereunder.

        "Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, undrawn Letters of Credit, but
specifically excluding any cash-secured Obligations.

        "EBITDA" means with respect to any fiscal period an amount equal to the
sum of (a) Consolidated Net Income of the Borrower and its Subsidiaries for such
fiscal period, plus (b) in each case to the extent deducted in the calculation
of the Borrower's Consolidated Net Income and without duplication,
(i) depreciation and amortization for such period, plus (ii) income tax expense
for such period, plus (iii) Consolidated Total Interest Expense paid or accrued
during such period, plus (iv) non-cash expense associated with granting stock
options, all as determined in accordance with GAAP.

        "Environmental Laws" means all laws, rules, regulations, orders and the
like issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.

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

        "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

        "Event of Default" has the meaning assigned in Article 8.

        "Funded Debt" means all Indebtedness of Borrower outstanding as of any
date of determination.

        "GAAP" means generally accepted accounting principles, consistently
applied, as in effect from time to time in the United States.

        "Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.

        "Insolvency Proceeding" means any proceeding commenced by or against any
Person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

        "Inventory" means all present and future inventory in which Borrower has
any interest.

        "Investment" means any beneficial ownership of (including stock,
partnership or limited liability company interest other securities) any Person,
or any loan, advance or capital contribution to any Person.

        "IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

        "Letter of Credit" means a commercial or standby letter of credit or
similar undertaking issued by Bank at Borrower's request in accordance with
Section 2.1(b)(iii).

        "Letter of Credit Sublimit" means a sublimit for Letters of Credit under
the Revolving Line not to exceed Two Million Dollars ($2,000,000).

        "Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance securing Indebtedness.

        "Liquidity Ratio" means, as of any date of determination, the ratio of
(a) the sum of (i) Cash plus (ii) net trade Consolidated Accounts receivable, to
(b) the sum of (i) Current Liabilities (excluding deferred revenues) plus
(ii) all Obligations outstanding under this Agreement, as of such date.

        "Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any other document, instrument or agreement entered
into among the parties in connection with this Agreement, all as amended or
extended from time to time.

        "Material Adverse Effect" means a material adverse effect on (i) the
business operations, condition (financial or otherwise) or prospects of Borrower
and its

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Subsidiaries taken as a whole, or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

        "Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.

        "Periodic Payments" means all installments or similar recurring payments
that Borrower may now or hereafter become obligated to pay to Bank pursuant to
the terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.

        "Permitted Indebtedness" means:

        (a)   Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;

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

        (c)   Indebtedness to Borrower by majority-owned or wholly-owned
Subsidiaries of Borrower, in the ordinary course of Borrower's business.

        (d)   Indebtedness, without duplication for any other item of "Permitted
Indebtedness" hereunder, not to exceed Five Million Dollars ($5,000,000) in the
aggregate at any time during the term hereof;

        (e)   Subordinated Debt;

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

        (g)   Extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon Borrower or its Subsidiary, as the
case may be; and

        (h)   Indebtedness under a Guarantee from Borrower to Bank of America,
N.A not to exceed Six Million Dollars ($6,000,000) in the aggregate at any time
during the term hereof;

        "Permitted Investment" means:

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

        (b)   (i) Marketable direct obligations issued or unconditionally
guaranteed or by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof or securities
which are secured or collateralized by these obligations, (ii) commercial paper
maturing no more than one (1) year from the date of creation thereof,
(iii) certificates of deposit maturing no more than one year from the date of
investment therein and issued by a bank organized under the laws of the United
States of any state thereof; (iv) money market accounts with a financial
institution; and (v) money market funds, in each case of (ii) through (v) above,
having a rating of A or A2 or better from Standard & Poor's Corporation or
Moody's Investors Service;

        (c)   Investments permitted under Section 7.3;

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        (d)   Repurchases of stock in accordance with Section 7.6;

        (e)   Investments accepted in connection with Permitted Transfers;

        (f)    Investments not to exceed One Million Dollars ($1,000,000) in the
aggregate in any fiscal year consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plan agreements approved by Borrower's Board of
Directors;

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

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

        (i)    Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash Investments by Borrower do not exceed One Million Dollars ($1,000,000)
in the aggregate in any fiscal year; and

        (j)    Investments by Borrower in majority-owned Subsidiaries of
Borrower, in the ordinary course of Borrower's business which do not include a
cash advance. Investments in majority-owned Subsidiaries which do include a cash
advance will not exceed Ten Million Dollars ($10,000,000) in the aggregate in
any fiscal year, including net cash distributions permitted by Section 7.10
hereof.

        "Permitted Liens" means the following:

        (a)   Any Liens existing on the Closing Date and disclosed in the
Schedule (excluding Liens to be satisfied with the proceeds of the Advances);

        (b)   Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings and for which Borrower maintains adequate reserves;

        (c)   Liens incurred in connection with Indebtedness permitted under
item (c) of the defined term "Permitted Indebtedness;"

        (d)   Liens incurred in connection with the extension, renewal or
refinancing of the Indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and any additional property acquired or leased with the proceeds of such
Indebtedness and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; and

        (e)   Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Sections 8.5 or 8.9.

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        "Permitted Transfer" means the conveyance, sale, license, lease,
transfer or disposition by Borrower or any Subsidiary of:

        (a)   Inventory in the ordinary course of business;

        (b)   licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business;

        (c)   worn-out or obsolete Equipment; or

        (d)   other assets of Borrower or its Subsidiaries that do not in the
aggregate exceed One Million Dollars ($1,000,000) during any fiscal year.

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

        "Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.

        "Responsible Officer" means each of the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.

        "Revolving Line" means a Credit Extension of up to Twenty Million
Dollars ($20,000,000) in the aggregate (inclusive of any amounts outstanding
under the Letter of Credit Sublimit).

        "Revolving Maturity Date" means April 7, 2008.

        "Schedule" means the schedule of exceptions attached hereto and approved
by Bank, if any.

        "SOS Reports" means the official reports from the Secretaries of State
of each Chief Executive Office State and the Borrower State and other applicable
federal, state or local government offices identifying all current security
interests filed in the Borrower's assets and Liens of record as of the date of
such report.

        "Subordinated Debt" means any debt incurred by Borrower that is
subordinated in writing to the debt owing by Borrower to Bank on terms
reasonably acceptable to Bank (and identified as being such by Borrower and
Bank).

        "Subsidiary" means any corporation, partnership or limited liability
company or joint venture in which (i) any general partnership interest or
(ii) more than fifty percent (50%) of the stock, limited liability company
interest or joint venture of which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.

        "Trailing Four Quarter EBITDA" means, as of any date of determination,
Borrower's EBITDA for the preceding four (4) quarters.

        1.2    Accounting Terms.    Any accounting term not specifically defined
herein shall be construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term "financial statements" shall include the
accompanying notes and schedules.

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        2.    LOAN AND TERMS OF PAYMENT.    

        2.1    Credit Extensions.    

        (a)    Promise to Pay.    Borrower promises to pay to Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrower, together with interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.

        (b)    Advances Under Revolving Line.    

        (i)    Amount.    Subject to and upon the terms and conditions of this
Agreement (1) Borrower may request Advances in an aggregate outstanding amount
not to exceed the lesser of (A) the Revolving Line or (B) the Borrowing Base,
less any amounts then outstanding under the Letter of Credit Sublimit, and
(2) amounts borrowed pursuant to this Section 2.1(b) may be repaid and
reborrowed at any time prior to the Revolving Maturity Date, at which time all
Advances under this Section 2.1(b) shall be immediately due and payable. Except
as set forth in the LIBOR Addendum (as defined below) Borrower may prepay any
Advances without penalty or premium.

        (ii)    Form of Request.    Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire transfers), on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit A hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's reasonable discretion
such Advances are necessary to meet Obligations which have become due and remain
unpaid (provided Bank shall provide notice of the same to Borrower). Bank shall
be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee thereof, and
Borrower shall indemnify and hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance, except for damages or losses caused by
Bank's gross negligence and willful misconduct. Bank will credit the amount of
Advances made under this Section 2.1(b) to Borrower's deposit account.

        (iii)    Letter of Credit Sublimit.    Subject to the availability under
the Revolving Line, and in reliance on the representations and warranties of
Borrower set forth herein, at any time and from time to time from the date
hereof through the Business Day immediately prior to the Revolving Maturity
Date, Bank shall issue for the account of Borrower such Letters of Credit as
Borrower may request by delivering to Bank a duly executed letter of credit
application on Bank's standard form; provided, however, that the outstanding and
undrawn amounts under all such Letters of Credit (i) shall not at any time
exceed the Letter of Credit Sublimit, and (ii) shall be deemed to constitute
Advances for the purpose of calculating availability under the Revolving Line.
Any drawn but unreimbursed amounts under any Letters of Credit shall be charged
as Advances against the Revolving Line. All Letters of Credit shall be in form
and substance acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank's form application and letter of credit
agreement. Borrower will pay any standard issuance and other fees that Bank
notifies Borrower it will charge for issuing and processing Letters of Credit.

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        (iv)    Collateralization of Obligations Extending Beyond
Maturity.    If Borrower has not secured to Bank's satisfaction its obligations
with respect to any Letters of Credit by the Revolving Maturity Date, then,
effective as of such date, the balance in any deposit accounts held by Bank and
the certificates of deposit or time deposit accounts issued by Bank in
Borrower's name (and any interest paid thereon or proceeds thereof, including
any amounts payable upon the maturity or liquidation of such certificates or
accounts), shall automatically secure such obligations to the extent of the then
continuing or outstanding and undrawn Letters of Credit. Borrower authorizes
Bank to hold such balances in pledge and to decline to honor any drafts thereon
or any requests by Borrower or any other Person to pay or otherwise transfer any
part of such balances for so long as the Letters of Credit are outstanding or
continue.

        2.2    Overadvances.    If the aggregate amount of the outstanding
Advances exceeds the lesser of the Revolving Line or the Borrowing Base at any
time, Borrower shall promptly pay to Bank, in cash, the amount of such excess.

        2.3    Interest Rates, Payments, and Calculations.    

        (a)    Interest Rates.    Except as set forth in Section 2.3(b), the
Advances shall bear interest, on the outstanding daily balance thereof, as set
forth in the LIBOR Addendum to Loan Agreement (the "LIBOR Addendum") attached as
Appendix I.

        (b)    Late Fee; Default Rate.    If any payment is not made within ten
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

        (c)    Payments.    Interest hereunder shall be due and payable on the
last calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.

        (d)    Computation.    In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

        2.4    Crediting Payments.    Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower directs Bank. After
the occurrence of an Event of Default, Bank shall have the right, in its sole
discretion, to immediately apply any wire transfer of funds, check, or other
item of payment to conditionally reduce Obligations, but such applications of
funds shall not be considered a payment on account unless such payment is of
immediately available federal funds or unless and until such check or other item
of payment is honored when presented for payment. Notwithstanding anything to
the contrary contained herein, any wire transfer or payment received by Bank
after 12:00 noon Pacific time shall be deemed to have

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been received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.

        2.5    Fees.    Borrower shall pay to Bank the following:

        (a)    Facility Fee.    On the Closing Date, a fee equal to Sixty-Two
Thousand Five Hundred Dollars ($62,500), which shall be nonrefundable (receipt
of which hereby is acknowledged); and

        (b)    Commitment Fee.    A fee equal to the Applicable Margin per annum
divided by 360 then multiplied by the actual amount of days, multiplied by the
difference between the amount then available under the Revolving Line and the
average daily balance outstanding thereunder during such period, paid quarterly
in arrears, commencing May 1, 2005, which shall be nonrefundable; and

        (c)    Bank Expenses.    On the Closing Date, all Bank Expenses incurred
through the Closing Date, and, after the Closing Date, all Bank Expenses as and
when they become due.

        2.6    Term.    This Agreement shall become effective on the Closing
Date and, subject to Section 13.7, shall continue in full force and effect for
so long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.

        3.    CONDITIONS OF LOANS.    

        3.1    Conditions Precedent to Initial Credit Extension.    The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
reasonably satisfactory to Bank, the following:

        (a)   this Agreement;

        (b)   an officer's certificate of Borrower with respect to incumbency
and resolutions authorizing the execution and delivery of this Agreement;

        (c)   satisfaction in full and termination of the credit facility
provided Borrower by Foothill Capital;

        (d)   current SOS Reports for the California and Delaware Secretaries of
State, indicating that except for Permitted Liens, there are no other security
interests or Liens of record in the Borrower's assets;

        (e)   agreement to provide insurance;

        (f)    payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;

        (g)   current financial statements, including audited statements for
Borrower's most recently ended fiscal year, together with an unqualified
opinion, company prepared consolidated and consolidating balance sheets and
income statements for the most recently ended month in accordance with
Section 6.2, and such other updated financial information as Bank may reasonably
request;

        (h)   current Compliance Certificate in accordance with Section 6.2; and

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

        3.2    Conditions Precedent to all Credit Extensions.    The obligation
of Bank to make each Credit Extension, including the initial Credit Extension,
is further subject to the following conditions:

        (a)   timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and

        (b)   the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true and correct in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2.

        4.    OPTION TO CONVERT FACILITY.    Borrower shall have the option,
upon no less than sixty (60) days prior written notice to Bank, provided an
Event of Default has not occurred and is not continuing prior thereto, to
convert this unsecured facility, to a secured Accounts receivable/formula-based
facility. Upon such conversion, Borrower shall execute for the benefit of Bank
an amendment to (or amendment and restatement of) this Agreement in form and
content reasonably satisfactory to Bank, including (but not limited to) with
respect to the definitions and determinations of the "Borrowing Base," "Eligible
Accounts," and the "Collateral" (which shall be "all assets") and the security
interest granted the Bank thereunder. Further, any such amendment (or amendment
and restatement) shall be subject to an audit of Borrower's Accounts, the
results of which must be satisfactory to Bank in its reasonable discretion.

        5.    REPRESENTATIONS AND WARRANTIES.    

        Borrower represents and warrants as follows:

        5.1    Due Organization and Qualification.    Borrower and each
Subsidiary is duly existing under the laws of the jurisdiction in which it is
organized and qualified and licensed to do business in any jurisdiction in which
the conduct of its business or its ownership of property requires that it be so
qualified, except where the failure to do so could not reasonably be expected to
cause a Material Adverse Effect.

        5.2    Due Authorization; No Conflict.    The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, except to the extent such default could not reasonably be expected to
cause a Material Adverse Effect.

        5.3    Name; Location of Chief Executive Office.    Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.

        5.4    Litigation.    Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in

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which a likely adverse decision could reasonably be expected to have a Material
Adverse Effect.

        5.5    No Material Adverse Change in Financial Statements.    All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated and consolidating financial condition as of the
date thereof and Borrower's consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.

        5.6    Solvency, Payment of Debts.    Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; and Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement.

        5.7    Compliance with Laws and Regulations.    To the best of their
knowledge, Borrower and each Subsidiary have met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could have a Material Adverse Effect. Borrower is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940. Borrower is not engaged principally, or
as one of the important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations T and U of the Board of Governors of the Federal Reserve System). To
the best of its knowledge, Borrower has complied in all material respects with
all the provisions of the Federal Fair Labor Standards Act. To the best of its
knowledge, Borrower is in compliance with all applicable environmental laws,
regulations and ordinances except where the failure to comply is not reasonably
likely to have a Material Adverse Effect. To the best of its knowledge, Borrower
has not violated any statutes, laws, ordinances or rules applicable to it, the
violation of which could reasonably be expected to have a Material Adverse
Effect. To the best of their knowledge Borrower and each Subsidiary have filed
or caused to be filed all tax returns required to be filed, and have paid, or
have made adequate provision for the payment of, all taxes reflected therein
except those being contested in good faith with adequate reserves under GAAP or
where the failure to file such returns or pay such taxes could not reasonably be
expected to have a Material Adverse Effect.

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

        5.9    Government Consents.    To the best of their knowledge, Borrower
and each Subsidiary have obtained all consents, approvals and authorizations of,
made all declarations or filings with, and given all notices to, all
governmental authorities that are necessary for the continued operation of
Borrower's business as currently conducted, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Effect.

        5.10    Full Disclosure.    To the best of their knowledge, no
representation, warranty or other statement made by Borrower in any certificate
or written statement furnished to Bank taken together with all such certificates
and written statements furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not misleading it being
recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not to be viewed as facts
and that actual results

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during the period or periods covered by any such projections and forecasts may
differ from the projected or forecasted results.

        6.    AFFIRMATIVE COVENANTS.    

        Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

        6.1    Good Standing and Government Compliance.    Borrower shall
maintain its and each of its Subsidiaries' corporate existence and good standing
in the applicable jurisdiction, shall maintain qualification and good standing
in each other jurisdiction in which the failure to so qualify could have a
Material Adverse Effect, and shall furnish to Bank the organizational
identification number issued to Borrower by the authorities of the state in
which Borrower is organized, if applicable. To the extent applicable, the
Borrower shall meet, and shall cause each Subsidiary to meet, the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA. Borrower shall comply in all material respects with all applicable
Environmental Laws, and maintain all material permits, licenses and approvals
required thereunder where the failure to do so could reasonably be expected to
have a Material Adverse Effect. To the extent that failure to comply could
reasonably be expected to have a Material Adverse Effect, Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, and shall maintain,
and shall cause each of its Subsidiaries to maintain, in force all licenses,
approvals and agreements.

        6.2    Financial Statements, Reports, Certificates.    Borrower shall
deliver the following to Bank: (i) as soon as available, but in any event within
thirty (30) days after the end of each quarter, a company prepared consolidated
and consolidating balance sheet and income statement covering Borrower's
operations during such period, in a form reasonably acceptable to Bank and
certified by a Responsible Officer; (ii) as soon as available, but in any event
within ninety (90) days after the end of Borrower's fiscal year, audited
consolidated and consolidating financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an opinion which is
unqualified or otherwise consented to in writing by Bank on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank, which shall reflect no material changes from the
company-prepared financial statements for the periods covered thereby;
(iii) 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 Forms 10-K and 10-Q filed with the Securities and
Exchange Commission, within fifteen (15) days of filing; (iv) promptly upon
receipt of notice thereof, a report of any legal actions pending or threatened
against Borrower or any Subsidiary that could reasonably be expected to result
in damages or costs to Borrower or any Subsidiary of One Million Dollars
($1,000,000) or more; (v) promptly upon receipt, each management letter prepared
by Borrower's independent certified public accounting firm regarding Borrower's
management control systems; (vi) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time, including Borrower's annual operating budget no later than thirty
(30) days prior to the beginning of Borrower's fiscal year and (vii) a detailed
listing of all net cash distributions to Subsidiaries, within thirty (30) days
after the end of each quarter and within ninety (90) days after the end of the
Borrower's fiscal year.

        (a)   Within twenty (20) days after the last day of each quarter,
Borrower shall deliver to Bank a Borrowing Base Certificate in substantially the
form of Exhibit B hereto.

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        (b)   Within (20) days after the last day of each quarter, Borrower
shall deliver to Bank with the quarterly financial statements, a Compliance
Certificate certified as of the last day of the applicable quarter and signed by
a Responsible Officer in substantially the form of Exhibit C hereto.

        (c)   As soon as possible and in any event within thirty (30) calendar
days after becoming aware of the occurrence or existence of an Event of Default
hereunder, a written statement of a Responsible Officer setting forth details of
the Event of Default, and the action which Borrower has taken or proposes to
take with respect thereto.

        (d)   Within thirty (30) days after the last day of each fiscal year,
Borrower shall deliver to Bank aged listings by invoice date of accounts
receivable and accounts payable, signed by a Responsible Officer.

        (e)   Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than annually unless an Event of Default has occurred
and is continuing.

        Borrower may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrower delivers this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or.pdf file within five (5) Business Days of submission of
the unsigned electronic copy the certification of monthly financial statements,
the intellectual property report, the Borrowing Base Certificate and the
Compliance Certificate, each bearing the physical signature of the Responsible
Officer.

        6.3    Taxes.    To the extent that failure so to do could reasonably be
expected to have a Material Adverse Effect, Borrower shall make, and cause each
Subsidiary to make, due and timely payment or deposit of all federal, state, and
local taxes, assessments, or contributions required of it by law, including, but
not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state
disability, and will execute and deliver to Bank, on demand, proof satisfactory
to Bank indicating that Borrower or a Subsidiary has made such payments or
deposits and any appropriate certificates attesting to the payment or deposit
thereof; provided that Borrower or a Subsidiary need not make any payment if the
amount or validity of such payment is contested in good faith by appropriate
proceedings, if applicable, and is reserved against (to the extent required by
GAAP) by Borrower or such Subsidiary.

        6.4    Insurance.    

        (a)   Borrower, at its expense, shall keep its property insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrower's business is
conducted on the date hereof. Borrower shall also maintain liability and other
insurance in amounts and of a type that are customary to businesses similar to
Borrower's.

        (b)   All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All
policies of property insurance shall be in a form reasonably satisfactory to
Bank, and all liability insurance policies shall specify that the insurer must
give at least 20 days notice to Bank before canceling its policy for any reason.
Upon Bank's request, Borrower shall deliver to Bank certified copies of the
policies of insurance and evidence of all premium payments.

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        6.5    Accounts.    Borrower shall establish with Bank, as quickly as is
reasonably practical and in no event later than sixty (60) days from the Closing
Date, primary depositary, operating and other accounts with Bank as are
reasonably required by Borrower to establish and maintain Borrower's U.S.
domestic treasury management activities. Bank shall provide such services on
substantially the same terms as are provided by Bank to companies in similar
businesses as Borrower. Borrower shall be permitted to maintain at other
institutions such domestic accounts as are necessary to facilitate its
international treasury management activities. Notwithstanding the foregoing,
Borrower and its Subsidiaries formed in the United States shall at all times
maintain at least the aggregate amount of Ten Million Dollars ($10,000,000) in
Cash in accounts located in the Continental United States.

        6.6    Financial Covenants.    Borrower shall at all times maintain the
following financial ratios and covenants:

        (a)    Liquidity Ratio.    A Liquidity Ratio of not less than 1.30 to
1.00.

        (b)    Trailing Four Quarter EBITDA.    A Trailing Four Quarter EBITDA
of not less than Ten Million Dollars ($10,000,000).

        6.7    Further Assurances.    At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

        7.    NEGATIVE COVENANTS.    

        Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the outstanding Obligations are paid in full or for
so long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent, which
shall not be unreasonably withheld:

        7.1    Dispositions.    Convey, sell, lease, license, transfer or
otherwise dispose of (collectively, to "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, including
its intellectual property, or move cash balances on deposit with Bank to
accounts opened at another financial institution, other than Permitted Transfers
and Permitted Investments.

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        7.2    Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in
Control.    Change its name or the Borrower State or relocate its chief
executive office without thirty (30) days prior written notification to Bank;
replace its chief executive officer or chief financial officer without written
notification to Bank within thirty (30) days after the termination date; engage
in any business, or permit any of its Subsidiaries to engage in any business,
other than or reasonably related or incidental to the businesses currently
engaged in by Borrower; change its fiscal year end; suffer or permit a Change in
Control.

        7.3    Mergers or Acquisitions.    Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not individually exceed cash
consideration of Three Million Dollars ($3,000,000), or Ten Million Dollars
($10,000,000) in the aggregate, (ii) no Event of Default has occurred, is
continuing or would exist after giving effect to such transactions, (iii) such
transactions do not result in a Change in Control, and (iv) Borrower is the
surviving entity.

        7.4    Indebtedness.    Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness if the
prepayment (x) could not reasonably be expected to have a Material Adverse
Effect, and (y) an Event of Default would not occur as a result of such
prepayment, except Indebtedness to Bank.

        7.5    Encumbrances.    Create, incur, assume or allow any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens. Agree with any Person other
than Bank not to grant a security interest in, or otherwise encumber, any of
its, or covenant to any other Person that Borrower in the future will refrain
from creating, incurring, assuming or allowing any Lien with respect to any of
Borrower's property, or permit any Subsidiary to do so.

        7.6    Distributions.    Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except that Borrower may (i) repurchase stock in the
aggregate cash amount of Twenty Million Dollars ($20,000,000) in any trailing
four (4) quarter period (commencing from and after the Closing Date), and
(ii) pay cash dividends not to exceed Two and One Half Cents ($0.025) per share
per quarter; in each case, as long as an Event of Default does not exist prior
to such repurchase or dividend, or would not exist after giving effect to such
repurchase or dividend.

        7.7    Investments.    Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or suffer or permit any Subsidiary to be a
party to, or be bound by, an agreement that restricts such Subsidiary from
paying dividends or otherwise distributing property to Borrower.

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

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        7.9    Subordinated Debt.    Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision affecting Bank's rights contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.

        7.10    Net Cash Distributions.    Make net cash distributions
(including dividends and other repayments) by Borrower to wholly owned or
majority owned Subsidiaries exceeding Ten Million Dollars ($10,000,000) in the
aggregate at any time during any fiscal year.

        7.11    No Investment Company; Margin Regulation.    Become or be
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit Extension
for such purpose.

        8.    EVENTS OF DEFAULT.    

        Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

        8.1    Payment Default.    If Borrower fails to pay any of the
Obligations within two (2) Business Days of the date when due;

        8.2    Covenant Default.    

        (a)   If Borrower fails to perform any obligation under Sections 6.2
(provided, that any breach of Section 6.2(a) shall be cured within two
(2) Business Days of notice or knowledge thereof), 6.4, 6.5 or 6.6, or violates
any of the covenants contained in Article 7 of this Agreement; or

        (b)   If Borrower fails or neglects to perform or observe any other
material term, provision, condition, covenant contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement between
Borrower and Bank and as to any default under such other term, provision,
condition or covenant that can be cured, has failed to cure such default within
ten (10) days after Borrower receives notice thereof or any Responsible Officer
obtains actual knowledge thereof; provided, however, that if the default cannot
by its nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such default
is likely to be cured within a reasonable time, then Borrower shall have an
additional reasonable period (which shall not in any case exceed forty-five
(45) days) to attempt to cure such default, and within such reasonable time
period the failure to have cured such default shall not be deemed an Event of
Default but no Credit Extensions will be made;

        8.3    Material Adverse Effect.    If there occurs any circumstance or
circumstances that could reasonably be expected to have a Material Adverse
Effect;

        8.4    Attachment.    If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within fifteen (15) days, or if Borrower
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by

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any state, county, municipal, or governmental agency, and the same is not paid
within fifteen (15) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower (provided that no Credit Extensions will be made during such cure
period);

        8.5    Insolvency.    If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty-five (45) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

        8.6    Other Agreements.    

        (a)   If there is a default or other failure to perform in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Million Dollars
($1,000,000) or that could reasonably be expected to have a Material Adverse
Effect;

        (b)   Notwithstanding any other provision of this Agreement, if there is
a default or other failure to perform in any agreement between Borrower and
Bank, other than this Agreement, resulting in a right by Bank, whether or not
exercised, to accelerate the maturity of any Indebtedness owing thereunder in an
amount in excess of One Million Dollars ($1,000,000) or that could reasonably be
expected to have a Material Adverse Effect;

        8.7    Subordinated Debt.    If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

        8.8    Judgments.    If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Million Dollars
($1,000,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of fifteen (15) days (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment); or

        8.9    Misrepresentations.    If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.

        9.    BANK'S RIGHTS AND REMEDIES.    

        9.1    Rights and Remedies.    Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

        (a)   Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in
Section 8.5, all Obligations shall become immediately due and payable without
any action by Bank);

        (b)   Demand that Borrower (i) deposit cash with Bank in an amount equal
to the amount of any Letters of Credit remaining undrawn, as collateral security
for the repayment of any future drawings under such Letters of Credit, and
(ii) pay in advance

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all Letter of Credit fees scheduled to be paid or payable over the remaining
term of the Letters of Credit, and Borrower shall promptly deposit and pay such
amounts; and

        (c)   Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank.

        9.2    Remedies Cumulative.    Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given. Borrower expressly agrees that this Section may not be
waived or modified by Bank by course of performance, conduct, estoppel or
otherwise.

        9.3    Demand; Protest.    Except as otherwise provided in this
Agreement, Borrower waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment and any other notices relating to
the Obligations.

        9.4    Bank Expenses.    If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower and an opportunity to cure the same (within
two (2) Business Days of the date of such notice): (a) make payment of the same
or any part thereof; (b) set up such reserves under the Revolving Line as Bank
reasonably deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type discussed in
Section 6.4 of this Agreement, and take any action with respect to such policies
as Bank reasonably deems prudent. Any amounts so paid or deposited by Bank shall
constitute Bank Expenses, shall be immediately due and payable, and shall bear
interest at the then applicable rate hereinabove provided. Any payments made by
Bank shall not constitute an agreement by Bank to make similar payments in the
future or a waiver by Bank of any Event of Default under this Agreement.

        10.    NOTICES.    

        Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery

19

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service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:

If to Borrower:   QAD INC.
6450 Via Real
Carpinteria, CA 93013
Attn: Chief Financial Officer
FAX: (805) 565-4202
If to Bank:
 
Comerica Bank
2321 Rosecrans Ave., Suite 5000
El Segundo, CA 90245
Attn: Manager
FAX: (310) 297-2290
with a copy to:
 
Comerica Bank
611 Anton Blvd., Suite 400
Costa Mesa, CA 92626
Attn: Bonnie E. Kehe, Senior Vice President
FAX: (714) 433-3280

        The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

        11.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.    

        This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Los
Angeles, State of California. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF
THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK
OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.

        12.    REFERENCE PROVISION.    

        The parties prefer that any dispute between them be resolved in
litigation subject to a Jury Trial Waiver as set forth in Section 11 of this
Agreement, but the availability of that process is in doubt because of the
opinion of the California Court of Appeal in Grafton Partners LP v. Superior
Court, 9 Cal.Rptr.3d 511. This Reference Provision will be applicable until the
California Supreme Court completes its review of that case, and will continue to
be applicable if either that court or a California Court of Appeal publishes a
decision holding that a pre-dispute Jury Trial Waiver provision similar to that
contained in the Loan Documents is invalid or unenforceable. Delay in requesting
appointment of a referee pending review of any such decision, or participation
in litigation pending review, will not be deemed a waiver of this Reference
Provision.

20

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        12.1    Mechanics.    

        (a)   Other than (i) nonjudicial foreclosure of security interests in
real or personal property, (ii) the appointment of a receiver or (iii) the
exercise of other provisional remedies (any of which may be initiated pursuant
to applicable law), any controversy, dispute or claim (each, a "Claim") between
the parties arising out of or relating to this Agreement or any other document,
instrument or agreement between the Bank and the undersigned (collectively in
this Section, the "Loan Documents"), will be resolved by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure ("CCP"), or their successor sections, which
shall constitute the exclusive remedy for the resolution of any Claim, including
whether the Claim is subject to the reference proceeding. Except as otherwise
provided in the Loan Documents, venue for the reference proceeding will be in
the Superior Court or Federal District Court in the County or District where
venue is otherwise appropriate under applicable law (the "Court").

        (b)   The referee shall be a retired Judge or Justice selected by mutual
written agreement of the parties. If the parties do not agree, the referee shall
be selected by the Presiding Judge of the Court (or his or her representative).
A request for appointment of a referee may be heard on an ex parte or expedited
basis, and the parties agree that irreparable harm would result if ex parte
relief is not granted. The referee shall be appointed to sit with all the powers
provided by law. Each party shall have one peremptory challenge pursuant to CCP
§170.6. Pending appointment of the referee, the Court has power to issue
temporary or provisional remedies.

        (c)   The parties agree that time is of the essence in conducting the
reference proceedings. Accordingly, the referee shall be requested to (a) set
the matter for a status and trial-setting conference within fifteen (15) days
after the date of selection of the referee, (b) if practicable, try all issues
of law or fact within ninety (90) days after the date of the conference and
(c) report a statement of decision within twenty (20) days after the matter has
been submitted for decision. Any decision rendered by the referee will be final,
binding and conclusive, and judgment shall be entered pursuant to CCP §644.

        (d)   The referee will have power to expand or limit the amount and
duration of discovery. The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party's failure to provide requested
discovery for any reason whatsoever. Unless otherwise ordered, no party shall be
entitled to "priority" in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.

        12.2    Procedures.    Except as expressly set forth in this Agreement,
the referee shall determine the manner in which the reference proceeding is
conducted including the time and place of hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter, except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee, and the referee will be provided a courtesy copy of the
transcript. The party making such a request shall have the obligation to arrange
for and pay the court reporter. Subject to the referee's power to award costs to
the prevailing party, the parties will equally share the cost of the referee and
the court reporter at trial.

21

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        12.3    Application of Law.    The referee shall be required to
determine all issues in accordance with existing case law and the statutory laws
of the State of California. The rules of evidence applicable to proceedings at
law in the State of California will be applicable to the reference proceeding.
The referee shall be empowered to enter equitable as well as legal relief,
provide all temporary or provisional remedies, enter equitable orders that will
be binding on the parties and rule on any motion which would be authorized in a
trial, including without limitation motions for summary judgment or summary
adjudication. The referee shall issue a decision at the close of the reference
proceeding which disposes of all claims of the parties that are the subject of
the reference. The referee's decision shall be entered by the Court as a
judgment or an order in the same manner as if the action had been tried by the
Court. The parties reserve the right to appeal from the final judgment or order
or from any appealable decision or order entered by the referee. The parties
reserve the right to findings of fact, conclusions of laws, a written statement
of decision, and the right to move for a new trial or a different judgment,
which new trial, if granted, is also to be a reference proceeding under this
provision.

        12.4    Repeal.    If the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by reference
procedure will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge or Justice, in accordance with the California
Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time.
The limitations with respect to discovery set forth above shall apply to any
such arbitration proceeding.

        12.5    THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER
THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY, AND
THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS
REFERENCE PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR
THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY
DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE
LOAN DOCUMENTS.    

        13.    GENERAL PROVISIONS.    

        13.1    Successors and Assigns.    This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties and shall bind all Persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder; provided that, as long as an
Event of Default has not occurred and is not continuing, Bank shall not grant
participations or partial assignments of Bank's obligations, rights or benefits
hereunder without Borrower's prior written consent, which shall not be
unreasonably withheld or delayed.

        13.2    Indemnification.    Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by

22

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Bank, its officers, employees and agents as a result of or in any way arising
out of, following, or consequential to transactions between Bank and Borrower
whether under this Agreement, or otherwise (including without limitation
reasonable attorneys' fees and expenses), except for losses arising out of
Bank's gross negligence or willful misconduct.

        13.3    Time of Essence.    Time is of the essence for the performance
of all obligations set forth in this Agreement.

        13.4    Severability of Provisions.    Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

        13.5    Amendments in Writing, Integration.    All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.

        13.6    Counterparts.    This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

        13.7    Survival.    All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 13.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.

[Balance of Page Intentionally Left Blank]

23

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

    QAD INC.
 
 
By:
 
/s/  DANIEL LENDER      

--------------------------------------------------------------------------------

 
 
Title:
 
Daniel Lender, Chief Financial Officer

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COMERICA BANK
 
 
By:
 
/s/  BONNIE E KEHL      

--------------------------------------------------------------------------------

 
 
Title:
 
Senior Vice President

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[Signature Page to Loan Agreement]

--------------------------------------------------------------------------------

DEBTOR   QAD INC.
SECURED PARTY:
 
COMERICA BANK

EXHIBIT A

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M. Eastern
Time]

DEADLINE FOR EQUIPMENT ADVANCES IS [3:00 P.M., Pacific Time/ 3:30 P.M. Eastern
Time]**

DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern Time]

[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]

**Subject to 3 day advance notice.

To: Loan Analysis   DATE:     TIME:   FAX #: (650) 846-6840    

--------------------------------------------------------------------------------

   

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

FROM:   QAD INC.   TELEPHONE REQUEST (For Bank Use Only):    

--------------------------------------------------------------------------------

Borrower's Name     FROM:       

--------------------------------------------------------------------------------

Authorized Signer's Name   The following person is authorized to request the
loan payment transfer/loan advance on the designated account and is known to me.
FROM:            

--------------------------------------------------------------------------------

Authorized Signer's Name  

--------------------------------------------------------------------------------

Authorized Request & Phone # PHONE #:            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Received by (Bank) & Phone # FROM ACCOUNT#:     (please include Note number, if
applicable)     TO ACCOUNT #:   Authorized Signature (Bank) (please include Note
number, if applicable)
   

--------------------------------------------------------------------------------

REQUESTED TRANSACTION TYPE   REQUESTED DOLLAR AMOUNT   For Bank Use Only
PRINCIPAL INCREASE* (ADVANCE)
 
$                                                 
 
Date Rec'd: PRINCIPAL PAYMENT (ONLY)   $                                        
           Time:         Comp. Status:        YES        NO OTHER INSTRUCTIONS:
      Status Date:         Time:

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  Approval:

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--------------------------------------------------------------------------------

All representations and warranties of Borrower stated in the Loan Agreement are
true and correct in all material respects as of the date of the telephone
request for and advance confirmed by this Borrowing Certificate, provided,
however, that those representations and warranties the date expressly referring
to another date shall be true and correct in all material respects as of such
date, any exceptions are attached in Exhibit B.

*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE
ONE)        YES        NO

        If YES, the Outgoing Wire Transfer Instructions must be completed below.

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OUTGOING WIRE TRANSFER INSTRUCTIONS   Fed Reference Number   Bank Transfer
Number
 
 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

The items marked with an asterisk (*) are required to be completed.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

*Beneficiary Name        

--------------------------------------------------------------------------------

*Beneficiary Account Number        

--------------------------------------------------------------------------------

*Beneficiary Address        

--------------------------------------------------------------------------------

Currency Type   US DOLLARS ONLY    

--------------------------------------------------------------------------------

*ABA Routing Number (9 Digits)        

--------------------------------------------------------------------------------

*Receiving Institution Name        

--------------------------------------------------------------------------------

*Receiving Institution Address        

--------------------------------------------------------------------------------

*Wire Account   $    

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

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EXHIBIT B

BORROWING BASE CERTIFICATE

--------------------------------------------------------------------------------

Borrower: QAD INC.   Lender: Comerica Bank
Commitment Amount: $20,000,000
 
 

--------------------------------------------------------------------------------

EBITDA        
1.
Immediately Preceding Quarter (ended             )
 
$                  
 
  2. Second Immediately Preceding Quarter (ended             )  
$                       3. Third Immediately Preceding Quarter (ended
            )   $                       4. Fourth Immediately Preceding Quarter
(ended             )   $                       5. TOTAL Trailing Four Quarter
EBITDA (as of             )       $                  
6.
LOAN VALUE OF EBITDA (150% of #6)
 
 
 
$                  
BALANCES
 
 
 
 
7.
Maximum Loan Amount
 
 
 
$20,000,000 8. Total Funds Available [Lesser of #6 or #7]      
$                   9. Present balance owing on Line of Credit      
$                   10. Outstanding under Sublimits (e.g., Letters of Credit)  
    $                   11. RESERVE POSITION (#8 minus #9 and #10)      
$                  

The undersigned represents and warrants that the foregoing is true and correct,
and that the information reflected in this Borrowing Base Certificate complies
with the representations and warranties set forth in the Loan Agreement between
the undersigned and Comerica Bank.

QAD INC.    
By:
 
 
 
     

--------------------------------------------------------------------------------

        Authorized Signer    

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EXHIBIT C

COMPLIANCE CERTIFICATE

TO:   COMERICA BANK
FROM:
 
QAD INC.

        The undersigned authorized officer of QAD INC. hereby certifies that in
accordance with the terms and conditions of the Loan 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 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.

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

Reporting Covenant

--------------------------------------------------------------------------------

  Required

--------------------------------------------------------------------------------

   
  Complies

--------------------------------------------------------------------------------

Quarterly financial statements   Quarterly within 30 days       Yes   No Annual
(CPA Audited)   FYE within 90 days       Yes   No 10K and 10Q   Within 15 days
of filing       Yes   No Borrowing Base Cert.   Quarterly within 20 days      
Yes   No Compliance Cert.   Quarterly within 30 days       Yes   No Operating
Plan/Budget   Annually within 30 days       Yes   No
Total amount of Borrower's cash and investments
 
Amount: $                  
 
 
 
 
 
  Total amount of Borrower's (and domestic Subsidiaries') cash and investments
maintained in the Continental United States   Amount: $                        
      Total amount of Borrower's cash and investments maintained with Bank  
Amount: $                              
Financial Covenant

--------------------------------------------------------------------------------

 
Required

--------------------------------------------------------------------------------

 
Actual

--------------------------------------------------------------------------------

 
Complies

--------------------------------------------------------------------------------

Measured on a Quarterly Basis:
 
 
 
 
 
 
 
   
Minimum Trailing 4 Quarter EBITDA
 
$10,000,000
 
$            
 
Yes
 
No  
Minimum Liquidity Ratio
 
1.30:1.00
 
    :1.00
 
Yes
 
No  
Minimum Cash in the Continental U.S.
 
$10,000,000(1)
 
$            
 
Yes
 
No

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(1)Detail of cash infusions by Borrower and cash repayments to Borrower to be
provided to Bank as and when made.

Comments Regarding Exceptions: See Attached.   BANK USE ONLY
Sincerely,
 
Received by:
 
         

--------------------------------------------------------------------------------

AUTHORIZED SIGNER     Date:            

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

SIGNATURE   Verified:            

--------------------------------------------------------------------------------

AUTHORIZED SIGNER

--------------------------------------------------------------------------------

TITLE   Date:            

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

DATE
 
Compliance Status                                Yes        No

--------------------------------------------------------------------------------

APPENDIX I
(LIBOR Addendum to Loan Agreement)

--------------------------------------------------------------------------------

SCHEDULE OF EXCEPTIONS

--------------------------------------------------------------------------------

Permitted Indebtedness (Section 1.1)

        The following agreement(s) evidence Permitted Indebtedness* against
QAD Inc.:

Agreement

--------------------------------------------------------------------------------

  Borrower

--------------------------------------------------------------------------------

  Lender

--------------------------------------------------------------------------------

  Original Principal Amount of Indebtedness

--------------------------------------------------------------------------------

Loan and Security Agreement, dated as of September 8, 2000, together with all
amendments thereto*   QAD Inc.   Foothill Capital Corporation   Term Loan
Amount—$15,000,000
  
Maximum Revolver Amount—$30,000,000 less outstanding principal balance of the
Term Loan

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*This Agreement shall be terminated substantially contemporaneously with the
Closing Date.

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Permitted Investments (Section 1.1)

Marketable Securities as of 02-28-05

 
  Principal

--------------------------------------------------------------------------------

  Maturity

--------------------------------------------------------------------------------

Auction Preferred           CHELA FINL USA INC CA STUD LOAN   $ 7,000,000  
03-03-05 Auction Preferred           EDUCATIONL FDG SOUTH INC     6,000,000  
03-03-05 Citi Institutional Liquid Reserves     24,806,299   None Smith Barney
Money Funds Cash Portfolio     1,419,905   None UBS Money Funds     35,648  
None    

--------------------------------------------------------------------------------

 

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Total   $ 39,261,852    

        Employee loans aggregate amount as of 01-31-05—$560,684

Equities related to customer reorganizations as of 01-31-05

Restricted Stock Henley Healthcare   283,333 shares Common Stock Tripath
Imaging, Inc.   80 shares

        In the course of the Borrower's business, it makes capital contributions
and advances to Subsidiaries which Investments as of 12-31-04 are reflected on
the consolidating balance sheet attached hereto as Exhibit A.

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EXHIBIT A
(to Schedule of Exceptions, Section 1.1 (Permitted Investments))
[hard copy to be inserted]

--------------------------------------------------------------------------------

Permitted Liens (Section 1.1)

        The following Uniform Commercial Code filings evidence Permitted Liens*
against QAD Inc.:

Debtor

--------------------------------------------------------------------------------

  Secured Party

--------------------------------------------------------------------------------

  Jurisdiction

--------------------------------------------------------------------------------

  Collateral

--------------------------------------------------------------------------------

  Filing Date

--------------------------------------------------------------------------------

  Filing No.

--------------------------------------------------------------------------------

QAD Inc.   Foothill Capital Corporation   Delaware   Collateral set forth in
Exhibit A to UCC-1 Financing Statement   August 2, 2000   0049304* QAD Inc.  
Foothill Capital Corporation   Delaware   Collateral set forth in Exhibit A to
UCC-1 Financing Statement   June 14, 2002   21464340* QAD Inc.   Ameritech
Credit Corporation   California   All security systems and other equipment and
items subject to Lease No. 001-0019681-001   January 18, 2000   0002260335 QAD
Inc.   Foothill Capital Corporation   California   Collateral set forth in
Exhibit A to UCC-1 Financing Statement   August 1, 2000   0021660955*

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        The following agreement(s) evidence Permitted Liens against QAD Inc.:

Agreement

--------------------------------------------------------------------------------

  Debtor

--------------------------------------------------------------------------------

  Secured Party

--------------------------------------------------------------------------------

Loan and Security Agreement, dated September 8, 2000, together with all
amendments thereto   QAD Inc.   Foothill Capital Corporation* Intellectual
Property Security Agreement, dated September 8, 2000   QAD Inc.   Foothill
Capital Corporation* Security Interest in Copyrights, dated September 8, 2000  
QAD Inc.   Foothill Capital Corporation* Security Interest in Trademarks, dated
September 8, 2000   QAD Inc.   Foothill Capital Corporation* Stock Pledge and
Security Agreement, dated September 8, 2000   QAD Inc.   Foothill Capital
Corporation* Deed of Trust With Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing, dated September 8, 2000   QAD Inc.  
Foothill Capital Corporation* Subordination Agreement, dated September 8, 2000
(governs subordination of Foothill Capital Corporation's interest to that of
Brown Investments, Inc.)   QAD Inc.   Foothill Capital Corporation* Real Estate
Management and Put Option Agreement, dated November 18, 1994, as modified by a
First Amendment dated as of January 27, 2000, by and between QAD Inc. and Brown
Investments, Inc.   N/A   N/A Account Control Agreement, dated September 8, 2000
(with Salomon Smith Barney Inc.)   QAD Inc.   Foothill Capital Corporation*
Account Control Agreement, dated October 2, 2000 (with PaineWebber Incorporated)
  QAD Inc.   Foothill Capital Corporation* Clearing Account Agreement, dated
December 4, 2000 (with Commerce Bank, N.A.)   QAD Inc.   Foothill Capital
Corporation*

--------------------------------------------------------------------------------

*These liens shall be terminated substantially contemporaneously with the
Closing Date.

--------------------------------------------------------------------------------

Prior Names (Section 5.3)

        qad.inc

--------------------------------------------------------------------------------

Litigation (Section 5.4)

        None.

--------------------------------------------------------------------------------

Corporation Resolutions and Incumbency Certification
Authority to Procure Loans

        I certify that I am the duly elected and qualified Secretary of
QAD INC.; that the following is a true and correct copy of resolutions duly
adopted by the Board of Directors of the Corporation in accordance with its
bylaws and applicable statutes.

Copy of Resolutions:

        RESOLVED:    that management is hereby authorized to replace the
existing loan facility with Foothill Financial with any of the proposed
alternatives as presented at the meeting at management's discretion but not
before the current termination fee commitment with Foothill Financial expires in
March, 2005.

        As secretary, I certify that the authority granted under this Resolution
includes:

1.Any one (1) of the following three (3) (E.V.P. and Chief Financial Officer,
V.P. Tax and Treasurer and V.P. and Controller) officers of the Corporation is
authorized, for, on behalf of, and in the name of the Corporation to:

(a)Negotiate and procure loans, letters of credit and other credit or financial
accommodations from Comerica Bank ("Bank"), a Michigan banking corporation,
including, without limitation, that certain Loan Agreement dated as of April 7,
2005 as may subsequently be amended from time to time.

(b)Execute and deliver in form and content as may be required by the Bank any
and all notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of this
Resolution, any or all of which may relate to all or to substantially all of the
Corporation's property and assets.

2.Said Bank be and it is authorized and directed to pay the proceeds of any such
loans or discounts as directed by the persons so authorized to sign.

3.Any and all agreements, instruments and documents previously executed and acts
and things previously done to carry out the purposes of this Resolution are
ratified, confirmed and approved as the act or acts of the Corporation.

4.This Resolution shall continue in force, and the Bank may consider the holders
of said offices and their signatures to be and continue to be as set forth in a
certified copy of this Resolution delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect on
any action previously taken by the Bank in reliance on this Resolution).

5.Any person, corporation or other legal entity dealing with the Bank may rely
upon a certificate signed by an officer of the Bank to effect that this
Resolution and any agreement, instrument or document executed pursuant to them
are still in full force and effect and binding upon the Corporation.

6.The Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

        I further certify that the above Resolution is in full force and effect
as of the date of this Certificate; that this Resolution and any borrowings or
financial accommodations under this Resolution have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolution nor any actions to be taken
pursuant to it is

1

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or will be in contravention of any provision of the articles of incorporation or
bylaws of the Corporation or of any agreement, indenture or other instrument to
which the Corporation is a party or by which it is bound; and that neither the
articles of incorporation nor bylaws of the Corporation nor any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound require the vote or consent of shareholders of the Corporation to
authorize any act, matter or thing described in the foregoing Resolution.

        I further certify that the following named persons have been duly
elected to the offices set opposite their respective names, that they continue
to hold these offices at the present time, and that the signatures which appear
below are the genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

NAME (Type or Print)

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  TITLE

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  SIGNATURE

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Daniel Lender

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  E.V.P. and CFO

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Mark Rasmussen

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  V.P. Tax and Treasurer

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Valerie Miller

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  V.P. and Controller

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        In Witness Whereof, I have affixed my name as Secretary and have caused
the corporate seal (where available) of said Corporation to be affixed on
April    , 2005.

   

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Roland Desilets, Secretary, QAD Inc.

The Above Statements are Correct.
 
     

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SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE. A SHAREHOLDER OTHER THAN SECRETARY
WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE.

        Failure to complete the above when the Secretary is authorized to sign
alone shall constitute a certification by the Secretary that the Secretary is
the sole Shareholder, Director and Officer of the Corporation.

2

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ATTN: QAD INC.

USA PATRIOT ACT
NOTICE
OF
CUSTOMER IDENTIFICATION

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

        To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each person who opens an
account.

        WHAT THIS MEANS FOR YOU: when you open an account, we will ask your
name, address, date of birth, and other information that will allow us to
identify you. We may also ask to see your driver's license or other identifying
documents.

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COMERICA BANK
Member FDIC

ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Revolver)

Name(s): QAD INC.       Date: April 7, 2005  
$20,000,000
 
credited to deposit account No. 1892038165 when Advances are requested by
Borrower
Amounts paid to others on your behalf:
    $   to Comerica Bank for Loan Fee   $   to Comerica Bank for Document Fee  
$   to Comerica Bank for accounts receivable audit (estimate)   $   to Bank
counsel fees and expenses   $   to          

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    $   to          

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    $   TOTAL (AMOUNT FINANCED)

Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.

/s/  DANIEL LENDER          

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Signature   Signature

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AGREEMENT TO PROVIDE INSURANCE

TO:   COMERICA BANK
Attn: Deni M. Snider, MC 4770
75 E. Trimble Road
San Jose, CA 95131   Date: April 7, 2005

Borrower: QAD INC.

        In consideration of a loan in the amount of $20,000,000:

        I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.

        I/We also agree to advise the below named agent to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.

        I/We understand that the policy must contain:

        1.     Fire and extended coverage in an amount sufficient to cover:

        (a)   The amount of the loan, OR

        (b)   All existing encumbrances, whichever is greater,

        But not in excess of the replacement value of the improvements on the
real property.

        2.     Lender's "Loss Payable" Endorsement Form 438 BFU in favor of
Comerica Bank, or any other form acceptable to Bank.

INSURANCE INFORMATION

Insurance Co./Agent   Telephone No.:
Agent's Address:
 
 

    Signature of Obligor:   /s/ Daniel Lender        

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Signature of Obligor:
 
         

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    FOR BANK USE ONLY    
INSURANCE VERIFICATION: Date:
 
 
Person Spoken to:
 
 
Policy Number:
 
 
Effective From:                          To:
 
 
Verified by:
 
 

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COMERICA BANK

Member FDIC   AUTOMATIC DEBIT AUTHORIZATION

To: Comerica Bank

Re: Loan #

You are hereby authorized and instructed to charge account No. 1892038165 in the
name of QAD INC. for principal, interest and other payments due on above
referenced loan as set forth below and credit the loan referenced above.

ý    Debit each interest payment as it becomes due according to the terms of the
Loan Agreement and any renewals or amendments thereof.

ý    Debit each principal payment as it becomes due according to the terms of
the Loan Agreement and any renewals or amendments thereof.

ý    Debit each payment for Bank Expenses as it becomes due according to the
terms of the Loan Agreement and any renewals or amendments thereof.

This Authorization is to remain in full force and effect until revoked in
writing.

Borrower Signature   Date
/s/ Daniel Lender
 
April 7, 2005
 
 
April 7, 2005

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COMERICA BANK

Member FDIC   AUTOMATIC DEBIT AUTHORIZATION

To: Comerica Bank

Re: Loan #

You are hereby authorized and instructed to charge account No. 1892038165 in the
name of QAD INC. for principal, interest and other payments due on above
referenced loan as set forth below and credit the loan referenced above.

ý    Debit each interest payment as it becomes due according to the terms of the
Loan Agreement and any renewals or amendments thereof.

ý    Debit each principal payment as it becomes due according to the terms of
the Loan Agreement and any renewals or amendments thereof.

ý    Debit each payment for Bank Expenses as it becomes due according to the
terms of the Loan Agreement and any renewals or amendments thereof.

This Authorization is to remain in full force and effect until revoked in
writing.

Borrower Signature   Date
 
 
April 7, 2005
 
 
April 7, 2005

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COMERICA BANK

COMERICA BANK
CLIENT AUTHORIZATION

Fax    (714) 433-3280

General Authorization

I hereby authorize Comerica Bank to use my company name, logo, and information
relating to our banking relationship in its marketing and advertising campaigns
which is intended for Comerica Bank's customers, prospects and shareholders.

Comerica Bank will forward any advertising or article including client for prior
review and approval.

  /s/ Daniel Lender        

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    Signature          
Daniel Lender
 
Chief Financial Officer
 
 

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    Printed Name   Title      
QAD, Inc.
 
 
 
 

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    Company          
6450 Via Real
 
 
 
 

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    Mailing Address          
Carpinteria, CA 93013
 
 
 
 

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    City, State, Zip Code          
(805) 566-6000
 
 
 
 

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    Phone Number          
(805) 566-4479
 
 
 
 

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    Fax Number          
 
 
 
 
 

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    E-Mail        

April 7, 2005

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LIBOR
Addendum To Loan Agreement

        This Addendum to Loan Agreement (this "Addendum") is entered into as of
this April 7, 2005, by and between Comerica Bank ("Bank") and QAD INC.
("Borrower"). This Addendum supplements the terms of the Loan Agreement of even
date herewith.

        14.    Definitions.    

        (a)    Advance.    As used herein, "Advance" means a borrowing requested
by Borrower and made by Bank under the Loan Agreement, including a LIBOR Option
Advance and/or a Prime Rate Option Advance.

        (b)    Business Day.    As used herein, "Business Day" means any day
except a Saturday, Sunday or any other day designated as a holiday under Federal
or California statute or regulation.

        (c)    LIBOR.    As used herein, "LIBOR" means the rate per annum
(rounded upward if necessary, to the nearest whole 1/8 of 1%) and determined
pursuant to the following formula:

    Base LIBOR LIBOR =  

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    100% - LIBOR Reserve Percentage

        (1)   "Base LIBOR" means the rate per annum determined by Bank at which
deposits for the relevant LIBOR Period would be offered to Bank in the
approximate amount of the relevant LIBOR Option Advance in the inter-bank LIBOR
market selected by Bank, upon request of Bank at 10:00 a.m. California time, on
the day that is the first day of such LIBOR Period.

        (2)   "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable LIBOR Period.

        (d)    LIBOR Business Day.    As used herein, "LIBOR Business Day" means
a Business Day on which dealings in U.S. Dollar deposits may be carried out in
the interbank LIBOR market.

        (e)    LIBOR Period.    As used herein, "LIBOR Period" means, with
respect to a LIBOR Option Advance:

        (1)   initially, the period commencing on, as the case may be, the date
the Advance is made or the date on which the Advance is converted to a LIBOR
Option Advance, and continuing for, in every case, a 30, 60 or 90-day period
thereafter so long as the LIBOR Option is quoted for such period in the
applicable interbank LIBOR market, as such period is selected by Borrower in the
notice of Advance as provided in the Loan Agreement or in the notice of
conversion as provided in this Addendum; and

        (2)   thereafter, each period commencing on the last day of the next
preceding LIBOR Period applicable to such LIBOR Option Advance and continuing
for, in every case, a 30, 60 or 90-day thereafter so long as the LIBOR Option is
quoted for such period in the applicable interbank LIBOR market, as such period
is selected by Borrower in the notice of continuation as provided in this
Addendum.

        (f)    Regulation D.    As used herein, "Regulation D" means
Regulation D of the Board of Governors of the Federal Reserve System as amended
or supplemented from time to time.

        (g)    Regulatory Development.    As used herein, "Regulatory
Development" means any or all of the following: (i) any change in any law,
regulation or interpretation thereof by any

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public authority (whether or not having the force of law); (ii) the application
of any existing law, regulation or the interpretation thereof by any public
authority (whether or not having the force of law); and (iii) compliance by Bank
with any request or directive (whether or not having the force of law) of any
public authority.

        Capitalized terms used herein without definition shall have the
definition ascribed in the Loan Agreement.

        15.    Interest Rate Options.    Borrower shall have the following
options regarding the interest rate to be paid by Borrower on the Advance under
the Loan Agreement:

        (a)   A rate equal to the Applicable Margin above Bank's LIBOR (the
"LIBOR Option"), which LIBOR Option shall be in effect during the relevant LIBOR
Period; or

        (b)   A rate equal to the Applicable Margin above or below (as
appropriate) the Prime Rate (the "Prime Rate Option").

        16.    LIBOR Option Advance.    The minimum LIBOR Option Advance will
not be less than One Million Dollars ($1,000,000) for any LIBOR Option Advance.

        17.    Payment of Interest on LIBOR Option Advances.    Interest on each
LIBOR Option Advance shall be payable pursuant to the terms of the Loan
Agreement. Interest on such LIBOR Option Advance shall be computed on the basis
of a 360-day year and shall be assessed for the actual number of days elapsed
from the first day of the LIBOR Period applicable thereto but not including the
last day thereof.

        18.    Bank's Records Re: LIBOR Option Advances.    With respect to each
LIBOR Option Advance, Bank is hereby authorized to note the date, principal
amount, interest rate and LIBOR Period applicable thereto and any payments made
thereon on Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to the Loan Agreement, which notations shall be
prima facie evidence of the accuracy of the information noted, absent manifest
error.

        19.    Selection/Conversion of Interest Rate Options.    At the time any
Advance is requested under the Loan Agreement and/or Borrower wishes to select
the LIBOR Option for all or a portion of the outstanding principal balance of
the Loan Agreement, and at the end of each LIBOR Period, Borrower shall give
Bank notice specifying (a) the interest rate option selected by Borrower; b) the
principal amount subject thereto; and (c) if the LIBOR Option is selected, the
length of the applicable LIBOR Period. Any such notice may be given by telephone
so long as, with respect to each LIBOR Option selected by Borrower, (i) Bank
receives written confirmation from Borrower not later than three (3) LIBOR
Business Days after such telephone notice is given; and (ii) such notice is
given to Bank prior to 10:00 a.m., California time, on the first day of the
LIBOR Period. For each LIBOR Option requested hereunder, Bank will quote the
applicable fixed LIBOR Rate to Borrower at approximately 10:00 a.m., California
time, on the first day of the LIBOR Period. If Borrower does not immediately
accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be
subject to a redetermination of the rate by Bank; provided, however, that if
Borrower fails to accept any such quotation given, then the quoted rate shall
expire and Bank shall have no obligation to permit a LIBOR Option to be selected
on such day. If no specific designation of interest is made at the time any
Advance is requested under the Loan Agreement or at the end of any LIBOR Period,
Borrower shall be deemed to have selected the Prime Rate Option for such Advance
or the principal amount to which such LIBOR Period applied. At any time the
LIBOR Option is in effect, Borrower may, at the end of the applicable LIBOR
Period, convert to the Prime Rate Option. At any time the Prime Rate Option is
in effect, Borrower may convert to the LIBOR Option, and shall designate a LIBOR
Period.

        20.    Prepayment.    In the event that the LIBOR Option is the
applicable interest rate for all or any part of the outstanding principal
balance of the Loan Agreement, and any payment or prepayment of any such
outstanding principal balance of the Loan Agreement shall occur on any

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day other than the last day of the applicable LIBOR Period (whether voluntarily,
by acceleration, required payment, or otherwise), or if Borrower elects the
LIBOR Option as the applicable interest rate for all or any part of the
outstanding principal balance of the Loan Agreement in accordance with the terms
and conditions hereof, and, subsequent to such election, but prior to the
commencement of the applicable LIBOR Period, Borrower revokes such election for
any reason whatsoever, or if the applicable interest rate in respect of any
outstanding principal balance of the Loan Agreement hereunder shall be changed,
for any reason whatsoever, from the LIBOR Option to the Prime Rate Option prior
to the last day of the applicable LIBOR Period, or if Borrower shall fail to
make any payment of principal or interest hereunder at any time that the LIBOR
Option is the applicable interest rate hereunder in respect of such outstanding
principal balance of the Loan Agreement, Borrower shall reimburse Bank, on
demand, for any resulting documented loss, cost or expense incurred by Bank as a
result thereof, including, without limitation, any such loss, cost or expense
incurred in obtaining, liquidating, employing or redeploying deposits from third
parties. Such amount payable by Borrower to Bank may include, without
limitation, an amount equal to the excess, if any, of (a) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, refunded
or converted, for the period from the date of such prepayment or of such failure
to borrow, refund or convert, through the last day of the relevant LIBOR Period,
at the applicable rate of interest for such outstanding principal balance of the
Loan Agreement, as provided under this Loan Agreement, over (b) the amount of
interest (as reasonably determined by Bank) which would have accrued to Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank LIBOR market. Calculation of any amounts payable
to Bank under this paragraph shall be made as though Bank shall have actually
funded or committed to fund the relevant outstanding principal balance of the
Loan Agreement hereunder through the purchase of an underlying deposit in an
amount equal to the amount of such outstanding principal balance of the Loan
Agreement and having a maturity comparable to the relevant LIBOR Period;
provided, however, that Bank may fund the outstanding principal balance of the
Loan Agreement hereunder in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of amounts
payable under this paragraph. Upon the written request of Borrower, Bank shall
deliver to Borrower a certificate setting forth the basis for determining such
losses, costs and expenses, which certificate shall be conclusively presumed
correct, absent manifest error. Any prepayment hereunder shall also be
accompanied by the payment of all accrued and unpaid interest on the amount so
prepaid. Any outstanding principal balance of the Loan Agreement which is
bearing interest at such time at the Prime Rate Option may be prepaid without
penalty or premium. Partial prepayments hereunder shall be applied to the
installments hereunder in the inverse order of their maturities.

        BY INITIALING BELOW, BORROWER ACKNOWLEDGE(S) AND AGREE(S) THAT:
(A) THERE IS NO RIGHT TO PREPAY ANY LIBOR OPTION ADVANCE, IN WHOLE OR IN PART,
WITHOUT PAYING THE PREPAYMENT AMOUNT, EXCEPT AS OTHERWISE REQUIRED UNDER
APPLICABLE LAW; (B) BORROWER SHALL BE LIABLE FOR PAYMENT OF THE PREPAYMENT
AMOUNT IF BANK EXERCISES ITS RIGHT TO ACCELERATE PAYMENT OF ANY LIBOR OPTION
ADVANCE AS PART OR ALL OF THE OBLIGATIONS OWING UNDER THE LOAN AGREEMENT,
INCLUDING WITHOUT LIMITATION, ACCELERATION UNDER A DUE-ON-SALE PROVISION;
(C) BORROWER WAIVES ANY RIGHTS UNDER SECTION 2954.10 OF THE CALIFORNIA CIVIL
CODE, OR ANY SUCCESSOR STATUTE; AND (D) BANK HAS MADE EACH LIBOR OPTION ADVANCE
PURSUANT TO THE LOAN AGREEMENT IN RELIANCE ON THESE AGREEMENTS.

MR

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BORROWER'S INITIALS    

        21.    Hold Harmless and Indemnification.    Borrower agrees to
indemnify Bank and to hold Bank harmless from, and to reimburse Bank on demand
for, all losses and expenses which Bank sustains or incurs as a result of
(i) any payment of a LIBOR Option Advance prior to the last day

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of the applicable LIBOR Period for any reason, including, without limitation,
termination of the Loan Agreement, whether pursuant to this Addendum or the
occurrence of an Event of Default; (ii) any termination of a LIBOR Period prior
to the date it would otherwise end in accordance with this Addendum; or
(iii) any failure by Borrower, for any reason, to borrow any portion of a LIBOR
Option Advance.

        22.    Funding Losses.    The indemnification and hold harmless
provisions set forth in this Addendum shall include, without limitation, all
losses and expenses arising from interest and fees that Bank pays to lenders of
funds it obtains in order to fund the loans to Borrower on the basis of the
LIBOR Option(s) and all losses incurred in liquidating or re-deploying deposits
from which such funds were obtained and loss of profit for the period after
termination. A written statement by Bank to Borrower of such losses and expenses
shall be conclusive and binding, absent manifest error, for all purposes. This
obligation shall survive the termination of this Addendum and the payment of the
Loan Agreement.

        23.    Regulatory Developments Or Other Circumstances Relating To
Illegality or Impracticality of LIBOR.    If any Regulatory Development or other
circumstances relating to the interbank Euro-dollar markets shall, at any time,
in Bank's reasonable determination, make it unlawful or impractical for Bank to
fund or maintain, during any LIBOR Period, to determine or charge interest rates
based upon LIBOR, Bank shall give notice of such circumstances to Borrower and:

        (i)    In the case of a LIBOR Period in progress, Borrower shall, if
requested by Bank, promptly pay any interest which had accrued prior to such
request and the date of such request shall be deemed to be the last day of the
term of the LIBOR Period; and

        (ii)   No LIBOR Period may be designated thereafter until Bank
determines that such would be practical.

        24.    Additional Costs.    Borrower shall pay to Bank from time to
time, upon Bank's request, such amounts as Bank determines are needed to
compensate Bank for any costs it incurred which are attributable to Bank having
made or maintained a LIBOR Option Advance or to Bank's obligation to make a
LIBOR Option Advance, or any reduction in any amount receivable by Bank
hereunder with respect to any LIBOR Option or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Developments, which (i) change the basis
of taxation of any amounts payable to Bank hereunder with respect to taxation of
any amounts payable to Bank hereunder with respect to any LIBOR Option Advance
(other than taxes imposed on the overall net income of Bank for any LIBOR Option
Advance by the jurisdiction where Bank is headquartered or the jurisdiction
where Bank extends the LIBOR Option Advance); (ii) impose or modify any reserve,
special deposit, or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, Bank (including
any LIBOR Option Advance or any deposits referred to in the definition of
LIBOR); or (iii) impose any other condition affecting this Addendum (or any of
such extension of credit or liabilities). Bank shall notify Borrower of any
event occurring after the date hereof which entitles Bank to compensation
pursuant to this paragraph as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. Determinations by Bank for
purposes of this paragraph, shall be conclusive, provided that such
determinations are made in good faith on a reasonable basis.

        25.    Legal Effect.    Except as specifically modified hereby, all of
the terms and conditions of the Loan Agreement remain in full force and effect.

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        IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the
date first set forth above.

QAD INC.   COMERICA BANK
By:
 
Mark Rasmussen
 
By:
 
     

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Title:   VP Tax and Treasurer   Title:        

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QuickLinks

EXHIBIT A
EXHIBIT B BORROWING BASE CERTIFICATE
EXHIBIT C COMPLIANCE CERTIFICATE
APPENDIX I (LIBOR Addendum to Loan Agreement)
SCHEDULE OF EXCEPTIONS
EXHIBIT A (to Schedule of Exceptions, Section 1.1 (Permitted Investments)) [hard
copy to be inserted]