**Exhibit 10.1**

 

**SECOND LOANMODIFICATION AGREEMENT**

 

ThisSecond Loan Modification Agreement (this “**Loan ModificationAgreement**”) is entered into as of May 24, 2010, by and between (i) **SILICON VALLEY BANK**, a California corporation, with itsprincipal place of business at 3003 Tasman Drive, Santa Clara, California95054 and with a loan production office located at One Newton Executive Park, Suite 200,2221 Washington Street, Newton, Massachusetts 02462 (“**Bank**”)and (ii)  **CALIPER LIFE SCIENCES, INC.**,a Delaware corporation with a principal place of business located at 68 ElmStreet, Hopkinton, Massachusetts 01748 (“**Caliper**”), **NOVASCREEN BIOSCIENCES CORPORATION**, a Maryland corporation (“**NovaScreen**”), **XENOGEN CORPORATION**,a Delaware corporation (“**Xenogen**”), and **CALIPER LIFE SCIENCES LTD.**, a company organized under thelaws of Canada (“**Caliper****Ltd.**”)(hereinafter, Caliper, NovaScreen, Xenogen, and Caliper Ltd. are jointly andseverally, individually and collectively, referred to as “**Borrower**”).

 

1.             DESCRIPTIONOF EXISTING 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 March 6, 2009, evidencedby, among other documents, a certain Second Amended and Restated Loan andSecurity Agreement, dated as of March 6, 2009, by and between Borrower andBank, as modified by that certain First Loan modification Agreement, dated asof December 11, 2009 (as amended, the “**LoanAgreement**”).  Capitalized termsused but not otherwise defined herein shall have the same meaning as in theLoan Agreement.

 

2.             DESCRIPTIONOF COLLATERAL.  Repayment of theObligations is secured by the Collateral as described in the Loan Agreement(together with any other collateral security granted to Bank, the “**Security Documents**”).

 

Hereinafter,the Security Documents, together with all other documents evidencing orsecuring the Obligations shall be referred to as the “**ExistingLoan Documents**”.

 

3.             DESCRIPTIONOF CHANGE IN TERMS.

 

A.                                   Modificationsto Loan Agreement.

 

1                                          The Loan Agreement shall beamended by deleting the following, appearing as Section 2.3(a) thereof,in its entirety:

 

“(a)         Subject to Section 2.3(b), theprincipal amount outstanding under the Revolving Line shall accrue interest ata floating per annum rate equal to: (x) if Borrower’s unrestricted cash isequal to or greater than Twenty Million Dollars ($20,000,000.00), onepercentage point (1.00%) above the Prime Rate, or (y) if Borrower’sunrestricted cash is less than Twenty Million Dollars ($20,000,000.00), twopercentage points (2.00%) above the Prime Rate, which interest shall be payablemonthly in accordance with Section 2.3(f) below.  Any changes to the applicable interest ratedue as set forth in (x) or (y) above, shall be effective on the firstday of the month following such event.”

 

andinserting in lieu thereof the following:

 

“(a)         Interest Rate; Advances.  Subject to Section 2.3(b), the principalamount outstanding under the Revolving Line shall accrue interest at a floatingper annum rate equal to the Prime Rate plus one-half of one percent (0.50%),which interest shall be payable monthly, in arrears, in accordance with Section 2.3(f) below.”

 

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2                                          The Loan Agreement shall beamended by deleting the following, appearing as Section 2.4(d) thereof,in its entirety:

 

“(d)         Unused Revolving Line Facility Fee.  A fee (the “**UnusedRevolving Line Facility Fee**”), which fee shall be paid monthly, inarrears, on the last day of each month, in an amount equal to one-half of onepercent (0.50%) per annum of the average unused portion of the Revolving Line,as determined by Bank.  The unusedportion of the Revolving Line, for the purposes of this calculation, shallinclude amounts reserved under the Cash Management Services Sublimit forproducts provided and under the Foreign Exchange Sublimit for FX ForwardContracts (as described in Section 2.1.3). Borrower shall not be entitled to any credit, rebate or repayment of anyUnused Revolving Line Facility Fee previously earned by Bank pursuant to this Section notwithstandingany termination of the within Agreement, or suspension or termination of Bank’sobligation to make loans and advances hereunder; and”

 

and inserting in lieu thereof the following:

 

“(d)         Unused Revolving Line Facility Fee.  A fee (the “**UnusedRevolving Line Facility Fee**”), payable monthly, in arrears, on acalendar year basis, in an amount equal to two-fifths of one percent (0.40%)per annum of the average unused portion of the Revolving Line, as determined byBank.  The unused portion of theRevolving Line, for the purposes of this calculation, shall include amountsreserved under the Cash Management Services Sublimit for products provided andunder the Foreign Exchange Sublimit for FX Forward Contracts (as described in Section2.1.3).  Borrower shall not be entitledto any credit, rebate or repayment of any Unused Revolving Line Facility Feepreviously earned by Bank pursuant to this Section notwithstanding anytermination of the within Agreement, or suspension or termination of Bank’sobligation to make loans and advances hereunder; and”

 

3                                          The Loan Agreement shall beamended by deleting the following, appearing as Section 6.9 thereof, inits entirety:

 

“**6.9        Financial Covenants**.

 

Borrowershall maintain at all times, to be tested as of the last day of each quarter:

 

(a)           Adjusted Quick Ratio.  A ratio of Quick Assets to Quick Liabilitiesof at least 0.95****to 1.0 for the quarter ending December 31,2008 and for each fiscal quarter thereafter.

 

(b)           MinimumEBITDA-Cap Ex.  Borrower’sEBITDA minus its capital expenditures, (“**EBITDA-Cap Ex**”)for the two (2) quarter period ending as of the last day of each quarter,shall be in an amount equal to: (i) losses not greater than (A) OneMillion Five Hundred Thousand Dollars ($1,500,000) for the quarter ended December 31,2008; (B) Six Million Eight Hundred Thousand Dollars ($6,800,000) for thequarter ending March 31, 2009; (C) Eight Million Seven HundredThousand Dollars ($8,700,000) for the quarter ending June 30, 2009; and (D) FiveMillion Five Hundred Thousand Dollars ($5,500,000) for the quarter ending September 30,2009; (ii) not less than Sixty Thousand Dollars ($60,000) for the quarterending December 31, 2009; (iii) losses not greater than (A) TwoMillion Dollars ($2,000,000) for the quarter ending March 31, 2010; (B) FiveMillion Dollars ($5,000,000) for the quarter ending June 30, 2010; and (C) TwoMillion Dollars ($2,000,000) for the quarter ending September 30, 2010; (iv) notless than Two Million Dollars ($2,000,000) for the quarter ending December 31,2010; and (v) losses not greater than Five Hundred Thousand Dollars($500,000) for the quarter ending March 31, 2011.”

 

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andinserting in lieu thereof the following:

 

“**6.9        Financial Covenants**.

 

Borrowershall maintain at all times, to be tested as of the last day of each quarter:

 

(a)           Adjusted Quick Ratio.  A ratio of Quick Assets to Quick Liabilitiesof at least 1.25****to 1.0 for the quarter ending June 30,2010 and for each fiscal quarter thereafter.

 

(b)           MinimumEBITDA-Cap Ex.  Borrower’sEBITDA minus its capital expenditures, (“**EBITDA-Cap Ex**”)for the two (2) quarter period ending as of the last day of each quarter,shall be in an amount equal to: (i) losses not greater than (A) OneMillion Five Hundred Thousand Dollars ($1,500,000) for the quarter ended December 31,2008; (B) Six Million Eight Hundred Thousand Dollars ($6,800,000) for thequarter ending March 31, 2009; (C) Eight Million Seven HundredThousand Dollars ($8,700,000) for the quarter ending June 30, 2009; and (D) FiveMillion Five Hundred Thousand Dollars ($5,500,000) for the quarter ending September 30,2009; (ii) not less than Sixty Thousand Dollars ($60,000) for the quarterending December 31, 2009; (iii) losses not greater than (A) TwoMillion Dollars ($2,000,000) for the quarter ending March 31, 2010; (B) FiveMillion Five Hundred Thousand Dollars ($5,500,000) for the quarter ending June 30,2010; (C) Four Million Five Hundred Thousand Dollars ($4,500,000) for thequarter ending September 30, 2010; (D) Two Million Dollars($2,000,000) for the quarter ending December 31, 2010; and (E) ThreeMillion Five Hundred Thousand Dollars ($3,500,000) for the quarter ending March 31,2011.  Thereafter, if the Revolving Lineis extended, in Bank’s sole discretion, then commencing with the quarterlyperiod ending June 30, 2011, Borrower shall achieve EBITDA-Cap Ex equal tolosses not greater than Three Million Dollars ($3,000,000), which amount shallbe increased by Five Hundred Thousand Dollars ($500,000) (i.e. the maximum netlosses will be reduced by Five Hundred Thousand Dollars ($500,000)) for eachquarterly period thereafter.”

 

4                                          The Loan Agreement shall beamended by deleting the following definitions appearing in Section 13.1thereof:

 

““**Net Income**”****means, ascalculated on a consolidated basis for Borrower and its Subsidiaries, if any, forany period as at any date of determination, the net profit (or loss), afterprovision for taxes, of Borrower and its Subsidiaries for such period taken asa single accounting period.

 

“**Prime Rate**” is the greater of (i) four and one-half ofone percent (4.50%) and (ii) Bank’s most recently announced “prime rate,”even if it is not Bank’s lowest rate.”

 

andinserting in lieu thereof the following:

 

““**Net Income**”****means, as calculatedon a consolidated basis for Borrower and its Subsidiaries, if any, for anyperiod as at any date of determination, the net profit (or loss), exclusive ofany extraordinary gains and/or gains or proceeds from the sale of product linesof the Borrower, after provision for taxes, of Borrower and its Subsidiariesfor such period taken as a single accounting period.

 

“**Prime Rate**” is Bank’s most recently announced “prime rate,”even if it is not Bank’s lowest rate.”

 

5                                          The Compliance Certificateappearing as Exhibit B to the Loan Agreement is hereby replacedwith the Compliance Certificate attached as Exhibit A hereto.

 

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4.             FEES.  Borrower shall pay to Bank a modification feeequal to Five Thousand Dollars ($5,000), which fee shall be due on the date hereofand shall be deemed fully earned as of the date hereof.   Borrower shall also reimburse Bank for alllegal fees and expenses incurred in connection with this amendment to theExisting Loan Documents.

 

5.             RATIFICATIONOF NEGATIVE PLEDGE.  Borrower herebyratifies, confirms and reaffirms, all and singular, the terms and conditions ofa certain negative pledge arrangement with respect to Borrower’s intellectualproperty, between Borrower and Bank, and Borrower acknowledges, confirms andagrees that said negative pledge arrangement remains in full force and effect.

 

6.             RATIFICATIONOF PERFECTION CERTIFICATE.  Borrowerhereby ratifies, confirms and reaffirms, all and singular, the terms anddisclosures contained in a certain Perfection Certificate dated as of March 6,2009 (as updated, amended, amended and restated, supplemented and/or modifiedas of the date hereof, including, without limitation, as a result of the “SaleTransaction”, as such term is defined in that certain Consent and ReleaseAgreement, by and between Borrower and Bank, dated as of the date hereof), andacknowledges, confirms and agrees the disclosures and information provided byBorrower to Bank in the Perfection Certificate (as updated, amended, amendedand restated, supplemented and/or modified as of the date hereof) has notchanged.

 

7.             AUTHORIZATIONTO FILE.  Borrower hereby authorizesBank to file UCC financing statements without notice to Borrower, with allappropriate jurisdictions, as Bank deems appropriate, in order to further perfector protect Bank’s interest in the Collateral, including a notice that anydisposition of the Collateral, by either the Borrower or any other Person,shall be deemed to violate the rights of the Bank under the Code.

 

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

 

9.             RATIFICATIONOF LOAN 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.

 

10.           NODEFENSES OF BORROWER.  Borrowerhereby acknowledges and agrees that Borrower has no offsets, defenses, claims,or counterclaims against Bank with respect to the Obligations, or otherwise,and that if Borrower now has, or ever did have, any offsets, defenses, claims,or counterclaims against Bank, whether known or unknown, at law or in equity,all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank fromany liability thereunder.

 

11.           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.

 

12.           RIGHTOF SET-OFF.  In consideration of Bank’sagreement to enter into this Loan Modification Agreement, Borrower herebyreaffirms and hereby grants to Bank, a lien, security interest and right of setoff as security for all Obligations to Bank, whether now existing or hereafterarising upon and against all deposits, credits, collateral and property, now orhereafter in the possession, custody, safekeeping or control of Bank or anyentity under the control of Silicon Valley Bank (including a Bank subsidiary)or in transit to any of them.  At anytime after the occurrence and during the continuance of an Event of Default,without demand or notice, Bank may set off the same or any part thereof andapply the same to any liability or obligation of Borrower even though unmaturedand regardless of the adequacy of any other collateral securing the loan.  ANY AND ALL RIGHTS TO REQUIRE BANK TOEXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICHSECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT

 

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TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OFBORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

13.           CONFIDENTIALITY.  Bank may use confidential information for thedevelopment of databases, reporting purposes, and market analysis, so long assuch confidential information is aggregated and anonymized prior todistribution unless otherwise expressly permitted by Borrower.  The provisions of the immediately precedingsentence shall survive the termination of the Loan Agreement.

 

14.           JURISDICTION/VENUE.  Borrower accepts for itself and in connectionwith its properties, unconditionally, the exclusive jurisdiction of any stateor federal court of competent jurisdiction in the Commonwealth of Massachusettsin any action, suit, or proceeding of any kind against it which arises out ofor by reason of this Loan Modification Agreement.  NOTWITHSTANDING THE FOREGOING, THE BANK SHALLHAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITSPROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARYOR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCETHE BANK’S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

 

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

 

*[The remainder of this page is intentionallyleft blank.]*

 

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ThisLoan Modification Agreement is executed as a sealed instrument under the lawsof the Commonwealth of Massachusetts as of the date first written above.

 

 
| **BORROWER:**                      |
|------------------------------------|
|                               |   |
| CALIPER LIFE SCIENCES, INC.   |
|                               |   |
| By                                 | /s/  Peter F. McAree |   |
| Name:                              | Peter  F. McAree |
| Title:                             | Senior  Vice President and CFO |
|                               |   |
| NOVASCREEN BIOSCIENCES CORPORATION |
|                               |   |
| By                                 | /s/  Peter F. McAree |   |
| Name:                              | Peter  F. McAree |
| Title:                             | Vice  President, Finance |
|                               |   |
| XENOGEN CORPORATION                |
|                               |   |
| By                                 | /s/  Peter F. McAree |   |
| Name:                              | Peter  F. McAree |
| Title:                             | Vice  President, Finance |
|                               |   |
| CALIPER LIFE SCIENCES LTD.         |
|                               |   |
| By                                 | /s/  Peter F. McAree |   |
| Name:                              | Peter  F. McAree |
| Title:                             | Vice  President, Finance |
|                               |   |
| ** **                         |
| **BANK:**                          |
|                               |   |
| SILICON VALLEY BANK                |
|                               |   |
| By                                 | /s/  Michael Quinn |   |
| Name:                              | Michael  Quinn |   |
| Title:                             | Vice  President |   |

 

----

 

 

**EXHIBIT B**

 

**COMPLIANCE CERTIFICATE**

 
| TO:    | SILICON  VALLEY BANK                | Date:  |   |
|--------|-------------------------------------|--------|--------|
| FROM:  | CALIPER  LIFE SCIENCES, INC.   |   |
|   | NOVASCREEN  BIOSCIENCES CORPORATION |   |
|   | XENOGEN  CORPORATION                |   |
|   | CALIPER  LIFE SCIENCES, LTD.   |   |

 

Theundersigned authorized officers of Caliper Life Sciences, Inc., NovaScreenBiosciences Corporation, Xenogen Corporation and Caliper Life Sciences, Ltd.(individually and collectively, jointly and severally, “**Borrower**”)certify that under the terms and conditions of the Loan and Security Agreementbetween Borrower and Bank (the “**Agreement**”), (1) Borroweris in complete compliance 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 relatingto unpaid employee payroll or benefits of which Borrower has not previouslyprovided written notification to Bank. Attached are the required documents supporting the certification.  The undersigned certifies that these areprepared in accordance with GAAP consistently applied from one period to thenext except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that noborrowings may be requested at any time or date of determination that Borroweris not in compliance with any of the terms of the Agreement, and thatcompliance is determined not just at the date this certificate isdelivered.  Capitalized terms used butnot otherwise defined herein shall have the meanings given them in theAgreement.

 

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

 
| **Reporting  Covenant**                                                                     | ** ** | **Required**                          | ** ** | **Complies** |
|---------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|--------------|
| ** **                                                                                  | ** ** | ** **                            | ** ** | ** **   |
| Quarterly  consolidated and consolidating financial statements with Compliance  Certificate |       | Quarterly  within 45 days             |       | Yes  No |
| Annual  consolidated and consolidating financial statement (CPA Audited) + CC               |       | FYE  within120 days                   |       | Yes  No |
| 10-Q,  10-K and 8-K                                                                         |       | Within  5 days after filing with SEC  |       | Yes  No |
| A/R &  A/P Agings; Deferred Revenue report, cash report                            |       | Monthly  within 15 days               |       | Yes  No |
| Transaction  Reports                                                                        |       | Weekly  and with each Advance request |       | Yes  No |
| Board  approved projections                                                                 |       | Annually,  as revised                 |       | Yes  No |

 

Thefollowing intellectual property was registered after the Effective Date (if noregistrations, state “None”)

 
| **Financial  Covenant**                       | ** ** | **Required**  | ** **       | **Actual**                                                                       | ** ** | **Complies**     | ** ** |
|-----------------------------------------------|------------|---------------|------------------|----------------------------------------------------------------------------------|------------|------------------|------------|
| **Maintain at all times, tested  quarterly:** | ** ** | ** **    | ** **       | ** **                                                                       | ** ** | ** **       | ** ** |
| **Minimum Quick Ratio**                       | ** ** | **1.25:1.00** | ** **       | **            :1.0** | ** ** | **Yes  No** | ** ** |
| **Minimum  EBITDA minus Cap Ex***             | ** ** | **$**         | **  ** | ** **                                                                       | **$**      | **  ** | ** ** | **Yes  No** | ** ** |
|                                               |            |               |                  |                                                                                  |            |                  |            |  |  |

 

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*SeeSection 6.9(b) of the Loan and Security Agreement

 

1

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

 

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

 

 

 
| Caliper  Life Sciences, Inc.   |   | **BANK  USE ONLY** |
|-------------------------------------|--------|--------------------|
|                                |   |               |
| By:                                 |   |               | Received  by: |   |
| Name:                               |   |               | AUTHORIZED SIGNER |
| Title:                              |   |               | Date: |   |
|                                |   |               |
| NovaScreen  Biosciences Corporation |   | Verified:          |   |
|                                |   | AUTHORIZED SIGNER  |
| By:                                 |   |               | Date: |   |
| Name:                               |   |               |   |
| Title:                              |   |               | Compliance  Status:                      Yes             No |
|                                |   |               |
| Xenogen  Corporation                |   |               |
|                                |   |               |
| By:                                 |   |               |   |
| Name:                               |   |               |   |
| Title:                              |   |               |   |
|                                |   |               |
| Caliper  Life Sciences, Ltd.   |   |               |
|                                |   |               |
| By:                                 |   |               |   |
| Name:                               |   |               |   |
| Title:                              |   |               |   |

 

2

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**Schedule 1 to Compliance Certificate**

 

**Financial Covenants of Borrower**

 
| Dated: |   |   |
|--------|--------|--------|

 

Inthe event of a conflict between this Schedule and the Loan Agreement, the termsof the Loan Agreement shall control.

 

**I.**              **ADJUSTEDQUICK RATIO**(Section 6.9(a))

 

**Required:**A ratio of Quick Assets to Quick Liabilities of at least: 1.25****to 1.0 for the quarter ending March 31, 2010 and foreach fiscal quarter thereafter

 
| A.     |   | Aggregate  value of the unrestricted cash and Cash Equivalents and Marketable Securities  of Borrower                                                                                              |   | $      |   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|   |   |                                                                                                                                                                                               |   |   |
| B.     |   | Aggregate  value of the net billed accounts receivable and Unbilled Accounts of Borrower                                                                                                           |   | $      |   |
|   |   |                                                                                                                                                                                               |   |   |
| C.     |   | Quick  Assets (the sum of lines A and 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      |   | Aggregate  value of (i) Deferred Revenue, (ii) real estate related  restructuring expenses, and (iii) customer deposits                                                                  |   |   |
|   |   |                                                                                                                                                                                               |   |   |
| G.     |   | Quick  Liabilities (the sum of lines D and E minus line F)                                                                                                                                         |   | $      |   |
|   |   |                                                                                                                                                                                               |   |   |
| H.     |   | Adjusted  Quick Ratio (line C divided by line G)                                                                                                                                                   |   |   |

 

Isline H equal to or greater than 1.25 to 1.0

 
| o  No,  not in compliance | o  Yes,  in compliance |
|-------------------------------------|----------------------------------|

 

3

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**II.**            **MINIMUM****EBITDA minus CAP-EX** (Section 6.9(b)

 

Required:Borrower’s EBITDA minus its capital expenditures, (“**EBITDA-CapEx**”) for the two (2) quarter period ending as of the last dayof each quarter, shall be in an amount equal to: (i) losses not greaterthan (A) One Million Five Hundred Thousand Dollars ($1,500,000) for thequarter ended December 31, 2008; (B) Six Million Eight HundredThousand Dollars ($6,800,000) for the quarter ending March 31, 2009; (C) EightMillion Seven Hundred Thousand Dollars ($8,700,000) for the quarter ending June 30,2009; and (D) Five Million Five Hundred Thousand Dollars ($5,500,000) for thequarter ending September 30, 2009; (ii) not less than Sixty ThousandDollars ($60,000) for the quarter ending December 31, 2009; (iii) lossesnot greater than (A) Two Million Dollars ($2,000,000) for the quarterending March 31, 2010; (B) Five Million Five Hundred Thousand Dollars($5,500,000) for the quarter ending June 30, 2010; (C) Four MillionFive Hundred Thousand Dollars ($4,500,000) for the quarter ending September 30,2010; (D) Two Million Dollars ($2,000,000) for the quarter ending December 31,2010; and (E) Three Million Five Hundred Thousand Dollars ($3,500,000) forthe quarter ending March 31, 2011. Thereafter, if the Revolving Line is extended, in Bank’s solediscretion, then commencing with the quarterly period ending June 30, 2011,Borrower shall achieve EBITDA-Cap Ex equal to losses not greater than ThreeMillion Dollars ($3,000,000), which amount shall be increased by Five HundredThousand Dollars ($500,000) (i.e. the maximum net losses will be reduced byFive Hundred Thousand Dollars ($500,000)) for each quarterly period thereafter.

 
| A.     |   | Net  Income, exclusive of any extraordinary gains (including, without limitation,  gains or proceeds from the sale of product lines of the Borrower) |                                                                 | $      |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------|
|   |   |                                                                                                                                                 |                                                                 |   |
| B.     |   | Interest  Expense                                                                                                                                    |                                                                 | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |
| C.     |   | To  the extent included in the determination of Net Income:                                                                                          |                                                                 |   |
|   |   |                                                                                                                                                 |                                                                 |   |
|   |   | 1.                                                                                                                                                   | Depreciation  expense                                                |   | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |   |
|   |   | 2.                                                                                                                                                   | Amortization  expense                                                |   | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |   |
|   |   | 3.                                                                                                                                                   | Non-cash  stock-based compensation expense and restructuring expense |   | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |
| D.     |   | income  tax expense                                                                                                                                  |                                                                 | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |
| E.     |   | EBITDA  (line A, plus line B, plus line C.1, plus line C.2, plus line C.3, and plus  line D)                                                         |                                                                 | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |
| F.     |   | capital  expenditures                                                                                                                                |                                                                 | $      |   |
|   |   |                                                                                                                                                 |                                                                 |   |
| G.     |   | EBIDTA  minus CAP EX (line E minus line F)                                                                                                           |                                                                 | $      |   |

 

Isline G equal to or greater than $[                                              ]?

 
| o  No,  not in compliance | o  Yes,  in compliance |
|-------------------------------------|----------------------------------|

 

1

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