<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended 1/31/97 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from to
Commission file number 1-8266
DATARAM CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-1831409
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 7528, Princeton, NJ 08543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 799-0071
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date. Common Stock ($1.00 par
value): As of February 14, 1997, there were 3,179,410 shares outstanding.
<PAGE>
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
January 31, 1997 and April 30, 1996
(Unaudited) (Audited)
January 31, 1997 April 30, 1996
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,702,754 $ 8,482,447
Trade receivables, less allowance
for doubtful accounts and sales returns
of $800,000 at January 31, 1997
and $800,000 at April 30, 1996 8,731,837 12,077,714
Inventories 2,440,464 2,311,897
Other current assets 521,256 862,709
__________ __________
Total current assets 18,396,311 23,734,767
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 6,513,478 6,190,426
__________ __________
7,388,478 7,065,426
Less: accumulated depreciation
and amortization 5,342,126 4,867,226
__________ __________
Net property and equipment 2,046,352 2,198,200
Other assets 5,730 5,730
__________ __________
$ 20,448,393 $ 25,938,697
========== ==========
</TABLE>
<PAGE>
<PAGE> 3
<TABLE>
January 31, 1997 April 30, 1996
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,792,052 $ 5,909,262
Accrued liabilities 1,238,941 1,022,404
__________ __________
Total current liabilities 3,030,993 6,931,666
Deferred income taxes 929,000 929,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
3,183,310 at January 31, 1997
and 3,824,305 at April 30, 1996 3,183,310 3,824,305
Additional paid-in capital 2,568,807 3,425,142
Retained earnings 10,736,283 10,828,584
__________ __________
Total stockholders' equity 16,488,400 18,078,031
__________ __________
$ 20,448,393 $ 25,938,697
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 4
<TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Operations
Three and Nine Months Ended January 31, 1997 and 1996
(Unaudited)
1997 1996
3rd Quarter Nine Months 3rd Quarter Nine Months
<S> <C> <C> <C> <C>
Revenues $ 17,514,342 $ 52,130,588 $ 28,385,207 $ 85,601,073
Costs and expenses:
Cost of sales 13,944,417 41,165,237 26,910,340 77,689,791
Engineering and development 253,887 732,977 365,935 1,254,249
Selling, general and administrative 1,941,700 5,788,074 1,462,188 4,896,992
__________ __________ __________ __________
16,140,004 47,686,288 28,738,463 83,841,032
Earnings (loss)from operations 1,374,338 4,444,300 (353,256) 1,760,041
Other income (expense), net
Other income, net 1,840 18,447 0 0
Interest income 73,063 201,352 0 0
Interest expense 0 0 (44,691) (101,860)
__________ __________ __________ __________
74,903 219,799 (44,691) (101,860)
Earnings (loss) before income taxes 1,449,241 4,664,099 (397,947) 1,658,181
Income tax expense (benefit) 537,000 1,773,000 (155,000) 656,000
__________ __________ __________ __________
Net earnings (loss) $ 912,241 $ 2,891,099 $ (242,947) $ 1,002,181
========== ========== ========== ==========
<PAGE>
<PAGE> 5
Net earnings (loss) per share of common stock
Primary $ .27 $ .83 $ (.06) $ .26
========== ========== ========== ==========
Fully Diluted $ .27 $ .80 $ (.06) $ .26
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Primary 3,356,920 3,479,844 3,824,305 3,837,807
========== ========== ========= =========
Fully Diluted 3,441,108 3,610,129 3,824,305 3,837,807
========== ========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE> 6
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Nine Months Ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net earnings $ 2,891,099 $ 1,002,181
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 474,900 500,741
Bad debt expense 251,220 220,795
Changes in assets and liabilities:
Decrease (increase) in
trade receivables 3,094,656 (721,138)
Decrease (increase) in inventories (128,567) 2,576,869
Decrease in other current assets 341,453 277,653
Decrease in other assets 0 9,346
Decrease in accounts payable (4,117,210) (3,600,466)
Increase (decrease) in
accrued liabilities 216,537 (1,121,390)
Increase (decrease) in
deferred income taxes 0 514,000
__________ __________
Net cash provided by (used in)
operating activities 3,024,088 (341,409)
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (323,052) (230,115)
__________ __________
Net cash used in investing activities (323,052) (230,115)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan 21,400 238,000
Purchase of and retirement of common shares (4,502,129) 0
__________ __________
Net cash provided by (used in)
financing activities (4,480,729) 238,000
__________ __________
Net increase (decrease) in cash
and cash equivalents (1,779,693) (333,524)
Cash and cash equivalents at
beginning of year 8,482,447 721,811
__________ __________
Cash and cash equivalents at
end of period $ 6,702,754 $ 388,287
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 0 $ 101,860
Income taxes $ 1,290,000 $ 582,000
</TABLE>
See accompanying notes to consolidated financial statements. <PAGE>
<PAGE> 7
Dataram Corporation and Subsidiary
Notes to Consolidated Financial Statements
January 31, 1997 and April 30, 1996
(1) Cash and cash equivalents consist of unrestricted cash, bankers
acceptances, commercial paper and other short term investments. All
investments are convertible to cash within a period of approximately thirty
days or less.
(2) Inventories consist of the following categories:
1/31/97 4/30/96
Raw Materials $ 1,837,000 $ 1,435,000
Work In Process 98,000 45,000
Finished Goods 505,000 832,000
_________ _________
$ 2,440,000 $ 2,312,000
========= =========
(3) The Company has an agreement with a bank which provides for a total
unsecured line of credit of $12,000,000 with interest at no higher than one-half
percent below the bank's base commercial lending rate. Borrowings under
the line of credit are at the convenience of Company management and may be
repaid at any time. The line of credit agreement expires in October, 1998,
unless otherwise amended or extended.
(4) In 1982, the Company adopted an incentive stock option plan. As of
January 31, 1997, no further options may be granted under the plan and options
to purchase 6,000 shares were exercised in fiscal 1997 at an excercise price
of $3.57 per share and no further options remain outstanding.
In September 1992, an incentive and nonstatutory stock option plan was
adopted by the shareholders which provides for the granting of up to 950,000
shares of common stock to key employees. As of January 31, 1997, options to
purchase 479,000 shares at prices ranging from $5.125 to $7.125 per share were
outstanding. As of January 31, 1997 options to purchase 32,000 shares had been
exercised and options to purchase 204,400 shares were exercisable.
In November 1992 and March 1993, the Company granted to three non-employee
directors of the Company and the Company's outside general counsel
five year options to acquire a total of 120,000 shares of the Company's common
stock at an exercise price of $11.25 per share. On September 10, 1996, the
Company granted to a fourth non-employee director five year options to acquire
30,000 shares at an exercise price of $6.9375. As of January 31, 1997, none of
these options had been exercised and options to purchase 112,500 shares were
exercisable.
(5) In June of 1996, the Company announced an open market repurchase plan
providing for the repurchase of up to 250,000 shares of the Company's common
stock. In July of 1996, the plan was amended to provide for the repurchase of
up to 500,000 shares of the Company's common stock. On September 10, 1996 the
Board of Directors authorized the repurchase of an additional 300,000 shares.
As of January 31, 1997 a total of 647,000 shares had been repurchased at a
total cost of $4,503,000.
(6) Information furnished reflects all adjustments which are, in the
opinion of management, necessary to a fair presentation of the results of this
interim statement.
<PAGE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of January 31, 1997, working capital amounted to $15.4 million
reflecting a current ratio of 6.1 compared to working capital of $16.8
million and a current ratio of 3.4 as of April 30, 1996.
The Company's financial condition remains strong. The Company has
renegotiated its line of credit. The new agreement provides for a $12.0
million unsecured line of credit with a bank which expires in October 1998.
The line of credit has not been used during the current fiscal year. With its
current working capital balance and its line of credit, management believes
that it will be able to support its growth and other capital needs for the
foreseeable future.
Results of Operations
Revenues for the three month period ending January 31, 1997 were
$17,514,000 compared to revenues of $28,385,000 for the comparable prior year
period. Fiscal 1997 nine month revenues totaled $52,131,000 versus nine month
revenues of $85,601,000 for the prior fiscal year. The decline in revenues was
the result of declining average selling prices for the Company's products
reflecting an eighty percent decrease in the price of dynamic random access
memory chips (DRAMs)which are the primary raw material in memory boards. As a
result of competitive conditions in the memory board marketplace, the Company
passed these cost savings through to our customers. Increased unit volume
partially offset the reduction in selling prices. Total units shipped have
increased by approximately 180% in this year's third quarter, versus the third
quarter last year.
Cost of sales for the third quarter and nine months of fiscal 1997 were
80% and 79%, respectively of revenues versus 95% and 91% for the same prior
year periods. Included in last years third quarter and nine months cost of
sales was a $1,200,000 charge for a write down to market value of inventory.
The remaining increase in operating margins is the result of increased unit
volume which created significant economies of scale. Prices for the four and
sixteen megabit DRAM continued to decline during the third quarter. To
minimize the impact of the changes in raw material values, the Company has
maintained tight control over inventory levels, while still meeting customer
delivery requirements.
Engineering and development costs in fiscal 1997's third quarter and nine
months were $264,000 and $733,000, respectively versus $366,000 and $1,254,000
for the same prior year periods. The decrease in cost was due to modest
reductions in staff, and an overall control of cost primarily associated with
lower product design costs of today's simplified memory boards. The Company
intends to maintain its commitment to timely introduction of new memory
products as new workstations and computers are introduced.
<PAGE>
<PAGE> 9
Selling, general and administrative costs in this year's third quarter
increased to 11% of revenues from 5% for the same prior year period. Three
month total expenditures increased by $480,000 from the comparable prior year
period. Nine month selling, general and administrative costs increased by
$891,000 in fiscal 1997 versus fiscal 1996. These increases are primarily
attributable to certain planned marketing and promotional expenditures and
legal expenses incurred related to a Complaint filed by Sun Microsystems, Inc.
The Company has continued to strategically add to its sales department this
year to accelerate our ability to service new and existing customers.
Other income (expense),net for the third quarter and nine months of
fiscal 1997 consisted primarily of interest income on short term investments.
Prior year other income (expense) consisted of interest expense associated
with the Company's revolving credit line.
PART II: OTHER INFORMATION
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 (a). Financial Data Schedule
10 (a) Amendment Number One To Loan Agreement
99 (a). Press Release reporting results of Third Quarter, Fiscal Year
1997 (Attached).
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
<PAGE>
<PAGE> 10
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATARAM CORPORATION
Date: Feb. 26, 1997 By: MARK E. MADDOCKS
__________________ ___________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 6,702,754
<SECURITIES> 0
<RECEIVABLES> 9,531,837
<ALLOWANCES> 800,000
<INVENTORY> 2,440,464
<CURRENT-ASSETS> 18,396,311
<PP&E> 7,388,478
<DEPRECIATION> 5,342,126
<TOTAL-ASSETS> 20,448,393
<CURRENT-LIABILITIES> 3,030,993
<BONDS> 0
0
0
<COMMON> 3,183,310
<OTHER-SE> 13,305,090
<TOTAL-LIABILITY-AND-EQUITY> 20,448,393
<SALES> 52,130,588
<TOTAL-REVENUES> 52,130,588
<CGS> 41,165,237
<TOTAL-COSTS> 41,165,237
<OTHER-EXPENSES> 732,977
<LOSS-PROVISION> 251,221
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,664,099
<INCOME-TAX> 1,773,000
<INCOME-CONTINUING> 2,891,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,891,099
<EPS-PRIMARY> .83
<EPS-DILUTED> .80
</TABLE>
<PAGE> 1
FOR IMMEDIATE RELEASE CONTACT: Mark Maddocks
Vice-President, Finance
Telephone: (609) 799-0071
DATARAM RECORDS STRONG EARNINGS
FOR THIRD QUARTER, NINE MONTHS OF FISCAL '97
PRINCETON, NJ, February 7, 1997 Dataram Corporation (AMEX: DTM)
sustained its favorable earnings performance for the third
quarter and nine months of fiscal 1997, Robert V. Tarantino,
president and chief executive officer, announced today.
The Company achieved net earnings of $912,000 or $.27
primary and fully diluted earnings per share, for the third
quarter ended January 31, 1997, compared to a loss of $243,000,
or $.06 per share, for the comparable prior year quarter. The
prior year third quarter operating results included a $1,200,000
pre-tax charge for a write down to market value of inventory.
Third quarter revenues totaled $17.5 million versus $28.4 million
in the year earlier period.
For the nine months ended January 31, 1997, net earnings
were $2,891,000 or $.83 primary and $.80 fully diluted earnings
per share, versus $1,002,000 million, or $.26 per share, for the
prior period. Revenues were $52.1 million compared to $85.6
million recorded in the comparable period.
Continued....
<PAGE>
<PAGE> 2
Dataram Earnings Release - Page 2
Tarantino attributed the strong earnings to continued high
unit volume demand for the Company's memory products, combined
with economies of scale and production efficiencies achieved at
the Company's state-of-the-art manufacturing facility.
"Third quarter units shipped were 180% greater than last
year's comparable quarter," Tarantino stated. "Revenues continue
to be affected by the dramatic decline in the price of Dynamic
Random Access Memory (DRAM) chips, the major cost component of
computer memory boards. DRAM chips, which were approximately $25
per megabyte last year, are now available at less than $5 per
megabyte."
"While we are pleased with our operating results, the
Company must continue to make the strategic investments which
will result in future profitable growth," Tarantino declared.
"Dataram's established operational efficiency allows us to
broaden our product line at an extremely low incremental cost. We
continue to upgrade our sales, marketing and manufacturing
capabilities to capitalize on future opportunities in the
computer memory marketplace."
Tarantino announced that the Company has entered into an
agreement with IBM whereby IBM will service their computers
containing Dataram memory products. "This agreement attests to
the quality and reliability of our products and underscores our
reputation as a leading supplier of memory in the industry,"
Tarantino stated.
Continued....<PAGE>
<PAGE> 3
Dataram Earnings Release - Page 3
Tarantino also announced that Dataram continued its stock
repurchase program during the third quarter, purchasing 115,300
shares of its common stock, bringing the total year to date
purchases to 645,200 shares.
Dataram recently renegotiated its line of credit agreement
with its bank. The new agreement provides for an increase in the
Company's unsecured revolving credit line to $12 million and
extends its maturity. With no debt and strong operating cash
flow, Tarantino said the Company is solidly positioned to pursue
opportunities in the computer memory industry while maintaining
its strong financial condition.
Dataram develops, manufactures and markets quality computer
memory products for workstations, servers and personal computers.
Continued....
<PAGE>
<PAGE> 4
Dataram Earnings Release - Page 4
Dataram Corporation and Subsidiary
Consolidated Summary Information
(In thousands except per share amounts)
Quarter Ended Nine Months Ended
January 31 January 31
1997 1996 1997 1996
____ ____ ____ ____
Revenues $17,514 $28,385 $52,131 $85,601
Net Earnings (Loss) $912 $ (243) $ 2,891 $ 1,002
Net Earnings (Loss) Per Share
Primary $.27 $(.06) $.83 $.26
Fully Diluted $.27 $(.06) $.80 $.26
Average Shares Outstanding
Primary 3,357 3,824 3,480 3,838
Fully Diluted 3,441 3,824 3,610 3,838
<PAGE> 1
AMENDMENT NUMBER ONE TO LOAN AGREEMENT
This Amendment to Loan Agreement (the "Amendment") is made
this 1 day of November, 1996 by and between DATARAM CORPORATION,
a New Jersey corporation, having an address at Route 571,
Princeton Road, West Windsor Township, New Jersey (the
"Borrower") and NEW JERSEY NATIONAL BANK, having an address at
CN-1, Pennington, NJ 08534 (the "Bank").
BACKGROUND
WHEREAS, the Borrower and the Bank entered into a certain
Loan Agreement dated October 27, 1994 (the "Agreement");
WHEREAS, the Borrower and the Bank have agreed to amend the
Agreement to increase the amount of the Revolver Credit Advance
Limit and Revolver Note from $10,000,000 to $12,000,000 until
October 31, 1997, then decrease the Revolver Credit Advance Limit
to $6,000,000 on November 1, 1997, extend the Revolving Credit
Maturity Date to October 31, 1998 and correct the Agreement as
hereinafter set forth.
WHEREAS, all capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to them in the
Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1 The Revolving Credit Maturity Date is hereby extended
to October 31, 1998. To that end, the definition of Revolving
Credit Maturity Date contained in Section 1.01 of the Agreement
is hereby amended to read in its entirety as follows:
"Revolving Credit Maturity Date" means October 31,
1998.
2. The amount of the Revolver Credit Advance Limit is
increased from $10,000,000 to $12,000,000 until October 31, 1997,
then decreased to $6,000,000 on November 1, 1997 until the
Revolver Credit Maturity Date. To that end, the definition of
Revolving Credit Advance Limit contained in Section 1.01 of the
Agreement is hereby amended to read in its entirety as follows:
"Revolving Credit Advance Limit" means the sum of
Twelve Million Dollars ($12,000,000) through October 31, 1997 and
the sum of Six Million Dollars ($6,000,000) from November 1, 1997
until the Revolving Credit Maturity Date.
3. Section 6.26 of the Agreement is hereby amended to
read in its entirety as follows:
1<PAGE>
<PAGE> 2
"6.26. Tangible Net Worth. The Borrower shall
maintain as of April 30, 1996, and thereafter, Tangible Net Worth
of not less than $16,000,000."
4. The Borrower shall execute and deliver to the Bank a
replacement revolver note of the Borrower in substantially the
form attached as Exhibit A-1 (the "Replacement Revolver Note") to
evidence the indebtedness of the Borrower for the Revolving
Credit Advances by the Bank. The Replacement Revolver Note shall
replace and supersede the Revolver Note but shall not extinguish
the Borrower's unconditional obligation to repay the indebtedness
evidenced by the Revolver Note of the Borrower to the Bank dated
October 27, 1994. All references in the Agreement to the
Revolver Note shall henceforth be deemed to refer to the
Replacement Revolver Note.
5. The effectiveness of this Amendment is conditioned
upon the Bank's receipt of the following documents:
(A) This Amendment Number One to Loan Agreement;
(B) Replacement Revolver Note;
(C) Certified Resolutions of the Board of Directors of
the Borrowers authorizing the execution of this Amendment; and
(D) Favorable opinion of counsel to the Borrower dated
the date of this Amendment.
6. Representations and Warranties. The Borrower has
taken all corporate action necessary to authorize the execution,
delivery and performance of this Amendment and the Replacement
Revolver Note. This Amendment and the Replacement Revolver Note
is, or when executed by the Borrower and delivered to the Bank
will be, duly executed and constitute the valid and legally
binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms. The Borrower
hereby ratifies and confirms the representations and warranties
of the Borrower set forth in Article IV of the Agreement (as
updated to reflect Borrower's most recent financial statements)
as being true and correct on the date hereof.
7. Borrower Remains Liable. Nothing contained herein
shall release, satisfy or extinguish any existing obligations of
Borrower to Bank. Borrower hereby confirms that each of the
existing loan documents and all collateral, liens, mortgages,
security interests and pledges created by Borrower and described
therein continue unimpaired and in full force and effect.
8. Indemnity. Borrower agrees to indemnify Bank from
and against any and all claims, losses and liabilities growing
out of or resulting from this Amendment.
9. Waivers. The Bank waives any default or Event of
Default existing on or prior to
2<PAGE>
<PAGE> 3
the date hereof which is cured or which would not have occurred
or arisen if the amendments set forth herein had taken
retroactive effect on the date of the Agreement.
10. Incorporation of Amendment. The parties hereto
acknowledge and agree that this Amendment is incorporated into
and made a part of the Agreement and the other existing loan
documents, the terms and provisions of which, unless expressly
modified herein, or unless no longer applicable by their terms,
continue unchanged and in full force and effect. To the extent
that any term or provision of this Amendment is or may be deemed
expressly inconsistent with any term or provision in the
Agreement and the other existing loan documents, the terms and
provisions hereof shall control.
11. Miscellaneous.
(a) Headings. The section headings contained in this
Amendment are included for convenience of reference only and
shall not be used to interpret any provision of this Amendment.
(b) Governing Law. The laws of the State of New Jersey
shall govern the construction of this Amendment and the rights
and remedies of the parties thereto. The provisions hereof are
severable and the validity or unenforceability of any provision
shall not effect or impair the remaining provisions which shall
continue in full force and effect. This Amendment shall bind the
parties hereto and their respective successors and assigns.
(c) Modifications. No modification hereof or any
agreement referred to herein shall be binding or enforceable
unless in writing and signed on behalf of the party against whom
enforcement is sought.
(d) Third Parties. No rights are intended to be created
hereunder for the benefit of any third party, creditor or
incidental beneficiary.
IN WITNESS WHEREOF, the parties have caused the Amendment to
be executed as of the date first above written.
ATTEST: DATARAM CORPORATION,
a New Jersey corporation
By: ROBERT TARANTINO By: MARK MADDOCKS
_______________________ ____________________________
Print Name and Title Print Name and Title
Robert Tarantino Mark Maddocks
Pres & CEO Vice President, Finance
[Signatures Continued on Next Page]
3<PAGE>
<PAGE> 4
ATTEST: NEW JERSEY NATIONAL BANK
By: OLIVER B. TAYLOR By: STEPHEN F. BAYER
________________________ ____________________________
Print Name and Title Print Name and Title
Oliver B. Taylor Stephen F. Bayer
Vice President Vice President
4<PAGE>
<PAGE> 5
EXHIBIT A-1
REPLACEMENT
REVOLVER NOTE
$12,000,000.00 Princeton, New Jersey
November __, 1996
FOR VALUE RECEIVED, DATARAM CORPORATION, a New Jersey
corporation, having an address at Route 571, Princeton Road, West
Windsor Township, New Jersey 08543 ("Borrower") , promises to pay
to the order of NEW JERSEY NATIONAL BANK, a national banking
association, having its principal office at 360 Scotch Road,
Pennington, NJ 08034 ("Bank"), at its offices or at such other
address as may hereafter be specified by Bank, in lawful money of
the United States of America, the principal sum of TWELVE MILLION
DOLLARS ($12,000,000.00) (the "Loan"), together with interest
thereon at the rate or rates and in the installments and at the
times hereinafter provided.
1. Definitions. Whenever used in this Replacement Revolver
Note, the following words and phrases shall have the respective
meanings ascribed to them below.
(A) "Adjusted LIBO Rate" - means the LIBO Rate plus the
Applicable Margin.
(B) "Adjusted Prime Rate" - means the Prime Rate minus the
Applicable Margin.
(C) "Applicable Margin" - means, for Prime Rate Tranches
0.75% per annum and for LIBOR Tranches 1.00% per annum.
(D) "Applicable Treasury Bond Obligation(s)" - means the
debt obligation(s) of the United States Treasury having a
maturity date(s) nearest in time to the maturity date(s) of the
principal being prepaid and the maturity date(s) and yield(s) to
maturity of such Applicable Treasury Bond Obligation(s) shall be
determined by Bank in its sole discretion on the basis of
quotations published in the Wall Street Journal (or comparable
source) on the date of prepayment.
(E) "Assessment Rate" - means, for any elected LIBOR
Interest Period for any LIBOR Tranche, the actual rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) at which
premiums for Federal deposit insurance (if any) are then charged
during such LIBOR Interest Period to CoreStates Bank, N.A. for
Dollar time deposits with CoreStates Bank, N.A. at its foreign
branch.
(F) "Bank" as defined in the introductory paragraph hereof.
(G) "Borrower" - as defined in the introductory paragraph
hereof.
(H) "Business Day" - means any day other than a Saturday,
Sunday, or other day on which commercial banks in New Jersey are
authorized or required to close under the laws of the <PAGE>
<PAGE> 6
State of New Jersey.
(I) "Contract Right" - as defined in Section 7 hereof.
(J) "Default" - means and refers to any event, act or
occurrence, which with the passing of time or the giving of
notice or both, would constitute an Event of Default as defined
in the Loan Agreement.
(K) "Default Rate" - as defined in Section 7 hereof.
(L) "Dollars" and "$" - mean lawful money of the United
States of America.
(M) "Effective Date" - means, for the Prime Rate Tranche,
the date on which a Prime Rate Interest Period commences,
pursuant to Section 3 hereof, for the LIBOR Tranche, the date
Borrower designates as the date on which a LIBOR Interest Period
is to commence pursuant to Section 3 hereof.
(N) "Eurocurrency Reserve Requirement" - means, for any
LIBOR Tranche for any LIBOR Interest Period relating thereto, the
daily average of the stated maximum rate (expressed as a decimal)
at which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during such
LIBOR Interest Period under Regulation D by a member bank of the
Federal Reserve System against "Eurocurrency liabilities" (as
such term is used in Regulation D) but without benefit of or
credit for proration, exemptions, or offsets that might otherwise
be available to such member bank from time to time under
Regulation D. Without limiting the effect of the foregoing, the
Eurocurrency Reserve Requirement shall reflect any other reserves
required to be maintained by such member bank against (1) any
category of liabilities which includes deposits by reference to
which the LIBOR Interest Rate for LIBOR Tranches is to be
determined or (2) any category of extension of credit or other
assets that include LIBOR Tranches.
(O) "Event of Default" - shall mean an Event of Default as
defined in the Loan Agreement.
(P) "Interest Period" - means any period during which the
Interest Rate is the Adjusted Prime Rate, or any Adjusted LIBO
Rate, as appropriate.
(Q) "Interest Rate" - means the Adjusted LIBO Rate and the
Adjusted Prime Rate, or the Default Rate, as appropriate.
(R) "LIBOR Interest Period" - for a LIBOR Tranche means a
period of time, beginning on an Effective Date, of 30, 60 or 90
days in length, selected by Borrower - by telephone or in writing
(and if by telephone, confirmed by Borrower the same day by
facsimile), during which the Interest Rate for such LIBOR Tranche
is the Adjusted LIBO Rate. If a LIBOR Interest Period would
2<PAGE>
<PAGE> 7
otherwise end on a day that is not a Business Day, such LIBOR
Interest Period shall be extended to the next Business Day,
unless such Business Day would fall in the next calendar month,
in which event such LIBOR Interest Period shall end on the
immediately preceding Business Day.
(S) "LIBO Rate" - means, for each LIBOR Tranche, the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th
of 1%) determined by Bank according to the following formula:
R = X + Z
_____
1-Y
where R = LIBO Rate
X = London Interbank Offered Rate for such LIBOR
Tranche for the applicable LIBOR Interest Period
Y = Eurocurrency Reserve Requirement for such LIBOR
Tranche for the applicable LIBOR Interest Period
Z - the Assessment Rate (if applicable).
(AA) "LIBOR Tranche" - means each portion of the Loan to
which an Adjusted LIBO Rate applies.
(AB) "Loan" - as defined in the introductory paragraph
hereof.
(AC) "Loan Documents" - means that certain term note or
notes executed by Borrower to Bank which, in the aggregate does
not exceed Three Million Five Hundred Thousand Dollars
($3,500,000.00), this Replacement Revolver Note in the principal
amount of Twelve Million Dollars ($12,000,000.00), that certain
Loan Agreement dated of even date herewith between Borrower and
Bank and any and all other documents executed by Borrower in
connection with the Loan.
(AD) "London Business Day" - means any Business Day on
which commercial banks, are open for international business
(including dealing in Dollar deposits) in London, England and New
Jersey.
(AE) "London Interbank Offered Rate" - applicable to any
elected LIBOR Interest Period for a LIBOR Tranche means the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th
of 1%) quoted by the principal London branch of CoreStates Bank,
N.A. two London Business Days prior to the first day of such
LIBOR Interest Period for the offering to leading banks in the
London interbank market of Dollar deposits in immediately
available funds for a period, and in an amount, comparable to the
LIBOR Interest Period and principal amount of the LIBOR Tranche
which shall be made by Bank and/or be outstanding during such
LIBOR Interest Period.
3<PAGE>
<PAGE> 8
(AF) "Material Adverse Effect" - has the meaning given such
term in the Loan Agreement.
(AG) "Maturity Date" - as defined in Section 3 hereof.
(AH) "Operating Account" - has the meaning given to such
term in Section 3 hereof.
(AI) "Person" - has the meaning given such term in the Loan
Agreement.
(AJ) "Prime Rate" - means for each day, the lending rate
set and announced by Bank from time to time for purposes of
fixing interest rates on various categories of loans which Bank
determines are to be tied to such Prime Rate. The Prime Rate is
not necessarily the lowest rate of interest which Bank charges
any of its customers.
(AK) "Prime Rate Interest Period" - for a Prime Rate
Tranche, means a period of time beginning with an Effective Date,
of 365 days in length, selected by Borrower by telephone or in
writing (and if by telephone, confirmed by Borrower the same day
by facsimile) during which the Interest Rate for such Prime Rate
Tranche is the Adjusted Prime Rate. If the Prime Rate Interest
Period would otherwise end on a day that is not a Business Day,
such Prime Rate Interest Period shall be extended to the next
Business Day, unless such Business Day would fall into the next
calendar month, in which event such Prime Rate Interest Period
shall end on the immediately preceding day.
(AL) "Prime Rate Tranche" - means each portion of the Loan
to which the Adjusted Prime Rate applies.
(AM) "Regulation D" - means Regulation D of the Board of
Governors of the Federal Reserve System as amended or
supplemented from time to time.
2. Interest Rate.
(A) The principal sum outstanding f rom time to time
hereunder shall bear interest from the date or dates advanced
until the date repaid at a rate equal to the Adjusted Prime Rate.
The Adjusted Prime Rate shall change simultaneously with each
change in the Prime Rate.
(B) Notwithstanding the foregoing, at any time up to that
date which is 90 days prior to the Maturity Date, provided no
Event of Default or Default has occurred, Borrower shall have the
option to fix the interest rate on portions of the Loan of TWO
HUNDRED THOUSAND DOLLARS ($200,000.00) or more, in a minimum of
TWO HUNDRED THOUSAND DOLLARS ($200,000.00) at the Adjusted LIBO
Rate, subject to Bank's ability to secure such funds for such
periods.
(C) Borrower may exercise the option to have portions of
the Loan from time to time bear interest at the Adjusted LIBO
Rate by giving Bank written notice (which shall be irrevocable),
by
4<PAGE>
<PAGE> 9
telephone or in writing, by 10:00 A.M. at least two London
Business Days before each proposed LIBOR Tranche, specifying the
date and the amount of the proposed LIBOR Tranche and the length
of the proposed LIBOR Interest Period. Borrower will confirm any
telephonic notice of a proposed LIBOR Tranche the same day by
facsimile copy.
(D) The interest due on the Loan shall be payable as
provided in Section 3 below.
3. Interest and Principal Payments; Maturity Date.
(A) Prime Rate Loans. Borrower shall pay interest in
arrears on the unpaid principal amount of the Prime Rate Tranche,
from the date on which the Prime Rate Tranche is created until
such principal amount has been repaid in full, or converted to a
LIBOR Tranche, as the case may be, (1) every thirty (30) days
after the Effective Date of such Prime Rate Tranche and (2) on
the Maturity Date, at the Adjusted Prime Rate.
(B) Conversions to LIBOR Tranches. By notifying Bank at
least two (2) London Business Days prior to an Effective Date,
Borrower may convert into a LIBOR Tranche all or any part of any
Prime Rate Tranche at any time in a minimum principal amount of
$200, 000. 00. At the end of the applicable LIBOR Interest
Period, the LIBOR Tranche will convert to a Prime Rate Tranche
unless Borrower notifies Bank at least two (2) London Business
Days before the end of the existing LIBOR Interest Period that
Borrower is electing to continue all or any part of the tranche
as a LIBOR Tranche and is selecting a new LIBOR Interest Period.
(C) Libor Tranches. Borrower shall pay interest in arrears
on the unpaid principal amount of each LIBOR Tranche at the
Adjusted LIBO Rate for such LIBOR Tranche from the date on which
such LIBOR Tranche is created until such principal amount has
been paid in full, or converted to a Prime Rate Tranche, as the
case may be, (1) every 30 days after the Effective Date of such
LIBOR Tranche, and (2) on the Maturity Date at the adjusted LIBO
Rate.
(D) Principal Repayment. Borrower shall repay the
outstanding principal balance of the Loan, all accrued and unpaid
interest thereon and any other sums then outstanding hereunder or
under the Loan Documents on October 31, 1998 (the "Maturity
Date"). Notwithstanding the foregoing, any principal amount
outstanding hereunder in excess of $6,000,000 on October 31, 1997
shall be repaid on that date.
(E) Operating Account. Borrower covenants and agrees to
maintain an operating account with Bank at all times during which
any portion of the Loan remains outstanding (the "Operating
Account"). Borrower hereby authorizes Bank to charge the
Operating Account for all payments hereunder as they become due.
Borrower agrees to keep in the Operating Account sufficient
amount to make such payments as and when they come due. Bank's
failure to so charge the Operating Account in order to satisfy
Borrower's payment obligations hereunder shall not relieve
Borrower's obligations to make all such payments. In the event
that Borrower shall fail to maintain a sufficient balance in the
Operating Account to satisfy a payment obligation on the date
such payment becomes
5<PAGE>
<PAGE> 10
due, Borrower shall continue to be obligated to make such payment
and, if such payment is not made by Borrower in some other manner
on or before the date such payment becomes due, such failure
shall constitute an Event of Default hereunder. All payments
received by Bank from Borrower shall be applied in the following
order: (a) to the payment of fees and other costs and expenses
then due and owing from Borrower, (b) to the payment of accrued
and unpaid interest then due, (c) to the payment of any
outstanding principal hereunder.
(F) Interest Calculation. Both before and after any
default, interest shall be calculated on the basis of a 360 day
year but charged on the basis of the actual number of days
elapsed in any calendar year or part thereof.
4. Prepayments.
(A) Borrower may prepay the Prime Rate Tranches in whole or
in part at any time and from time to time in a minimum amount of
Two Hundred Thousand Dollars ($200,000.00).
(B) Borrower may, at any time, prepay the principal balance
of a LIBO Rate Tranche in whole or in part, provided that
Borrower simultaneously therewith pays to Bank a prepayment
premium equal to the amount, if any, by which (a) the principal
being prepaid plus the installments of interest which would have
been payable thereon when discounted to a present value at a rate
per annum equal to the yield to maturity of the Applicable
Treasury Bond Obligation(s) exceed(s) (b) the principal amount
being prepaid. Borrower agrees to pay prepayment premium as
calculated in the foregoing sentence upon any prepayment of the
LIBOR Tranche, whether voluntary, required by Bank in connection
with any acceleration of the indebtedness hereunder upon the
occurrence of an Event of Default, or as otherwise required under
this Replacement Revolver Note. A determination of Bank as to
the amounts payable pursuant to this Section 4(B) shall be
conclusive absent manifest error.
5. Late Charges. If any installment of principal or interest
or both hereunder or other payment required to be made by
Borrower under the other Loan Documents is not paid within ten
(10) days after becoming due, Borrower shall pay to Bank on
demand a late charge of five percent (5%) of such overdue amount
to reimburse Bank for the additional expenses to be incurred as a
result of such delinquency, but such late payment fee shall not
obligate Bank to accept any overdue payment hereunder nor limit
the rights and remedies available to Bank as a result of
Borrower's default, as hereinafter provided. The amount of any
such late charge not paid promptly following demand shall be
deemed outstanding and payable pursuant to this Replacement
Revolver Note.
6. Event of Default. An Event of Default shall mean an Event
of Default as defined in the Loan Agreement .
7. Default Rate. Upon the occurrence of an Event of Default
hereunder, the interest rate otherwise payable hereunder (the
"Contract Rate") shall increase immediately and without notice
6<PAGE>
<PAGE> 11
and thereafter shall be payable at a rate of three percent (3%)
per annum in excess of the Contract Rate (said higher rate is
hereinafter called the "Default Rate"), until the Event of
Default has been cured, or in the event the principal of this
Replacement Revolver Note has been accelerated, until this
Replacement Revolver Note is paid in full, including the period
following entry of any judgment on or relating to this
Replacement Revolver Note or the other Loan Documents. Interest
on any such judgment shall accrue and be payable at the Default
Rate, and not at the statutory rate of interest, after judgment,
any execution thereon, and until actual receipt by the holder of
payment in full of this Replacement Revolver Note and said
judgment. Interest at the Default Rate shall be collectible as
part of any judgment hereunder and shall be secured by the other
Loan Documents.
8. Remedies. Upon the occurrence of an Event of Default, the
Bank shall be entitled to exercise all remedies available to it
under the terms of the Loan Agreement.
9. Accounts. Borrower hereby covenants and agrees that while
the Loan is outstanding it will maintain all of its bank accounts
with Bank.
10. Waivers by Borrower, Cumulative Remedies.
(A) Borrower hereby waives presentment for payment, demand,
notice of non-payment, notice of protest and protest of this
Replacement Revolver Note. The Borrower hereby consents to any
and all extensions of time, renewals, waivers or modifications
that may be granted by the Bank with respect to the payment or
other provisions of this Replacement Revolver Note, and agrees
that additional obligors may become parties hereto without notice
to the Borrower without affecting the Borrower's liability
hereunder.
(B) Borrower hereby waives-the benefit of any laws which
now or hereinafter might otherwise authorize the stay of any
execution to be issued on any judgment covered on this
Replacement Revolver Note. Borrower hereby waives its right to
trial by jury in connection with a portion of this Replacement
Revolver Note or under the loan agreement or any other document
executed in connection with this Loan and any legal proceeding
arising hereunder or thereunder.
(C) No failure or delay on the part of the Bank in
exercising any right, power or privilege under this Replacement
Revolver Note and no course of dealing between the Borrower and
the Bank shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall
preclude any other or further exercise of any right, power or
privilege that the Bank would otherwise have. No notice to, or
demand on, the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other
circumstances would constitute a waiver of the right of the Bank
to any other or further action and any circumstances without
notice or demand.
11. Costs and Expenses. The Borrower agrees, in accordance with
the terms of the Loan Agreement, to pay all costs and expenses of
the Bank incurred in order to enforce any remedy available to the
Bank under this Replacement Revolver Note, the Loan Agreement or
any Loan
7<PAGE>
<PAGE> 12
Document.
12. Reimbursement to Bank for Increased Costs Due to Capital
Adequacy Requirements. If after the date hereof any change in
law or regulation or the interpretation thereof by any court or
administrative or governmental authority charged with the
administration thereof, or compliance by Bank with any request or
directive (whether or not having the force of law) of any such
authority, applicable from time to time now or after the date
hereof to banks in general, shall (A) impose, modify, deem
applicable or result in the application of any capital
maintenance, capital ratio or similar requirements against loan
commitments or other facilities made by Bank and the result
thereof shall be to impose upon Bank a fee or a requirement to
increase any capital requirement applicable as a result of the
making or maintenance of the Loan (which imposition of or
increase in capital requirements may be determined by Bank's
reasonable allocation of the aggregate of such capital
impositions or increases), or (B) subject Bank to any tax, duty
or other charge with respect to the Loan, the Replacement
Revolver Note, or change the basis of taxation of payments to
Bank of the .principal of or interest on the Loan or any other
amounts due under this Agreement, in respect of the Loan (except
for changes in the rate of tax on the overall net income of Bank
imposed by any jurisdiction in which Bank is obligated to pay
taxes), then, upon demand by Bank, Borrower shall immediately pay
to Bank from time to time as specified by Bank, such additional
amounts or fees which shall be sufficient to compensate Bank for
such impositions of or increases in capital requirements or taxes
from the date of such change, together with interest on each such
amount from the date demanded until payment in full -thereof at
the Default Rate with respect to amounts or fees not paid when
due. Upon the occurrence of any event referred to above, a
certificate setting forth- in reasonable detail the amounts
necessary to compensate Bank as a result of an imposition of or
increase in capital requirements or taxes submitted by Bank to
Borrower shall be conclusive, absent manifest error or bad faith,
as to the amount thereof.
13. Special Provisions of LIBOR Tranches.
(A) Unavailability of Funds and Indeterminate Interest
Rates. If on or before the date Bank is to make any LIBOR
Tranche or on or before any Effective Date (1) Bank determines in
good faith that it is unable to obtain funds at the LIBO Rate for
the elected Interest Period for any reason, including, but not
limited to the unavailability of funds at such rate, any change
in existing law, any new law, the length of such Interest Period,
or otherwise or (2) Bank determines in good faith that no
adequate means exists to determine the LIBO Rate for such
Interest Period, then, at Bank's option, Borrower shall be deemed
to have requested a Prime Rate Tranche or shall be required to
elect an Interest Period of a length for which Bank may obtain
funds at the rate the adjustment of which determines the LIBO
Rate.
(B) Changes Affecting Ability to Maintain Funds. If,
during any Interest Period, any change in existing law, any new
law, or any other factor beyond the control of Bank prevents Bank
in its good faith determination from maintaining funds at the
rate the adjustment of which determines the LIBO Rate for such
Interest Period and requires Bank to cease so maintaining funds
actually so
8<PAGE>
<PAGE> 13
maintained prior to termination of such Interest Period, then on
the date of such required cessation, Borrower shall be required
to specify a different Interest Rate for such Interest Period or,
in the alternative, to elect an Interest Period of a length for
which Bank may maintain funds at the rate the adjustment of which
determines the LIBO Rate. In addition, within five days after
Bank notifies Borrower of such required conversion, Borrower
shall reimburse Bank for any loss or expense Bank has certified
in writing to Borrower that Bank has incurred as a result of any
such required cessation.
14. Interest Limitation; Severability.
(A) Nothing herein contained nor any transaction related
hereto shall be construed or shall operate either presently or
prospectively to require Borrower to pay interest at a rate
greater than is now lawful in such case to contract for, but
shall require payment of interest only to the extent of such
lawful rate. Any interest paid in excess of the lawful rate
shall be refunded to Borrower. Such refund shall be made by
application of the excessive amount of interest paid against any
sums outstanding hereunder, in which event any applicable
prepayment premium shall be waived with respect to the amount so
prepaid, and shall be applied in such order as Bank may
determine. If the excessive amount of interest paid exceeds the
sums outstanding hereunder, the portion exceeding the said sums
outstanding hereunder shall be refunded in cash by Bank. Any
such crediting or refund shall not cure or waive any default by
Borrower hereunder or under the other Loan Documents. Borrower
agrees, however, that in determining whether or not any interest
payable hereunder exceeds the highest rate permitted by law, any
non-principal amount (except payments specifically stated herein
to be "interest"), including, without limitation, late charges,
shall be deemed, to the extent permitted by law, to be an
expense, fee, premium or penalty rather than interest.
(B) In the event that for any reason one or more of the
provisions of this Replacement Revolver Note or their application
to any person or circumstance shall be held to be invalid,
illegal or unenforceable in any respect or to any extent, such
provisions shall, to such extent, be held for naught as though
not herein contained but shall nevertheless remain valid, legal
and enforceable in all such other respects and to such extent as
may be permissible. In addition, any such invalidity, illegality
or unenforceability shall not affect any other provisions of this
Replacement Revolver Note, but this Replacement Revolver Note
shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
15. Notices. All notices, requests, demands or other
communications to or upon the Borrower or the Bank shall be
deemed to have been given or made when hand delivered or
deposited in the mail by certified mail, return receipt
requested, postage prepaid, addressed to the Borrower or the
Bank, as the case may be, at their respective addresses indicated
herein or at such other addresses as the Borrower or the Bank may
hereafter specify in writing to the other, except that any
communication with respect to a change of address shall be deemed
to be given or made when received by the Borrower or the Bank to
whom such communication was sent.
16. Successors and Assigns. This Replacement Revolver Note
is binding upon the
9<PAGE>
<PAGE> 14
Borrower and its successors and assigns except that Borrower
shall not have the right to assign its rights or obligations
hereunder or any interest herein.
17. Amendment. This Replacement Revolver Note may not be
changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change,
modification or discharge is sought.
18. Governing Law. This Replacement Revolver Note has been
executed and delivered in the State of New Jersey and shall be
construed and enforced in accordance with the laws of the State
of New Jersey.
19. Captions. The captions or headings of the sections in this
Replacement Revolver Note are for convenience only and shall not
control or effect the meaning or construction of any term or
provision of this Replacement Revolver Note.
IN WITNESS WHEREOF, the Borrower has executed this
Replacement Revolver Note as of the date and year first above
written.
ATTEST: DATARAM CORPORATION,
a New Jersey corporation
By: ROBERT TARANTINO By: MARK MADDOCKS
________________________ _______________________
Print Name and Title Print Name and Title
Robert Tarantino Mark Maddocks
President & CEO Vice President, Finance
10<PAGE>
<PAGE> 15
SCHEDULE TO REVOLVER NOTE
Unpaid
Principal
Amount of Balance of Name of
Amount of Principal Revolving Person Making
Date Loan Prepaid Credit Note Notation
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
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