**Exhibit 10.1**

 

**FIRST LOAN MODIFICATION AGREEMENT**

** **

This First LoanModification Agreement (this “Loan Modification Agreement”) is entered into asof August 5, 2008, by and among (a) **SILICONVALLEY BANK**, a California corporation, with its principal place of businessat 3003 Tasman Drive, Santa Clara, California 95054 and with a loanproduction office located at One Newton Executive Park, Suite 200, 2221Washington Street, Newton, Massachusetts 02462 (“Bank”) and (b) **NETWORK ENGINES, INC.**, a Delawarecorporation, with offices at 25 Dan Road, Canton, Massachusetts 02021 (“Network”),and **ALLIANCE SYSTEMS, INC.**, a Texascorporation with offices at 3501 East Plano Parkway, Suite 100, Plano,Texas 75074 (“Alliance”) (Network and Alliance are individually and collectively,jointly and severally, “Borrower”).

 

# 1.             DESCRIPTION OFEXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness andobligations which may be owing by Borrower to Bank, Borrower is indebted toBank pursuant to a loan arrangement dated as of October 11, 2007,evidenced by, among other documents, a certain Loan and Security Agreementdated as of October 11, 2007, between Borrower and Bank (as amended, the “LoanAgreement”).  Capitalized terms used butnot otherwise defined herein shall have the same meaning as in the LoanAgreement.

#  

# 2.             DESCRIPTION OFCOLLATERAL.  Repayment of theObligations is secured by the Collateral as described in the Loan Agreement(together with any other collateral security granted to Bank, the “SecurityDocuments”).

#  

Hereinafter, the SecurityDocuments, together with all other documents evidencing or securing theObligations shall be referred to as the “Existing Loan Documents”.

 

# 3.             DESCRIPTION OFCHANGE IN TERMS.

#  

## A.                                   Modificationsto Loan Agreement.

##  

### 1                                          TheLoan Agreement shall be amended by deleting the following text appearing in Section 2.1.2(a) thereof:

###  

“The face amount ofoutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit and any Letter of Credit Reserve) may not exceed Fifteen Million Dollars($15,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.3 and2.1.4.”

 

and inserting in lieuthereof the following:

 

“The face amount ofoutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit and any Letter of Credit Reserve) may not exceed Ten Million Dollars($10,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.3 and2.1.4.”

 

### 2                                          TheLoan Agreement shall be amended by deleting the following text appearing in Section 2.1.3thereof:

###  

“FX Forward Contractsshall have a Settlement Date of at least one (1) FX Business Day after thecontract date and shall be subject to a reserve of ten percent (10%) of eachoutstanding FX Forward Contract in a maximum aggregate amount equal to OneMillion Five Hundred Thousand Dollars ($1,500,000.00) (the “**FX Reserve**”), inclusive of Credit Extensionrelating to Sections 2.1.1, 2.1.2 and 2.1.4. The aggregate amount of FX Forward Contracts at any one time may notexceed ten (10) times the amount of the FX Reserve and the aggregateamount of FX Forward Contracts may not exceed Fifteen 

 

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Million Dollars($15,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.1,2.1.2 and 2.1.4.”

 

and inserting in lieuthereof the following:

 

“FX Forward Contractsshall have a Settlement Date of at least one (1) FX Business Day after thecontract date and shall be subject to a reserve of ten percent (10%) of eachoutstanding FX Forward Contract in a maximum aggregate amount equal to OneMillion Dollars ($1,000,000.00) (the “**FXReserve**”), inclusive of Credit Extension relating to Sections 2.1.1,2.1.2 and 2.1.4.  The aggregate amount ofFX Forward Contracts at any one time may not exceed ten (10) times theamount of the FX Reserve and the aggregate amount of FX Forward Contracts maynot exceed Ten Million Dollars ($10,000,000.00), inclusive of Credit Extensionsrelating to Sections 2.1.1, 2.1.2 and 2.1.4.”

 

### 3                                          TheLoan Agreement shall be amended by deleting the following appearing as Section 2.2thereof in its entirety:

###  

“              **2.2**          **Overadvances**.  If, at any time, the Credit Extensions underSections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (a) theRevolving Line or (b) the Borrowing Base, Borrower shall immediately payto Bank in cash such excess.”

 

and inserting in lieuthereof the following:

 

“              **2.2**          **Overadvances**.  If, at any time, the Credit Extensions underSections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the Revolving Line, Borrowershall immediately pay to Bank in cash such excess.”

 

### 4                                          TheLoan Agreement shall be amended by deleting the following text appearing in Section 2.4thereof:

###  

“If this Agreement is terminated on or prior to the date that is one (1) yearfrom the Effective Date (A) by Bank in accordance with clause (ii) inthe foregoing sentence, or (B) by Borrower for any reason, Borrower shallpay to Bank a termination fee in an amount equal to Seventy-Five ThousandDollars ($75,000.00) (the “Early Termination Fee”).”

 

and inserting in lieuthereof the following:

 

“If this Agreement is terminated on or prior to the date that is one (1) yearfrom the Effective Date (A) by Bank in accordance with clause (ii) inthe foregoing sentence, or (B) by Borrower for any reason, Borrower shallpay to Bank a termination fee in an amount equal to Fifty Thousand Dollars($50,000.00) (the “Early Termination Fee”).”

 

### 5                                          TheLoan Agreement shall be amended by deleting the following appearing as Section 5.3thereof in its entirety:

 

“              **5.3**          **AccountsReceivable**.  For any EligibleAccount in any Borrowing Base Certificate, all statements made and all unpaidbalances appearing in all invoices, instruments and other documents evidencingsuch Eligible Accounts are and shall be true and correct and all such invoices,instruments and other documents, and all of Borrower’s Books are genuine and inall material respects what they purport to be. All sales and other transactions 

 

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underlying or giving riseto each Eligible Account shall comply in all material respects with allapplicable laws and governmental rules and regulations.  Borrower has no knowledge of any actualInsolvency Proceeding of any Account Debtor whose accounts are an EligibleAccount in any Borrowing Base Certificate. To the best of Borrower’s knowledge, all signatures and endorsements onall documents, instruments, and agreements relating to all Eligible Accountsare genuine, and all such documents, instruments and agreements are legallyenforceable in accordance with their terms.”

 

and inserting in lieuthereof the following:

 

“              **5.3**          **IntentionallyDeleted**.”

 

### 6                                          TheLoan Agreement shall be amended by deleting the following text appearing as Section 6.2(b) thereofin its entirety:

###  

“              (b)           Within twenty (30) days after the last dayof each month, if an Advance is outstanding as of the last day of such month,deliver to Bank a duly completed Borrowing Base Certificate signed by aResponsible Officer, with aged listings of accounts receivable (by invoicedate).”

 

and inserting in lieuthereof the following:

 

“              (b)           Within thirty (30) days after the last dayof each month, if an Advance is outstanding as of the last day of such month,deliver to Bank aged listings of accounts receivable (by invoice date).”

 

### 7                                          TheLoan Agreement shall be amended by deleting the following text appearing as Section 6.7(b) thereofin its entirety:

###  

“              (b)           Operating Cash Flow.  Operating Cash Flow of at least (i) OneMillion Five Hundred Thousand Dollars ($1,500,000.00) for the quarter ending December 31,2007, (ii) Five Hundred Thousand Dollars ($500,000.00) for the quarterending March 31, 2008, (iii) One Million Five Hundred ThousandDollars ($1,500,000.00) for the quarter ending June 30, 2008, and (iv) TwoMillion Dollars ($2,000,000.00) for the quarter ending September 30, 2008and as of the last day of each quarter thereafter.”

 

and inserting in lieuthereof the following:

 

“              (b)           Operating Cash Flow.  Operating Cash Flow of at least (i) $1,500,000.00for the quarter ended December 31, 2007, (ii) $500,000.00 for thequarter ended March 31, 2008, (iii) $3,000,000.00 for the twelve (12)month period ending September 30, 2008, (iv) $1,000,000.00 for the twelve(12) month period ending December 31, 2008, (v) ($600,000.00) for thetwelve (12) month periods ending March 31, 2009 and June 30, 2009, (vi) $1.00for the twelve (12) month period ending September 30, 2009, (vii) $1,000,000.00for the twelve (12) month period ending December 31, 2009, and (viii) $2,000,000.00for the twelve (12) month period ending March 31, 2010 and for the twelve(12) month period ending on the last day of each quarter thereafter.”

 

### 8              TheLoan Agreement shall be amended by deleting the following definitions,appearing in Section 13.1 thereof:

 

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“              “**Availability Amount**” is (a) the lesser of (i) theRevolving Line or (ii) the Borrowing Base minus (b) the amount of alloutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit) plus an amount equal to the Letter of Credit Reserves, minus (c) theFX Reserve, and minus (d) the outstanding principal balance of anyAdvances (including any amounts used for Cash Management Services).”

 

“              “**Current Liabilities**” are all obligationsand liabilities of Borrower to Bank, plus, without duplication, the aggregateamount of Borrower’s Total Liabilities that mature within one (1) year.”

 

“              “**Operating Cash Flow**” is, for each quarter, (a) Borrower’sconsolidated EBITDA, minus (b) Borrower’s consolidated capitalexpenditures.”

 

“              “**Revolving Line**” is an Advance or Advances in an aggregateamount of up to Fifteen Million Dollars ($15,000,000.00) outstanding at anytime.”

 

“              “**Revolving Line Maturity Date**”****isOctober 9, 2008.”

 

and inserting in lieuthereof the following:

 

“              “**Availability Amount**” is (a) the Revolving Line, minus (b) theamount of all outstanding Letters of Credit (including drawn but unreimbursedLetters of Credit) plus an amount equal to the Letter of Credit Reserves, minus(c) the FX Reserve, and minus (d) the outstanding principal balanceof any Advances (including any amounts used for Cash Management Services).”

 

“              “**Current Liabilities**” are all obligations andliabilities of Borrower to Bank and all of Borrower’s Included Indebtedness,plus, without duplication, the aggregate amount of Borrower’s Total Liabilitiesthat mature within one (1) year.”

 

“              “**Operating Cash Flow**” is, for each quarter, (a) Borrower’sconsolidated EBITDA, minus (b) Borrower’s consolidated capitalexpenditures, minus (c) Borrower’s cash taxes.”

 

“              “**Revolving Line**” is an Advance or Advances in an aggregateamount of up to Ten Million Dollars ($10,000,000.00) outstanding at any time.”

 

“              “**Revolving Line Maturity Date**”****is                        ,2010 [DATE THAT IS 24 MONTHS AFTER THE DATE OF THE LOAN MODIFICATIONAGREEMENT].”

 

### 9                                          TheLoan Agreement shall be amended by inserting the following new definition,appearing alphabetically in Section 13.1 thereof:

 

“              “**Included****Indebtedness**”is (a) indebtedness for borrowed money, (b) obligations evidenced bynotes, bonds, debentures or similar instruments, and (c) capital leaseobligations.”

 

### 10                                    TheLoan Agreement shall be amended by deleting the following definitions,appearing in Section 13.1 thereof:

 

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“              “**Borrowing Base**” is (a) Five Million Dollars, plus (b) eightypercent (80.0%) of Eligible Accounts, as determined by Bank from Borrower’smost recent Borrowing Base Certificate; provided, however, that Bank maydecrease the foregoing percentages in its good faith business judgment based onevents, conditions, contingencies, or risks which, as determined by Bank mayadversely affect Collateral.”

 

“              “**Borrowing Base Certificate**” is that certain certificate inthe form attached hereto as Exhibit C.”

 

“              “**Eligible Accounts**” are Accounts which arise in the ordinarycourse of Borrower’s business that meet all Borrower’s representations andwarranties in Section 5.3.  Bankreserves the right, at any time and from time to time after the Effective Date,to adjust any of the criteria set forth below and to establish new criteria inits good faith business judgment.  UnlessBank agrees otherwise in writing, Eligible Accounts shall not include:

 

(a)           Accounts for which theAccount Debtor has not been invoiced;

 

(b)           Accounts that theAccount Debtor has not paid within ninety (90) days of invoice date;

 

(c)           Accounts owing from anAccount Debtor, fifty percent (50%) or more of whose Accounts have not beenpaid within ninety (90) days of invoice date;

 

(d)           Credit balances overninety (90) days from invoice date;

 

(e)           Accounts owing from anAccount Debtor, including Affiliates, whose total obligations to Borrowerexceed twenty-five percent (25%) of all Accounts (provided that such percentageshall be fifty percent (50.0%) forAccounts for which the Account Debtor is EMC) for the amounts thatexceed that percentage, unless Bank approves in writing;

 

(f)            Accounts owing from anAccount Debtor which does not have its principal place of business in theUnited States;

 

(g)           Accounts owing from anAccount Debtor which is a federal, state or local government entity or anydepartment, agency, or instrumentality thereof;

 

(h)           Accounts owing from anAccount Debtor to the extent that Borrower is indebted or obligated in anymanner to the Account Debtor (as creditor, lessor, supplier or otherwise -sometimes called “contra” accounts, accounts payable, customer deposits orcredit accounts), with the exception of customary credits, adjustments and/ordiscounts given to an Account Debtor by Borrower in the ordinary course of itsbusiness;

 

(i)            Accounts fordemonstration or promotional equipment, or in which goods are consigned, orsold on a “sale guaranteed”, “sale or return”, “sale on approval”, “bill andhold”, or other terms if Account Debtor’s payment may be conditional;

 

(j)            Accounts for which theAccount Debtor is Borrower’s Affiliate, officer, employee, or agent;

 

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(k)           Accounts in which theAccount Debtor disputes liability or makes any claim (but only up to thedisputed or claimed amount), or if the Account Debtor is subject to anInsolvency Proceeding, or becomes insolvent, or goes out of business;

 

(l)            Accounts owing from anAccount Debtor with respect to which Borrower has received deferred revenue(but only to the extent of such deferred revenue);

 

(m)          Accounts owing from anAccount Debtor with respect to which Borrower maintains a reserve in connectionwith Borrower’s provision of a right of return to the Account Debtor (but onlyto the extent of such reserve);

 

(n)           Accounts for which Bankin its good faith business judgment determines collection to be doubtful; and

 

(0)           other Accounts Bankdeems ineligible in the exercise of its good faith business judgment.”

 

### 11                                    TheLoan Agreement shall be amended by deleting Exhibit C thereof andinserting in lieu thereof Schedule 1 hereto.

###  

### 12                                    TheLoan Agreement shall be amended by deleting Exhibit D thereof andinserting in lieu thereof Schedule 2 hereto.

###  

# 4.             FEES.  Borrower shall pay to Bank a modification feeequal to Fifteen Thousand Dollars ($15,000.00), which fee shall be due on thedate hereof and shall be deemed fully earned as of the date hereof.  In addition, Borrower shall pay to Bank ananniversary fee equal to Fifteen Thousand Dollars ($15,000.00) (the “AnniversaryFee”), which Anniversary Fee shall be earned as of the date hereof, and shallbe payable on the earliest to occur of: (i) August 5, 2009 [DATE THATIS 12 MONTHS AFTER THE DATE OF THE LOAN MODIFICATION AGREEMENT]; (ii) the occurrenceof an Event of Default; or (iii) the early termination of the LoanAgreement.  Borrower shall also reimburseBank for all legal fees and expenses incurred in connection with this amendmentto the Existing Loan Documents.

#  

# 5.             PERFECTIONCERTIFICATES.

#  

# (a)           In  connection with this Loan ModificationAgreement, Network delivered to Bank a perfection certificate signed by Network(the “Perfection Certificate”).  Networkrepresents and warrants to Bank that: (i) Network’s exact legal name isthat indicated on the Perfection Certificate and on the signature page hereof;and (ii) Network is an organization of the type, and is organized in thejurisdiction, set forth in the Perfection Certificate; and (iii) thePerfection Certificate accurately sets forth Network’s organizationalidentification number or accurately states that Network has none; and (iv) thePerfection Certificate accurately sets forth Network’s place of business, or,if more than one, its chief executive office as well as Network’s mailing addressif different, and (v) all other information set forth on the PerfectionCertificate pertaining to Network is accurate and complete.

#  

# (b)           Alliance herebyratifies, confirms and reaffirms, all and singular, the terms and disclosurescontained in a certain Perfection Certificate dated as of October 11,2007, between Alliance and Bank, and acknowledges, confirms and agrees thedisclosures and information Alliance provided to Bank in the PerfectionCertificate have not changed, as of the date hereof.

#  

# 6.             CONSISTENTCHANGES.  The Existing Loan Documentsare hereby amended wherever necessary to reflect the changes described above.

 

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# 7.             RATIFICATION OFLOAN DOCUMENTS.  Borrower herebyratifies, confirms, and reaffirms all terms and conditions of all security orother collateral granted to the Bank, and confirms that the indebtednesssecured thereby includes, without limitation, the Obligations.

#  

# 8.             NO DEFENSES OFBORROWER.  Borrower herebyacknowledges and agrees that, as of the date of this Loan ModificationAgreement, Borrower has no offsets, defenses, claims, or counterclaims againstBank with respect to the Obligations, or otherwise, and that if Borrower nowhas, or ever did have, any offsets, defenses, claims, or counterclaims againstBank, whether known or unknown, at law or in equity, all of them are herebyexpressly WAIVED and Borrower hereby RELEASES Bank from any liabilitythereunder.

#  

# 9.             CONTINUINGVALIDITY.  Borrower understands andagrees that in modifying the existing Obligations, Bank is relying uponBorrower’s representations, warranties, and agreements, as set forth in theExisting Loan Documents.  Except asexpressly modified pursuant to this Loan Modification Agreement, the terms ofthe Existing Loan Documents remain unchanged and in full force and effect.  Bank’s agreement to modifications to theexisting Obligations pursuant to this Loan Modification Agreement in no wayshall obligate Bank to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreementshall constitute a satisfaction of the Obligations.  It is the intention of Bank and Borrower toretain as liable parties all makers of Existing Loan Documents, unless theparty is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.

#  

# 10.           COUNTERSIGNATURE.  This Loan Modification Agreement shall becomeeffective only when it shall have been executed by Borrower and Bank.

#  

*[The remainder of this page isintentionally left blank]*

 

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This Loan ModificationAgreement is executed as a sealed instrument under the laws of the Commonwealthof Massachusetts as of the date first written above.

 

 
| **BORROWER:**               | ** ** | **BANK:**                |
|-----------------------------|------------|--------------------------|
|                        |       |                     |
| **NETWORK  ENGINES, INC.**  | ** ** | **SILICON  VALLEY BANK** |
|                        |       |                     |
| By:                         |       |                     | By: |   |
|                        |       |                     |
| Name:                       |       |                     | Name: |   |
|                        |       |                     |
| Title:                      |       |                     | Title: |   |
|                        |       |                     |
| ** **                  |       |                     |
| ** **                  |       |                     |
| **ALLIANCE  SYSTEMS, INC.** |       |                     |
| ** **                  |       |                     |
| By:                         |       |                     |   |   |
|                        |       |                     |
| Name:                       |       |                     |   |   |
|                        |       |                     |
| Title:                      |       |                     |   |   |
|                             |            |                          |  |  |  |  |  |  |

 

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**Schedule 1**

** **

**EXHIBIT C**

** **

Intentionally Deleted.

 

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**Schedule 2**

** **

**EXHIBIT D**

** **

**COMPLIANCE CERTIFICATE**

 
| TO:   | SILICON VALLEY BANK                               | Date:  |   |
|-------|---------------------------------------------------|--------|--------|
| FROM: | NETWORK ENGINES, INC. and ALLIANCE SYSTEMS,  INC. |   |   |

 

The undersignedauthorized officer of Network Engines, Inc. and Alliance Systems, Inc.(individually and collectively, jointly and severally, “Borrower”) certifiesthat under the terms and conditions of the Loan and Security Agreement betweenBorrower and Bank (the “Agreement”), (1) Borrower is in completecompliance for the period ending                              with all required covenants except as noted below, (2) there are no Eventsof Default, (3) all representations and warranties in the Agreement aretrue and correct in all material respects on this date except as noted below;provided, however, that such materiality qualifier shall not be applicable toany representations and warranties that already are qualified or modified bymateriality in the text thereof; and provided, further that thoserepresentations and warranties expressly referring to a specific date shall betrue, accurate and complete in all material respects as of such date, (4) Borrower,and each of its Subsidiaries, has timely filed all required tax returns andreports, and Borrower has timely paid all foreign, federal, state and localtaxes, assessments, deposits and contributions owed by Borrower except asotherwise permitted pursuant to the terms of Section 5.9 of the Agreement,and (5) no Liens have been levied or claims made against Borrower or anyof its Subsidiaries relating to unpaid employee payroll or benefits of whichBorrower has not previously provided written notification to Bank.  Attached are the required documentssupporting the certification.  Theundersigned certifies that these are prepared in accordance with GAAPconsistently applied from one period to the next except as explained in anaccompanying letter or footnotes.  Theundersigned acknowledges that no borrowings may be requested at any time ordate of determination that Borrower is not in compliance with any of the termsof the Agreement, and that compliance is determined not just at the date thiscertificate is delivered.  Capitalizedterms used but not otherwise defined herein shall have the meanings given themin the Agreement.

 

**Pleaseindicate compliance status by circling Yes/No under “Complies” column.**

 
| **Reporting Covenant**                                   | ** ** | **Required**                                                                        | ** ** | **Complies** | ** ** |
|----------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|--------------|------------|
| ** **                                               | ** ** | ** **                                                                          | ** ** | ** **   | ** ** |
| Monthly financial statements with Compliance Certificate |       | Monthly within 30 days*                                                             |       | Yes No       |       |
| 10-Q, 10-K and 8-K                                       |       | Within 5 days after filing with SEC                                                 |       | Yes No       |       |
| A/R Agings                                               |       | Monthly within 30 days (if Obligations are outstanding on last day of  such month)* |       | Yes No       |       |
| Board Projections                                        |       | Annually 45 days after FYE                                                          |       | Yes No       |       |

 

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*See Section 6.2 of the Loan andSecurity Agreement

 
| **Financial Covenant**            | ** ** | **Required** | ** ** | **Actual** | ** ** | **Complies** | ** ** |
|-----------------------------------|------------|--------------|------------|------------|------------|--------------|------------|
|                              |       |         |       |       |       |         |       |
| Maintain on a Quarterly****Basis: | ** ** | ** **   | ** ** | ** ** | ** ** | ** **   | ** ** |
| Adjusted Quick Ratio              |       | 1.25:1.0     |       | :1.0       |       | Yes No       |       |
|                              |       |         |       |       |       |         |       |
| Operating Cash Flow               |       | $            | **         | $          |       | Yes No       |       |

 

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**Asset forth in Section 6.7(b) of the Loan and Security Agreement

 

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The following financialcovenant analyses and information set forth in Schedule 1 attached hereto aretrue and accurate as of the date of this Certificate.

 

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

 

 
| Network Engines, Inc.   | **BANK USE  ONLY**                                                                              |
|------------------------------|-------------------------------------------------------------------------------------------------|
| Alliance  Systems, Inc. | ** **                                                                                      |
|                         | Received by:                                                                                    |   |
|                         |                                                                                            | AUTHORIZED SIGNER |
| By:                          |                                                                                            |   | Date: |   |
| Name:                        |                                                                                            |   |   |   |
| Title:                       |                                                                                            |   | Verified: |   |
| ** **                   |                                                                                            | AUTHORIZED SIGNER |
| ** **                   | Date:                                                                                           |   |
| ** **                   |                                                                                            |   |
| ** **                   | Compliance Status:         Yes   No |
|                              |                                                                                                 |  |  |  |  |  |  |  |  |  |

 

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**Schedule 1 to Compliance Certificate**

 

**Financial Covenants of Borrower**

 

Dated:

 

In the event of a conflictbetween this Schedule and the Loan Agreement, the terms of the Loan Agreementshall control.

 
| I. |   | **Adjusted****Quick Ratio**  (Section 6.7(a)) |   |   |
|----|--------|----------------------------------------------------|--------|--------|

 
| Required: |   | 1.25:1.00                                       |
|-----------|--------|-------------------------------------------------|
| Actual:   |   |        :1.00 |

 
| A.     |   | Aggregate  value of the unrestricted cash of Borrower                                                                                                                                              |   | $      |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |   |                                                                                                                                                                                               |   |   |
| B.     |   | Aggregate value of the  net billed accounts receivable of Borrower                                                                                                                                 |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| C.     |   | Quick Assets (the sum  of lines A through B)                                                                                                                                                       |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| D.     |   | Aggregate value of  Obligations to Bank                                                                                                                                                            |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| E.     |   | Aggregate  value of liabilities of Borrower (including all Indebtedness) that matures  within one (1) year and current portion of Subordinated Debt permitted  by Bank to be paid by Borrower |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| F.     |   | Current  Liabilities (the sum of lines D and E)                                                                                                                                                    |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| G      |   | Deferred Revenue                                                                                                                                                                                   |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| H      |   | Line F minus line G                                                                                                                                                                                |   | $      |
|   |   |                                                                                                                                                                                               |   |   |
| I.     |   | Adjusted Quick Ratio  (line C divided by line H)                                                                                                                                                   |   |   |

 

Isline I equal to or greater than 1.25:1:00?

 
|   | o  |  No, not in compliance                   | o  Yes, in compliance |   |
|--------|---------|-----------------------------------------------|----------------------------|--------|
|   |    |                                          |                       |   |
| II.    |    | **Operating Cash Flow** (Section 6.7(b)) |                       |   |
|        |         |                                               |                            |        |  |  |  |  |

 
| Required: |    | $              (as  set forth in Section 6.7(b)) |                        |   |   |
|-----------|---------|-----------------------------------------------------------------------------------------------------------------------------|-----------------------------|--------|--------|
|      |    |                                                                                                                        |                        |   |   |
| Actual:   |    | $                                                                                                                           |                        |   |   |
|      |    |                                                                                                                        |                        |   |   |
|      | o  |  No, not in compliance                                                                                                 | o  Yes,  in compliance |   |

 

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