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Exhibit 10.7    
    

 
 

THIRD AMENDMENT
  TO
  LOAN AND SECURITY AGREEMENT    
    

        This Third Amendment to Loan and Security Agreement is entered into as of August 14, 2003 by and between COMERICA BANK, successor by merger to Comerica
Bank-California ("Bank") and SPY OPTIC, INC., a California corporation ("Borrower"). 

 
 

RECITALS    
    

        Borrower and Bank are parties to that certain Loan and Security Agreement dated as of October 5, 2001, as amended from time to time, including but not
limited to that certain First Amendment to Loan and Security Agreement dated as of July 17, 2002 and that certain Second Amendment to Loan and Security Agreement dated as of March 21,
2003 (collectively, the "Agreement"). The parties desire to amend the Agreement in accordance with the terms of this Amendment. 

        NOW,
THEREFORE, the parties agree as follows: 

        1.     The
following defined terms in Exhibit A to the Agreement hereby are amended to read, or added, as follows: 

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

        "Facility
B Revolving Line" means a Credit extension of up to One Million Dollars ($1,000,000). 

        "Facility
B Advance" or "Facility B Advances" means a cash advance or cash advances under Facility B. 

        "Facility
B" means the facility under which Borrower may request Bank to issue Facility B Advances, as specified in Section 2.1(c) hereof. 

        "Facility
B Maturity Date" means December 31, 2003. 

        2.     Section 2.l(c)
hereby is added to the Agreement to read as follows: 

        (c)    Facility B.    

        (i)    Amount.    Subject to and upon the terms and conditions of this Agreement, Borrower may request Facility B
Advances in an aggregate outstanding amount not to exceed the lesser of (A) the Facility B Revolving Line or (B) if Borrower's Leverage is greater than 1.50: 1.00, the Borrowing Base,
less any amounts outstanding under the Committed Revolving Line and the Letter of Credit Sublimit. Any amounts borrowed pursuant to this Section 2.1(c) may be repaid and reborrowed at any time
prior to the Facility B Maturity Date, at which time all Facility B Advances under this Section 2.1(c) shall be immediately due and payable. Borrower may prepay any Facility B Advances without
penalty or premium. 

        (ii)    Form of Request.    Whenever Borrower desires a Facility B Advance, Borrower will notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. Pacific time, on the Business Day that the Facility B Advance is to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit C. Bank is authorized to make Facility B 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 discretion such Facility B Advances are necessary to meet Obligations which have become due and remain unpaid. 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 as the result of Bank's gross negligence or willful
misconduct. Bank will credit the amount of Facility B Advances made under this Section 2.l(c) to Borrower's deposit account. 

        3.     Section 2.2
of the Agreement hereby is amended in its entirety to read as follows: 

        "2.2    Overadvances.    If the aggregate amount of the outstanding Advances
(plus the Facility B Advances, if any) exceeds the lesser of the Committed Revolving Line (plus the
Facility B Revolving Line) or, if Borrower's Leverage is greater than 1.50:1.00, the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess." 

        4.     Section 2.3(a)
of the Agreement hereby is amended in its entirety to read as follows: 

        (a)    Interest Rates.    

        (i)    Advances.    Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding
daily balance thereof, at a variable rate equal to one percent (1.00%) above the Prime Rate. 

        (ii)    Facility B Advances.    Except as set forth in Section 2.3(b), the Facility B Advances shall bear
interest, on the outstanding daily balance thereof, at a variable rate equal to two percent (2%) above the Prime Rate. 

        5.     Section 6.7(e)
hereby is added to the Agreement in its entirety to read as follows: 

        "(e)    Quick Ratio.    Commencing July 31, 2003, a ratio of Quick Assets to Current Liabilities of at least
0.45 to 1.00 for the months of July and August, 2003 increasing to 0.50 to 1.00 beginning with the month ending September 30, 2003." 

        6.     Bank
hereby waives Section 7.9 of the Agreement for the sole purpose of permitting Borrower to prepay up to $830,000 of Subordinated Debt on or after the date of
this Amendment. 

        7.     The
Exhibit D Borrowing Base Certificate of the Agreement shall be replaced in its entirety by the Exhibit D Borrowing Base Certificate attached hereto. 

        8.     The
Exhibit E Compliance Certificate of the Agreement shall be replaced in its entirety by the Exhibit E Compliance Certificate attached hereto. 

        9.     Unless
otherwise defined, all capitalized terms in this Amendment shall be as defined in the Agreement. Except as amended, the Agreement remains in full force and effect. 

        10.   Borrower
represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no
Event of Default has occurred and is continuing. 

        11.   This
Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. 

        12.   As
a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following: 

        (a)   this
Amendment, duly executed by Borrower; 

        (b)   Corporate
Resolutions to Borrow; 

        (c)   an
agreement to provide insurance; 

        (d)   disbursement
instructions; 

        (e)   an
amount equal to all Bank Expenses incurred to date, which may be debited from any of Borrower's accounts with Bank; and 

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

        IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written. 

	 	 	SPY OPTIC, INC.
	

 	
 	
By:	

/s/  [ILLEGIBLE]      

	

 	
 	

Title:	
President

	

 	
 	
COMERICA BANK
	

 	
 	
By:	

/s/  [ILLEGIBLE]      

	

 	
 	

Title:	

 
	 	 	 	

 
 

EXHIBIT D    
    

 
 

BORROWING BASE CERTIFICATE    
    

	Borrower: SPY OPTIC, INC.	 	Lender: COMERICA BANK

	

 	

 	
 	

 
	Commitment Amount:	$6,000,000	 	(Committed Revolving Line)
	 	$1,000,000	 	(Facility B Revolving Line)
	 	
	 	 
	NOT TO EXCEED	$7,000,000	 	 

	

DOMESTIC ACCOUNTS RECEIVABLE
	 	1.	Accounts Receivable Book Value as of            	$	 
	 	2.	Additions (please explain on reverse)	$	 
	 	3.	TOTAL ACCOUNTS RECEIVABLE	$	 
	

DOMESTIC ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	 	4.	Amounts over 60 days due/90 days invoice	$	 
	 	5.	Balance of 20% over 60 days past due accounts	$	 
	 	6.	Concentration Limits	 	 
	 	7.	Governmental Accounts	$	 
	 	8.	Contra Accounts	$	 
	 	9.	Demo Accounts	$	 
	 	10.	Intercompany/Employee Accounts	$	 
	 	11.	Other (please explain on reverse)	$	 
	 	12.	TOTAL DOMESTIC ACCOUNTS RECEIVABLE DEDUCTIONS	$	 
	 	13.	Eligible Accounts (#3 minus #12)	$	 
	 	14.	LOAN VALUE OF DOMESTIC ACCOUNTS (70% of # 14)	$	 
	

FOREIGN ACCOUNTS RECEIVABLE
	 	15.	Eligible Foreign Accounts	$	 
	 	16.	LOAN VALUE OF FOREIGN ACCOUNTS (90% of 15)	$	 
	

INVENTORY
	 	17.	Eligible Domestic Inventory	$	 
	 	18.	LOAN VALUE OF DOMESTIC INVENTORY

(lesser of 40% of 17, or $2,000,000)	$	 
	

BALANCES
	 	19.	Maximum Loan Amount	$	 
	 	20.	Total Funds Available (Lesser of #19 or (#14 + #16 + #18)	$	 
	 	21.	Present balance owing on Line of Credit	$	 
	 	22.	(Intentionally Omitted)	$	 
	 	23	Outstanding under Sublimits	$	 
	 	24.	RESERVE POSITION (#20 minus #21, #22 and #23)	$	 

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

	SPY OPTIC, INC.
	

By:	

	

 
	Authorized Signer	 

 
 

EXHIBIT E
  COMPLIANCE CERTIFICATE    
    

	TO:	 	COMERICA BANK
	FROM:	 	SPY OPTIC, INC.

        The
undersigned authorized officer of SPY OPTIC, INC. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending                        with
all required covenants, except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the
above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. 

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

	Reporting Covenant
 
	 	Required
	 	Complies

	Monthly financial statements	 	Monthly within 30 days	 	Yes	 	No
	Annual (CPA Audited)	 	FYE within 120 days	 	Yes	 	No
	10K and 10Q	 	(as applicable)	 	Yes	 	No
	A/R & A/P Agings, Borrowing Base Cert.	 	Monthly within 30 days (if required)	 	Yes	 	No

	
Financial Covenant
 
	
 	

Required
	
 	

Actual
	
 	

Complies

	Maintain on a Monthly Basis:	 	 	 	 	 	 	 	 	 
	 	Minimum Current Ratio	 	1.25:1.00	 	
	:1.00	 	Yes	 	No
	 	Maximum Debt—TNW	 	2.00:1.00	 	
	:1.00	 	Yes	 	No
	 	Minimum Tangible Net Worth	 	$9,000,000*	 	$
	 	Yes	 	No
	 	Minimum Quick Ratio	 	0.45:1.00**	 	
	:1.00	 	Yes	 	No
	Profitability	 	$500,000	 	$
	 	Yes	 	No

	*
	plus (i) fifty percent (50%) of Borrower's aggregate net income per fiscal quarter, and (ii) one hundred percent (100%) of
capital infusions, including Subordinated Debt.

	**
	beginning
07/31/03; increasing to 0.50:1.00 beginning 09/30/03. 

	Comments Regarding Exceptions: See Attached.	 	BANK USE ONLY
	

Sincerely,	
 	

Received by:	

	 	 	AUTHORIZED SIGNER

	

	
 	

Date:	

	SIGNATURE	 	 	 

	

 	
 	

Verified:	

	 	 	AUTHORIZED SlGNER

	

	
 	

 	

 
	TITLE	 	Date:	

	

 	
 	

Compliance Status	
 	

Yes	
 	

No
	
	 	 	 	 	 	 
	DATE	 	 	 	 	 	 

QuickLinks

Exhibit 10.7

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

RECITALS

EXHIBIT D

BORROWING BASE CERTIFICATE

EXHIBIT E COMPLIANCE CERTIFICATEQuickLinks
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Exhibit 10.8    
    

 
 

FOURTH AMENDMENT
  TO
  LOAN AND SECURITY AGREEMENT    
    

        This Fourth Amendment to Loan and Security Agreement is entered into as of November 26, 2003 by and between
COMERICA BANK ("Bank") and SPY OPTIC, INC., a California corporation ("Borrower"). 

RECITALS  

        Borrower and Bank are parties to that certain Loan and Security Agreement (dated as of October 5, 2001, as amended from time to time, including but not
limited to that certain First Amendment to Loan and Security Agreement dated as of July 17, 2002, that certain Second Amendment to Loan and Security Agreement dated as of March 21, 2003
and that certain Third Amendment to Loan and Security Agreement dated as of August 14, 2003 (collectively, the "Agreement"). The parties desire to amend the Agreement in accordance with the
terms of this Amendment. 

        NOW,
THEREFORE, the parties agree as follows: 

        1.     The
following defined terms in Exhibit A to the Agreement hereby are amended to read, or added, as follows: 

        "Borrowing
Base" means an amount equal to 70% of Eligible Accounts, plus 90% of Eligible Foreign Accounts,  plus 40% of Eligible Inventory (such amount not to exceed
Three Million Dollars ($3,000,000)), all as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower. 

        "Credit
Extension" means each Advance, Facility B Advance, Term Loan, Second Term Loan or any other extension of credit by Bank for the benefit of Borrower hereunder. 

        "Second
Term Loan" means the facility under which Borrower may request Bank to issue a term loan, as specified in Section 2.1(f) hereof. 

        "Second
Term Loan Maturity Date" means June 30, 2004. 

        2.     Section 2.1(f)
hereby is added to the Agreement to read as follows: 

        "(f)  Second Term Loan.

        (i)    Subject
to and upon the terms and conditions of this Agreement, on the date of this Amendment, Bank agrees to make one (1) term loan to Borrower in an aggregate
amount of One Million Dollars ($1,000,000) (the "Second Term Loan") which amount shall be used to finance working capital and growth expansion. 

        (ii)   Interest
shall accrue from the date of this Amendment at the rate specified in Section 2.3(a)(iii), and shall be payable monthly on the last day of each month so
long as the Second Term Loan is outstanding. The principal amount of the Second Term Loan which is outstanding on the Second Term Loan Maturity Date shall be then immediately due and payable in full,
plus all accrued and unpaid interest, together with all amounts owing under this Section 2.l(f). The Second Term Loan, once repaid, may not be reborrowed. Borrower may prepay all or any part of
the Second Term Loan without penalty or premium." 

        3.     Section 2.2
of the Agreement hereby is amended in its entirety to read as follows: 

        "2.2    Overadvances.    If the aggregate amount of the outstanding Advances
(plus the Facility B Advances, if any, plus the principal balance of the Second Term Loan, if any)
exceeds the lesser of the Committed Revolving Line (plus the Facility B Revolving Line plus the
principal balance of 

the
Second Term Loan) or, if Borrower's Leverage is greater than 1.50: 1.00, the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess." 

        4.     Section 2.3(a)
of the Agreement hereby is amended in its entirety to read as follows: 

        "(a) Interest Rates.

        (i)    Advances.    Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding
daily balance thereof, at a variable rate equal to one percent (1.00%) above the Prime Rate. 

        (ii)   Facility B Advances.    Except as set forth in Section 2.3(b), the Facility B Advances shall bear
interest, on the outstanding daily balance thereof, at a variable rate equal to two percent (2%) above the Prime Rate. 

        (iii)  Second Term Loan.    Except as set forth in Section 2.3(b), the Second Term Loan shall bear interest,
on the outstanding daily balance thereof, at a variable rate equal to five percent (5%) above the Prime Rate." 

        5.     Section 6.2(a)
of the Agreement hereby is amended and restated in its entirety as follows: 

        "(a)
Within 30 days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of
Exhibit D hereto, together with aged listings of accounts receivable and accounts payable; provided that, for so long as Borrower's Leverage is
less than 1.50:1.00, Borrower need not deliver to Bank a Borrowing Base Certificate. Borrower shall deliver to Bank, within 30 days after the last day of each month when the same is received,
evidence of Borrower's receipt of any Subordinated Debt or equity." 

        6.     Section 6.7(c)
of the Agreement hereby is amended and restated in its entirety as follows: 

        "(c)
Tangible Net Worth.    Commencing with the month ending December 31, 2003, a Tangible Net Worth of not less than
$8,600,000, plus (but not to be decreased by) (i) fifty percent (50%) of Borrower's aggregate net income per fiscal quarter, and (ii) one
hundred percent (100%) of capital infusions, including Subordinated Debt." 

        7.     Section 6.7(d)
of the Agreement hereby is amended and restated in its entirety as follows: 

        "(d)
Profitability.    No two (2) consecutive quarterly losses, and annual minimum profit (net income after taxes) of
Five Hundred Thousand Dollars ($500,000)." 

        8.     The
Exhibit D Borrowing Base Certificate of the Agreement shall be replaced in its entirety by the Exhibit D Borrowing Base Certificate attached hereto. 

        9.     The
Exhibit E Compliance Certificate of the Agreement shall be replaced in its entirety by the Exhibit E Compliance Certificate attached hereto. 

        10.   Borrower
shall execute and deliver to Bank, at the time of execution and delivery of this Amendment, a Warrant to Purchase Stock, in form and content reasonably
satisfactory to Bank (the "Warrant"). The Warrant shall bear an "Issue Date" (as set forth thereon) of July 1, 2004 and, until July 1, 2004 the Warrant shall not have any force or
effect, and the Bank shall not have any rights thereunder. In the event the Second Term Loan timely is repaid in accordance with the terms and conditions hereof, the original executed Warrant shall be
marked "cancelled" and returned to Borrower within ten (10) Business Days thereof. In the event the Second Term Loan is not timely repaid in accordance with the terms and conditions hereof, the
Warrant shall be deemed issued as of the Issue Date and shall then and thereafter be in full force and effect in accordance with the terms thereof. 

        11.   Unless
otherwise defined, all capitalized terms in this Amendment shall be as defined in the Agreement. Except as amended, the Agreement remains in full force and
effect. 

        12.   Borrower
represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no
Event of Default has occurred and is continuing. 

        13.   This
Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. 

        14.   As
a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following: 

        (a)   this
Amendment, duly executed by Borrower; 

        (b)   Corporate
Resolutions to Borrow; 

        (c)   a
Second Term Loan fee in the amount of Twenty Thousand Dollars ($20,000), which shall be due and payable and nonrefundable on the date hereof, and which may be debited
from any of Borrower's accounts with Bank; 

        (d)   a
Documentation Fee in the amount of Seven Hundred Fifty Dollars ($750.00), which shall be due and payable and nonrefundable on the date hereof, and which may be debited
from any of Borrower's accounts with Bank; 

        (e)   the
Warrant to purchase stock; 

        (f)    an
agreement to provide insurance; 

        (g)   disbursement
instructions; 

        (h)   an
amount equal to all Bank Expenses incurred to date, which may be debited from any of Borrower's accounts with Bank; and 

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

[Balance of Page Intentionally Left Blank]

        IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written. 

	 	 	SPY OPTIC, INC.
	

 	
 	
By:	

/s/  MICHAEL C. BROWER      

	

 	
 	

Title:	

CFO

	

 	
 	
COMERICA BANK
	

 	
 	
By:	

/s/ [ILLEGIBLE]

	

 	
 	

Title:	

VP Western Division

[Signature Page Intentionally Left Blank]

 
 

EXHIBIT D    
    

 
 

BORROWING BASE CERTIFICATE    
    

	Borrower: SPY OPTIC, INC.	 	Lender: COMERICA BANK

	

 	

 	
 	

 
	Commitment Amount:	$6,000,000	 	(Committed Revolving Line)
	 	$1,000,000	 	(Facility B Revolving Line)
	 	$1,000,000	 	(Second Term Loan)
	 	
	 	 
	NOT TO EXCEED	$8,000,000	 	 

	

DOMESTIC ACCOUNTS RECEIVABLE
	 	1.	Accounts Receivable Book Value as of	$	 
	 	2.	Additions (please explain on reverse)	$	 
	 	3.	TOTAL ACCOUNTS RECEIVABLE	$	 
	

DOMESTIC ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	 	4.	Amounts over 60 days due/90 days invoice	$	 
	 	5.	Balance of 20% over 60 days past due accounts	$	 
	 	6.	Concentration Limits	 	 
	 	7.	Governmental Accounts	$	 
	 	8.	Contra Accounts	$	 
	 	9.	Demo Accounts	$	 
	 	10.	Intercompany/Employee Accounts	$	 
	 	11.	Other (please explain on reverse)	$	 
	 	12.	TOTAL DOMESTIC, ACCOUNTS RECEIVABLE DEDUCTIONS	$	 
	 	13.	Eligible Accounts (#3 minus #12)	$	 
	 	14.	LOAN VALUE OF DOMESTIC ACCOUNTS (70% of #l4)	$	 
	

FOREIGN ACCOUNTS RECEIVABLE
	 	15.	Eligible Foreign Accounts	$	 
	 	16.	LOAN VALUE OF FOREIGN ACCOUNTS (90% of 15)	$	 
	

INVENTORY
	 	17.	Eligible Domestic Inventory	$	 
	 	18.	LOAN VALUE OF DOMESTIC INVENTORY (lesser of 40% of 17, or $3,000,000)	$	 
	

BALANCES
	 	19.	Maximum Loan Amount	$	 
	 	20.	Total Funds Available [Lesser of #19 or (#14 + #16 + #18)	$	 
	 	21.	Present balance owing on Line of Credit	$	 
	 	22.	[Intentionally Omitted]	$	 
	 	23	Outstanding under Sublimits	$	 
	 	24.	RESERVE POSITION (#20 minus #21, #22 and #23)	$	 

The undersigned represents and warrants that the foregoing is true, complete and correct in all material respects, and that the information reflected in this
Borrowing Base Certificate complies with the representations and warranties set forth in the Loan and Security Agreement, as amended from time to time, between the undersigned and Comerica
Bank.

	SPY OPTIC, INC.
	

By:	

	

 
	Authorized Signer	 

 
 

EXHIBIT E
  COMPLIANCE CERTIFICATE    
    

	TO:	 	COMERICA BANK
	FROM:	 	SPY OPTIC, INC.

        The
undersigned authorized officer of SPY OPTIC, INC. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (as amended from time to time, the "Agreement"), (i) Borrower is in complete compliance for the period
ending                        with all required covenants, except as noted
below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from
one period to the next except as explained in an accompanying letter or footnotes. 

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

	Reporting Covenant
 
	 	Required
	 	Complies

	Monthly financial statements	 	Monthly within 30 days	 	Yes	 	No
	Annual (CPA Audited)	 	FYE within 120 days	 	Yes	 	No
	10K and 10Q	 	(as applicable)	 	Yes	 	No
	A/R & A/P Agings; Inventory Summary	 	Monthly within 30 days	 	Yes	 	No
	Borrowing Base Cert.; evidence of equity/sub debt	 	Monthly within 30 clays (if applicable)	 	Yes	 	No

	
Financial Covenant
 
	
 	

Required
	
 	

Actual
	
 	

Complies

	Maintain on a Monthly Basis:	 	 	 	 	 	 	 	 	 
	 	Minimum Current Ratio	 	1.25:1.00	 	
	:1.00	 	Yes	 	No
	 	Maximum Debt—TNW	 	2.00:1.00	 	
	:1.00	 	Yes	 	No
	 	Minimum Tangible Net Worth	 	$8,600,000*	 	$
	 	Yes	 	No
	 	Minimum Quick Ratio	 	0.45:1.00**	 	
	:1.00	 	Yes	 	No
	Profitability (Annual)	 	$500,000***	 	$
	 	Yes	 	No

	*
	plus (i) fifty percent (50%) of Borrower's aggregate net income per fiscal quarter, and (ii) one hundred percent (100%) of
capital infusions, including Subordinated Debt.

	**
	beginning
07/31/03; increasing to 0.50:1.00 beginning 09/30/03.

	***
	no
two (2) consecutive quarterly losses. 

	Comments Regarding Exceptions: See Attached.	 	BANK USE ONLY
	

Sincerely,	
 	

Received by:	

	 	 	AUTHORIZED SIGNER

	

	
 	

Date:	

	SIGNATURE	 	 	 

	

 	
 	

Verified:	

	 	 	AUTHORIZED SlGNER

	

	
 	

 	

 
	TITLE	 	Date:	

	

 	
 	

Compliance Status	
 	

Yes	
 	

No
	
	 	 	 	 	 	 
	DATE	 	 	 	 	 	 

QuickLinks

Exhibit 10.8

FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

EXHIBIT D

BORROWING BASE CERTIFICATE

EXHIBIT E COMPLIANCE CERTIFICATE

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