<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 10/31/99 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 December 2, 1999, there were 5,281,236 shares outstanding.
This amount does not reflect the pending 3 for 2 stock split announced
November 10, 1999 and distributable on December 15, 1999.
<PAGE 2>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
October 31, 1999 and April 30, 1999
(Unaudited) (Audited)
October 31, 1999 April 30, 1999
Assets
Current Assets:
Cash and cash equivalents $ 8,389,248 $ 8,092,527
Trade receivables, less allowance
for doubtful accounts and sales returns
of $600,000 at October 31, 1999
and $450,000 at April 30, 1999 16,955,823 12,016,106
Inventories 4,449,631 3,290,300
Other current assets 653,210 475,387
__________ __________
Total current assets 30,447,912 23,874,320
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 5,929,089 5,188,696
__________ __________
6,804,089 6,063,696
Less: accumulated depreciation
and amortization 3,172,993 2,572,993
__________ __________
Net property and equipment 3,631,096 3,490,703
Other assets 9,210 8,655
__________ __________
$ 34,088,218 $ 27,373,678
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,062,136 $ 4,344,179
Accrued liabilities 2,054,773 1,840,647
Income taxes payable 230,408 250,408
__________ __________
Total current liabilities 12,347,317 6,435,234
Deferred income taxes 919,000 919,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
7,575,015 at October 31,
1999 and issued and outstanding
5,236,810 at April 30, 1999 7,575,015 5,236,810
Retained earnings 13,246,886 14,782,634
__________ __________
Total stockholders' equity 20,821,901 20,019,444
__________ __________
$ 34,088,218 $ 27,373,678
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE 3>
<TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three and Six Months Ended October 31, 1999 and 1998
(Unaudited)
1999 1998
2nd Quarter Six Months 2nd Quarter Six Months
<C> <C> <C> <C>
Revenues $ 29,385,690 $ 50,550,374 $ 16,261,859 $ 34,012,021
Costs and expenses:
Cost of sales 21,940,071 37,354,818 11,095,422 23,365,271
Engineering and development 343,087 676,062 371,824 703,434
Selling, general and administrative 3,857,280 6,907,116 2,810,081 5,747,042
__________ __________ __________ __________
26,140,438 44,937,996 14,277,327 29,815,747
Earnings from operations 3,245,252 5,612,378 1,984,532 4,196,274
Interest income 117,005 224,687 135,588 252,085
__________ __________ __________ __________
Earnings before income taxes 3,362,257 5,837,065 2,120,120 4,448,359
Income tax provision 1,281,000 2,225,000 830,000 1,741,000
__________ __________ __________ __________
Net earnings $ 2,081,257 $ 3,612,065 $ 1,290,120 $ 2,707,359
========== ========== ========== ==========
Net earnings per share of common stock
Basic $ .27 $ .46 $ .16 $ .33
========== ========== ========== ==========
Diluted $ .22 $ .38 $ .14 $ .29
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Basic 7,790,938 7,809,215 8,314,641 8,329,428
========== ========== ========= =========
Diluted 9,460,072 9,419,416 9,218,127 9,214,509
========== ========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 4>
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended October 31,1999 and 1998
(Unaudited)
1999 1998
Cash flows from operating activities:
Net earnings $ 3,612,065 $ 2,707,359
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 600,000 624,000
Bad debt expense 164,450 113,189
Changes in assets and liabilities:
(Increase) decrease in trade receivables (5,104,167) 1,762,167
Increase in inventories (1,159,331) (824,965)
Increase in other current assets (177,823) (133,928)
Increase in other assets (555) (3,000)
Increase (decrease) in accounts payable 5,717,957 (1,494,995)
Increase in accrued liabilities 214,126 117,165
Decrease in income taxes payable (20,000) (101,423)
__________ __________
Net cash provided by
operating activities 3,846,722 2,765,569
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (740,393) (641,391)
__________ __________
Net cash used in investing activities (740,393) (641,391)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan 573,022 0
Purchase and cancellation of common stock (3,382,630) 0
Purchase of common stock held in treasury 0 (422,741)
__________ __________
Net cash used in financing activities (2,809,608) (422,741)
__________ __________
Net increase in cash
and cash equivalents 296,721 1,701,437
Cash and cash equivalents at
beginning of year 8,092,527 7,529,906
__________ __________
Cash and cash equivalents at
end of period $ 8,389,248 $ 9,231,343
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 40,484 $ 38,751
Income taxes $ 2,065,000 $ 1,855,200
See accompanying notes to consolidated financial statements.
<PAGE 5>
Notes to Consolidated Financial Statements
October 31, 1999 and 1998
(Unaudited)
Basis of Presentation
The information at October 31, 1999 and for the three and six months ended
October 31, 1999 and 1998, is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary to state fairly the financial information set forth
therein in accordance with generally accepted accounting principles. The
interim results are not necessarily indicative of results to be expected for
the full fiscal year. These financial statements should be read in conjuction
with the audited financial statements for the year ended April 30, 1999
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
Stock Splits
On November 10, 1999 the Company's Board of Directors announced a three-for-
two stock split effected in the form of a dividend for shareholders of record
at the close of business on November 24, 1999 and payable December 15, 1999.
The stock split has been charged to additional paid in capital in the amount
of $546,781 and retained earnings in the amount of $1,978,224. On November 11,
1998 the Company's Board of Directors announced a two-for-one stock split
effected in the form of a dividend for shareholders of record at the close of
business on November 23, 1998 and payable December 3, 1998. The stock split
has been charged to additional paid in capital in the amount of $2,125,871 and
retained earnings in the amount of $655,534. Weighted average shares
outstanding and net earnings per share in the accompanying financial
statements have been restated to give retroactive effect to these stock
splits.
Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Dataram International Sales Corporation (a
Domestic International Sales Corporation (DISC)). All significant intercompany
transactions and balances have been eliminated.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash, money market preferred
stock and commercial paper with original maturities of three months or less.
Inventory valuation
Inventories are valued at the lower of cost or market, with costs determined
by the first-in, first-out method. Inventories at October 31, 1999 and April
30, 1999 consist of the following categories:
October 31, 1999 April 30, 1999
________________ ______________
Raw material $ 2,403,000 $ 1,335,000
Work in process 564,000 508,000
Finished goods 1,483,000 1,447,000
________________ ______________
$ 4,450,000 $ 3,290,000
================ ==============
<PAGE 6>
Property and equipment
Property and equipment is recorded at cost. Depreciation is generally computed
on the straight-line basis. Depreciation rates are based on the estimated
useful lives which range from three to five years for machinery and equipment.
When property or equipment is retired or otherwise disposed of, related costs
and accumulated depreciation are removed from the accounts.
Repair and maintenance costs are charged to operations as incurred.
Revenue recognition
Revenue from product sales is recognized when the related goods are shipped to
the customer and all significant obligations of the Company have been
satisfied. Estimated warranty costs are accrued.
Product development and related engineering
The Company expenses product development and related engineering costs as
incurred. Engineering effort is directed to development of new or improved
products as well as ongoing support for existing products.
Long-term debt
During the second quarter of fiscal 2000, the Company amended and restated its
credit facility with its bank. Under the amended agreement, the Company
modified certain financial covenants and increased the revolving credit
facility to $12,000,000 until October 31, 2000, at which point it will
decrease to $6,000,000 until October 31, 2001. The agreement provides for
Eurodollar rate loans, CD rate loans and base rate loans at an interest rate
no higher than the bank's base commercial lending rate less 1/2%. The Company
is required to pay a commitment fee equal to 1/16 of one percent per annum on
the unused commitment. The agreement contains certain restrictive financial
covenants including a minimum current ratio, minimum tangible net worth
requirement, minimum interest coverage ratio, maximum debt to equity ratio and
certain other covenants, as defined by the agreement. There were no borrowings
during fiscal 2000 and 1999. As of October 31, 1999, the amount available for
borrowing under the revolving credit facility was $12,000,000.
Income taxes
The Company follows the asset and liability method of accounting for income
taxes in accordance with the provisions of Statement of Financial Accounting
Standards SFAS No. 109, "Accounting for Income Taxes". Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period that the tax rate
changes.
Common Stock
During the quarter ended October 31, 1999, the Company purchased and retired
210,200 shares of its common stock. For the six month period ended October 31,
1999, 279,900 shares have been purchased and retired. These amounts do not
reflect the pending 3 for 2 stock split announced November 10, 1999 and
distributable on December 15, 1999.
<PAGE 7>
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in financial institutions and
brokerage accounts. To the extent that such deposits exceed the maximum
insurance levels, they are uninsured. The Company performs ongoing evaluations
of its customers' financial condition, as well as general economic conditions
and, generally, requires no collateral from its customers.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE 8>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward looking statements.
Liquidity and Capital Resources
As of October 31, 1999, working capital amounted to $18.1 million
reflecting a current ratio of 2.5 compared to working capital of $17.4 million
and a current ratio of 3.7 as of April 30, 1999.
During the second quarter of fiscal 2000, the Company amended and
restated its $12 million unsecured revolving credit line with its bank to
renew the expiring portion of the facility. Annually, $6 million of the
facility is scheduled to expire. The Company intends to renew any expiring
portion of the facility by the expiration date and maintain a $12 million
total facility. The credit facility was unused during the first six months of
fiscal 2000 and fiscal 1999. As of Octber 31, 1999 there was no amount
outstanding under the line of credit.
On September 10, 1998, the Company announced an open market repurchase program
providing for the repurchase of up to 500,000 shares of its common stock. On
June 15, 1999, the Company announced an additional open market repurchase plan
providing for the repurchase of up to 500,000 shares of the Company's common
stock. During the quarter ended October 31, 1999, the Company purchased
210,200 shares of its common stock at an average price of $13.14 per share. As
of October 31, 1999 there are 382,100 shares remaining available for purchase.
Management believes that its working capital together with internally
generated funds and its bank line of credit are adequate to finance the
Company's operating needs and future capital requirements.
Year 2000
The Company's products are all year 2000 compliant. The Company has
completed its upgrade of its manufacturing, accounting, production and
inventory control systems and software and management believes that these
systems and software are now year 2000 compliant. The Company has numerous
personal computers and peripheral devices used in information technology and
non-information technology applications which have been tested for year 2000
compliance. The Company has upgraded or replaced any non year 2000 compliant
devices and management believes that these devices are all year 2000
compliant. Management estimates that the financial impact of the upgrades has
not had a material effect on the Company's consolidated financial condition,
results of operations and liquidity.
As part of the Company's Year 2000 readiness program, the Company has
identified its key vendors and suppliers and management believes that its key
vendors and suppliers are year 2000 compliant. The Company has a diverse and
ever changing customer base, with no single customer typically accounting for
10% or more of its revenue. The Company has not ascertained the stage of year
2000 readiness of its current customers.
<PAGE 9>
The possible consequences of the Company, its key vendors, certain
customers, governments or government agencies, financial institutions,
utilities, etc. of not being year 2000 compliant by January 1, 2000 include
but are not limited to, among other things, a temporary plant closing, delays
in the delivery of products, delays in collection of receivables, and
inventory and supply obsolescence. Because of the widespread nature of this
problem, no assurances can be made that the Company will not be materially
adversely affected by a temporary inability of the Company to conduct its
business in the ordinary course for a period of time after January 1, 2000.
However, management believes that the actions it has taken should
significantly reduce the adverse effect any such disruptions may have.
Results of Operations
Revenues for the three month period ending October 31, 1999 were
$29,386,000 compared to revenues of $16,262,000 for the comparable prior year
period. Fiscal 2000 six month revenues totaled $50,550,000 versus six month
revenues of $34,012,000 for the prior fiscal year. The increase in revenues
was the result of strong volume growth coupled with more stable average
selling prices. Volume, measured in gigabytes shipped, increased 104% in the
second quarter compared to the prior year comparable period.
Cost of sales for the second quarter and six months of fiscal 1999 were 75%
and 74%, respectively of revenues versus 68% and 69% for the same prior year
periods. The increase in the cost of sales was mainly the result of reduced
sales of certain of the Company's Digital Equipment Corporation (now Compaq)
compatible memory products which command high margins.
Engineering and development costs in fiscal 2000's second quarter and six
months were $343,000 and $676,000, respectively versus $372,000 and $703,000
for the same prior year periods. The Company intends to maintain its
commitment to the timely introduction of new memory products as new
workstations and computers are introduced.
Selling, general and administrative costs in this year's second quarter
and six months decreased to 13% and 14%, respectively of revenues from 17% for
the same prior year periods. Three month total expenditures increased by
$1,047,000 from the comparable prior year period. Six month selling, general
and administrative costs increased by $1,160,000 in fiscal 2000 versus fiscal
1999. The increase in costs is primarily attributable to a continued expansion
of the Company's sales force, as well as an increase in costs associated with
increased revenues and profits.
Other income (expense),net for the second quarter and six months of
fiscal 1999 and fiscal 2000 consists primarily of interest income on short
term investments.
Safe Harbor Statement
The information provided in this interim report may include forward-
looking statements relating to future events, such as the development of new
products, the commencement of production or the future financial performance
of the Company. Actual results may differ from such projections and are
subject to certain risks including, without limitation, risks arising from:
changes in the price of memory chips, changes in the demand for memory systems
for workstations and servers, increased competition in the memory systems
industry, delays in developing and commercializing new products and other
factors described in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
<PAGE 10>
PART II: OTHER INFORMATION
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10 (a). Amendment to revolving line of credit agreement (Attached).
27 (a). Financial Data Schedule
28 (a). Press Release reporting results of Second Quarter, Fiscal Year
2000 (Attached).
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
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: December 10, 1999 By: MARK E. MADDOCKS
_____________________ ___________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
Page 8 of 8
Page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-1-1999
<PERIOD-END> OCT-31-1999
<CASH> 8,389,248
<SECURITIES> 0
<RECEIVABLES> 17,555,823
<ALLOWANCES> 600,000
<INVENTORY> 4,449631
<CURRENT-ASSETS> 30,447,912
<PP&E> 6,804,089
<DEPRECIATION> 3,172,993
<TOTAL-ASSETS> 34,088,218
<CURRENT-LIABILITIES> 12,347,317
<BONDS> 0
0
0
<COMMON> 7,575,015
<OTHER-SE> 13,246,886
<TOTAL-LIABILITY-AND-EQUITY> 34,088,218
<SALES> 50,550,374
<TOTAL-REVENUES> 50,550,374
<CGS> 37,354,818
<TOTAL-COSTS> 37,354,818
<OTHER-EXPENSES> 676,062
<LOSS-PROVISION> 164,450
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,837,065
<INCOME-TAX> 2,225,000
<INCOME-CONTINUING> 3,612,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,612,065
<EPS-BASIC> .46
<EPS-DILUTED> .38
</TABLE>
<PAGE >
FOR: Dataram Corporation
APPROVED BY: Mark E. Maddocks
Chief Financial Officer
Dataram Corporation
(609) 799-0071
FOR IMMEDIATE RELEASE
CONTACT: Investor Relations:
Cheryl Schneider/John Blackwell
Press: Michael McMullan, David Nugent
Morgen-Walke Associates, Inc.
(212) 850-5600
DATARAM REPORTS 61% EARNINGS INCREASE
DECLARES THREE FOR TWO STOCK SPLIT
PRINCETON, NJ, November 10, 1999 - Dataram Corporation (AMEX:
DTM) today reported record earnings for its second quarter ended
October 31, 1999.
For the fiscal 2000 second quarter, net earnings were $2,081,000,
up 61% compared with the second quarter of fiscal 1999. On a diluted
basis, earnings per share increased 57% to a record $0.33 in the
quarter, compared with $0.21 in the second quarter of fiscal 1999.
Revenues of $29.4 million were up 81% versus $16.3 million in the
prior year's second quarter. Volume, measured in gigabytes shipped,
increased 104% in the second quarter compared to the prior year
period. On a sequential basis, quarterly revenues increased 39% to
$29.4 million from $21.2 million and net earnings rose 36% to
$2,081,000 from $1,531,000.
For the fiscal 2000 six-month period, net earnings rose 33% to
$3,612,000, or $0.58 per diluted share, versus $2,707,000, or $0.44
per diluted share. Revenues of $50.6 million were up 49% compared to
$34.0 million in the comparable period of fiscal 1999.
Robert V. Tarantino, Dataram's president and chief executive
officer, commented, "It is a pleasure to report yet another quarter of
record earnings. This is our eighth consecutive quarter of delivering
increased year-over-year bottom line results. These results reflect
continued strong growth in volume and more stable average selling
prices. The market for our high capacity memory products is
benefiting not only from the growing need for more powerful memory
products to manage the expanding Internet infrastructures, but by our
growing presence in the OEM and channel assembly businesses."
-more-
<PAGE >
DATARAM REPORTS 61% EARNINGS INCREASE Page 2
DECLARES THREE FOR TWO STOCK SPLIT
Mr. Tarantino continued, "In an important development this
quarter, we entered into an agreement with Compaq Computer Corporation
whereby AlphaServer network and workstation users can add Dataram
memory to their Compaq service agreements. This action improves our
competitiveness by increasing the value of Dataram memory to our
existing and potential customers."
Mr. Tarantino added, "In addition to actively expanding our core
business, we continued to foster new relationships with channel
assemblers and original equipment manufacturers (OEMs). Our OEM
business, which we entered in the fourth quarter of our 1999 fiscal
year, contributed revenue of over $3 million in the second quarter, an
improvement of nearly 150% from the first quarter. We are confident
that this segment will provide us with numerous growth opportunities
and will improve the efficiency of our manufacturing assets as we
build volume."
The Company continued its previously announced 1,000,000 share
repurchase program. During the second quarter the Company bought back
210,200 shares at an average price of $13.14, bringing the total
number of shares purchased year-to-date to 279,900 shares. As of
November 9, 1999, the Company has purchased 617,900 shares under the
current authorization.
Additionally, the Company announced that its Board of Directors
has approved a three-for-two split of its common stock for
shareholders of record at the close of business on November 24, 1999.
The stock split will be in the form of a one share dividend for each
two shares owned. The distribution of the additional shares will occur
on December 15, 1999. The Company's share repurchase program will
remain in place. "The Company's strong financial performance makes
today's actions possible," Mr. Tarantino said. "The stock split will
provide additional liquidity for our shares and, coupled with the
repurchase program, return value to our shareholders."
Mr. Tarantino concluded, "A more stable price environment coupled
with increasing demand for high capacity memory products and expanding
OEM relationships point to a promising future and solid results in the
upcoming quarters. We anticipate these conditions persisting in the
coming months and into next year. As such, we are confident that we
will be able to maintain our momentum and continue to grow through the
remainder of the year and into the new millenium."
Dataram Corporation is a leading provider of gigabyte memory
upgrades for workstations and network servers. The Company
specializes in the manufacture of large-capacity memory boards for
Compaq/Digital, Dell, Hewlett-Packard, IBM, Intel, Silicon Graphics
and Sun Microsystems computers.
-more-
<PAGE >
DATARAM REPORTS 61% EARNINGS INCREASE Page 3
DECLARES THREE FOR TWO STOCK SPLIT
The information provided in this press release may include forward-
looking statements relating to future events, such as the development of new
products, the commencement of production, or the future financial performance
of the Company. Actual results may differ from such projections and are
subject to certain risks including, without limitation, risks arising from:
changes in the price of memory chips, changes in the demand for memory systems
for workstations and servers, increased competition in the memory systems
industry, delays in developing and commercializing new products and other
factors described in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
(Financial Tables To Follow)
<PAGE >
DATARAM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
10/31/99 10/31/98 10/31/99 10/31/98
________ ________ ________ ________
(Unaudited) (Unaudited)
Revenues $ 29,385 $ 16,262 $ 50,550 $ 34,012
Costs and expenses:
Cost of sales 21,940 11,095 37,355 23,365
Engineering and
development 343 372 676 704
Selling, general and
administrative 3,857 2,810 6,907 5,747
_______ _______ _______ _______
26,140 14,277 44,938 29,816
Earnings from operations 3,245 1,985 5,612 4,196
Interest income, net 117 135 225 252
_______ _______ _______ _______
Earnings before income taxes 3,362 2,120 5,837 4,448
Income taxes 1,281 830 2,225 1,741
_______ _______ _______ _______
Net earnings $ 2,081 $ 1,290 $ 3,612 $ 2,707
======= ======= ======= =======
Net earnings per share:
Basic $ 0.40 $ 0.23 $ 0.69 $ 0.49
======= ======= ======= =======
Diluted $ 0.33 $ 0.21 $ 0.58 $ 0.44
======= ======= ======= =======
Average number of shares outstanding:
Basic 5,194 5,543 5,206 5,553
======= ======= ======= =======
Diluted 6,307 6,145 6,280 6,143
======= ======= ======= =======
-more-
<PAGE >
DATARAM CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
October 31, 1999 April 30, 1999
________________ ______________
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,389 $ 8,093
Trade receivables, net 16,956 12,016
Inventories 4,450 3,290
Other current assets 653 475
________________ ______________
Total current assets 30,448 23,874
Property and equipment, net 3,631 3,491
Other assets 9 9
________________ ______________
$ 34,088 $ 27,374
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,062 $ 4,344
Accrued liabilities 2,285 2,092
________________ ______________
Total current liabilities 12,347 6,436
Deferred income taxes 919 919
Stockholders' equity 20,822 20,019
________________ ______________
$ 34,088 $ 27,374
# # #
<PAGE >
AMENDMENT NUMBER THREE TO LOAN AGREEMENT
This Amendment Number Three to Loan Agreement (the
"Amendment") is made as of the 29th day of October, 1999, 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 FIRST UNION NATIONAL BANK, successor
by merger to CoreStates Bank, N.A., successor by merger to New
Jersey National Bank, having an address at 370 Scotch Road, West
Trenton, New Jersey 08628 (the "Bank").
BACKGROUND
WHEREAS, the Borrower and the Bank entered into a certain
Loan Agreement dated October 27, 1994 (the "Loan Agreement"), as
amended by Amendment Number One to Loan Agreement dated November
1, 1996, by the Letter Agreement dated October 22, 1997, and by
Amendment Number Two to Loan Agreement dated October 26, 1998
(the Loan Agreement, as amended through the date hereof is
referred to herein as the "Agreement");
WHEREAS, the Borrower and the Bank have agreed to further
amend the Agreement to maintain the amount of the Revolver Credit
Advance Limit at $12,000,000 until October 31, 2000, then
decrease the amount of the Revolver Credit Advance Limit to
$6,000,000 from November 1, 2000, extend the Revolving Credit
Maturity Date to October 31, 2001, and amend and modify 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, 2001. To that end, the definition of Revolving
Credit Maturity Date contained in Section 1.02 of the Agreement
is hereby amended to read in its entirety as follows:
"Revolving Credit Maturity Date" means October 31, 2001.
2. The amount of the Revolver Credit Advance Limit is
maintained at $12,000,000 from November 1, 1999 until October 31,
2000, then decreased to $6,000,000 on November 1, 2000 until the
Revolver Credit Maturity Date. To that end, the definition of
Revolving Credit Advance Limit contained in Section 1.02 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, 2000 and
the sum of Six Million Dollars ($6,000,000) from November 1,
2000 until the Revolving Credit Maturity Date.
3. Section 6.26 of the Agreement is hereby amended to read in
its entirety as follows:
6.26. Tangible Net Worth. The Borrower shall maintain at
all times Tangible Net Worth of not less than $16,000,000.
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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 "Third Replacement Revolver
Note") to evidence the indebtedness of the Borrower for the
Revolving Credit Advances by the Bank. The Third Replacement
Revolver Note shall replace and supercede the Revolver Note of
the Borrower to the Bank dated October 27, 1994, the Replacement
Revolver Note of the Borrower to the Bank dated November 1, 1996
and the Second Replacement Revolver Note of the Borrower to the
Bank dated October 26, 1996 [which should have been dated 1998]
(collectively, the "Original Notes"), but shall not extinguish
the Borrower's unconditional obligation to repay the indebtedness
evidenced by the Original Notes. All references in the Agreement
to the Revolver Note shall henceforth be deemed to refer to the
Third Replacement Revolver Note.
5. The effectiveness of this Amendment is conditioned upon
the Bank's receipt of the following documents:
(A) This Amendment Number Three to Loan Agreement;
(B) Third Replacement Revolver Note; and
(C) Certified Resolutions of the Board of Directors of
the Borrowers authorizing the execution of this
Amendment.
6. Representations and Warranties. In order to induce the
Bank to enter into this Amendment, the Borrower makes the
following representations and warranties to the Bank, which shall
survive the execution and delivery hereof:
(1) It is a corporation duly incorporated and validly
existing and in good standing under the laws of the jurisdiction
of its incorporation and has the corporate power to execute,
deliver and perform its obligations under the Agreement as
amended by this Amendment;
(2) The execution and delivery of this Amendment has
been authorized by all necessary corporate action on its part,
this Amendment has been duly executed and delivered by it; and
this Amendment and the Agreement, as amended hereby, constitutes
the legal, valid and binding obligations of it enforceable
against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, moratorium laws from time to time
in effect and general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(3) Neither the execution and delivery of this
Amendment, nor the consummation by the Borrower of the
transactions herein contemplated, nor compliance with the terms,
conditions and provisions hereof will conflict with or result in
a breach of any of the terms, conditions or provisions of (i) its
Articles or Certificate of Incorporation or By-Laws; (ii) any
other agreement or instrument to which it is now a party or by
which it or its property is, or may be, bound, or constitute a
default thereunder, or result thereunder in the creation or
imposition of any security interest, mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of its properties
or assets; or (iii) any judgment or order, writ, injunction or
decree of any court to which it is subject;
(4) No action of, or filing with, any governmental or
public body or authority is required to authorize, or is
otherwise required in connection with the execution, delivery and
performance of this Amendment;
(5) No Event of Default has occurred and is continuing
under the Agreement, and no event has occurred which, with
notice, lapse of time or both, would constitute such an Event of
Default; and
(6) The representations and warranties set forth in the
Agreement and the other Loan Documents are true and correct as of
the date hereof in all material respects (as updated to reflect
Borrower's most recent financial statements).
7. Full Force and Effect. The parties hereto acknowledge and
agree that this Amendment is incorporated into and made a part of
the Agreement and the other 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
in the Amendment is or may be deemed expressly inconsistent with
any term or provision in the Agreement and the other Loan
Documents, the terms and provisions hereof shall control. This
Amendment is limited as written and shall not be deemed (i) to be
an amendment of or a consent under or waiver of any other term or
condition of the Agreement or (ii) to prejudice any right or
rights which the Bank now has or may have in the future under or
in connection with the Agreement or the other Loan Documents.
8. Security Interests. It is agreed and confirmed that after
giving effect to this Amendment, the security interests granted
by the Borrower pursuant to the Security Agreement and the other
Loan Documents secure, inter alia, the payment of the obligations
arising under the Agreement, as amended by this Amendment.
9. Indemnity. Borrower agrees to indemnify Bank from and
against any and all claims, losses and liabilities growing out
of or resulting from this Amendment.
10. Year 2000 Compatibility. Borrower shall take all action
necessary to assure that Borrower's computer based systems are
able to operate and effectively process date including dates on
and after January 1, 2000. At the request of Bank, Borrower
shall provide Bank assurance acceptable to Bank of Borrower's
Year 2000 Compatibility.
11. Miscellaneous.
(1) 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.
(2) 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.
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(3) 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.
(4) Third Parties. No rights are intended to be created
hereunder for the benefit of any third party, creditor or
incidental beneficiary.
(5) Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed shall be
deemed to be an original, and all which when taken together shall
constitute one and the same agreement.
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:_________________________ By:______________________________
_________________________ ______________________________
Print Name and Title Print Name and Title
FIRST UNION NATIONAL BANK
By:______________________________
______________________________
Print Name and Title
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EXHIBIT A-1
THIRD
REPLACEMENT
REVOLVER NOTE
$12,000,000.00 West Windsor, New Jersey
October 29, 1999
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
the order of FIRST UNION NATIONAL BANK, successor by merger to
CoreStates Bank, N.A., successor by merger to New Jersey National
Bank, a national banking association, having its principal office
at 370 Scotch Road, West Trenton, New Jersey 08628 ("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
($12,000,000.00), or the aggregate unpaid principal amount of all
Revolving Credit Advances (as defined in the Loan Agreement,
hereinafter referred to) made to the Borrower by the Bank (the
"Loan") pursuant to the Loan Agreement, together with interest
thereon at the rate or rates and in the installments and at the
times hereinafter provided.
1. Definitions. Whenever used in this Third Replacement
Revolver Note, the following words and phrases shall have the
respective meanings ascribed to them below.
(1) "Adjusted LIBOR Rate" - means the LIBOR Rate plus the
Applicable Margin.
(2) "Adjusted Prime Rate" - means the Prime Rate minus the
Applicable Margin.
(3) "Applicable Margin" - means, for Prime Rate Tranches
0.75% per annum and for LIBOR Tranches 1.00% per annum.
(4) "Bank" - as defined in the introductory paragraph
hereof.
(5) "Borrower" - as defined in the introductory paragraph
hereof.
(6) "Business Day" - means any day other than a Saturday,
Sunday, or other day on which commercial banks in New Jersey are
authorized or required to close under the laws of the State of
New Jersey.
(7) "Contract Right" - as defined in Section 7 hereof.
(8) "Default" - means and refers to any event, act or
occurrence, which with the passing of time or the giving of
notice or both, would constitute and Event of Default as defined
in the Loan Agreement.
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(9) "Default Rate" - means and refers to any event, act or
occurrence, which with the passing of time or the giving of
notice or both, would constitute an Event of Default as defined
in the Loan Agreement.
(10) "Dollars" and "$" - mean lawful money of the United
States of America.
(11) "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.
(12) "Event of Default" - shall mean and Event of Default
as defined in the Loan Agreement.
(13) "Indemnified Loss or Expense" - as defined in Section
4 hereof.
(14) "Interest Period" - means any period during which the
Interest Rate is the Adjusted Prime Rate, or any Adjusted LIBOR
Rate, or the Default Rate, as appropriate.
(15) "Interest Rate" - means the Adjusted LIBOR Rate and
the Adjusted Prime Rate, or the Default Rate, as appropriate.
(16) "LIBOR Interest Period" - for a LIBOR Tranche means,
initially, the period of time, beginning on an Effective Date and
ending one, two or three months thereafter, as 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 LIBOR
Rate and thereafter, each period commencing on the last day of
the immediately preceding LIBOR Interest Period and ending one,
two or three months thereafter, as selected by Borrower-by
telephone or in writing (and if by telephone, confirmed by
Borrower the same day by facsimile), but in no event after the
Revolving Credit Maturity Date; subject, however, to the
following provisions: (i) if any LIBOR Interest Period would
otherwise end on a day which is not a Business Day, that LIBOR
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
LIBOR Interest Period into another calendar month, in which event
such LIBOR Interest Period shall end on the immediately preceding
Business Day; and (ii) any LIBOR Interest Period that begins on
the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month
at the end of such LIBOR Interest Period) shall end on the last
Business Day of a calendar month.
(17) "LIBOR Rate" - means, for each LIBOR Tranche, with
respect to each day during each LIBOR Interest Period, the rate
(rounded to the next higher 1/100 of 1%) for U.S. dollar deposits
for the relevant LIBOR Interest Period, as reported on Telerate
page 3750 as of 11:00 a.m., London time, on the second London
Business Day before the relevant LIBOR Interest Period begins (or
if not so reported, then as determined by the Bank from another
recognized source or interbank quotation), adjusted for reserves
by dividing that rate by 1.00 minus the LIBOR Reserve.
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(18) "LIBOR Reserve" means the maximum percentage reserve
requirement (rounded to the next higher 1/100 of 1% and expressed
as a decimal) in effect for any day during the LIBOR Interest
Period under the Federal Reserve Board's Regulation D for
Eurocurrency liabilities as defined therein. Notwithstanding the
foregoing, if the Borrower has hedged the interest expense
incidental to any Loan accruing interest based upon the LIBOR
Rate by entering into an interest rate swap transaction pursuant
to a swap agreement, LIBOR Rate shall be rounded five decimal
places in accordance with the 1991 ISDA Definitions published by
the International Swaps and Derivatives Association, Inc.
(19) "LIBOR Tranche" - means each portion of the Loan to
which an Adjusted LIBOR Rate applies.
(20) "Loan" - as defined in the introductory paragraph
hereof.
(21) "Loan Agreement" - means the Loan Agreement dated
October 27, 1994, as amended by Amendment Number One to Loan
Agreement dated November 1, 1996, by the Letter Agreement dated
October 22, 1997, by Amendment Number Two to Loan Agreement dated
October 26, 1998, and as may be further amended, supplemented,
modified or extended from time to time.
(22) "Loan Documents" - means this Third Replacement
Revolver Note in the Principal amount of up to Twelve Million
Dollars ($12,000,000.00), the Loan Agreement and any and all
other documents executed by Borrower in connection with the Loan.
(23) "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.
(24) "Material Adverse Effect" - has the meaning given such
term in the Loan Agreement.
(25) "Maturity Date" - as defined in Section 3 hereof.
(26) "Operating Account" - has the meaning given to such
term in Section 3 hereof.
(27) "Person" - has the meaning given such term in the Loan
Agreement.
(28) "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.
(29) "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
be facsimile) during which the Interest Rate for such
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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 calender month, in which event such Prime Rate
Interest Period shall end on the immediately preceding day.
(30) "Prime Rate Tranche" - means each proportion of the
Loan to which the Adjusted Prime Rate applies.
(31) "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
(1) The principal sum outstanding from 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.
(2) 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 LIBOR
Rate, subject to Bank's ability to secure such funds for such
periods.
(3) Borrower may exercise the option to have portions of
the Loan from time to time bear interest at the Adjusted LIBOR
Rate by giving bank written notice (which shall be irrevocable),
by 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.
(4) The interest due on the Loan shall be payable as
provided in Section 3 below.
3. Interest and Principal Payments; Maturity Date.
(1) 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.
(2) 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 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 (2) London
Business Bays 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.
(3) LIBOR Tranches. Borrower shall pay interest in
arrears on the unpaid principal amount of each LIBOR Tranche at
the Adjusted LIBOR 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
LIBOR Rate.
(4) 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, 2001 (the "Maturity
Date").
(5) 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 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: (i) to the payment of fees and other costs
and expenses then due and owing from Borrower, (ii) to the
payment of accrued and unpaid interest then due, (iii) to the
payment of any outstanding principal hereunder.
(6) 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 calender year or part thereof.
4. Prepayments.
(1) Borrower may repay 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).
(2) Borrower may, at any time, prepay the principal
balance of a LIBOR Rate Tranche in whole or in part; provided,
however, that Borrower shall indemnify Bank against Bank's loss
or expense in employing deposits as a consequence of any
prepayment of any LIBOR Rate Tranche on a date other than the
last day of the LIBOR Interest Period ("Indemnified Loss or
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Expense"). The amount of such Indemnified Loss or Expense shall
be determined by Bank based upon the assumption that Bank funded
100% of such LIBOR Rate Tranche in the London interbank market.
Any prepayment shall include accrued and unpaid interest to the
date of prepayment on the principal amount prepaid and all other
sums due and payable hereunder. Nothing herein shall be deemed
to alter or affect any obligations that Borrower may have to Bank
under any interest rate swap agreements. Borrower agrees to pay
the Indemnified Loss or Expense 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 Third 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 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 Third Replacement Revolver Note.
6. Event of Default. An Event of Default shall mean and 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
and thereafter shall be payable at a rate of three (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 Third Replacement
Revolver Note has been accelerated, until this Third Replacement
Revolver Note is paid in full, including the period following
entry of any judgment on or relating to this Third 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 Third 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 primary
operating accounts with the Bank.
10. Waivers by Borrower, Cumulative Remedies.
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(1) Borrower hereby waives presentment for payment,
demand, notice of non-payment, notice of protest and protest of
this Third 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 Third Replacement Revolver
Note, and agrees that additional obligors may become parties
hereto without notice to the Borrower without affecting the
Borrower's liability hereunder.
(2) 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 Third
Replacement Revolver Note. Borrower hereby waives its right to
trial by jury in connection with a portion of this Third
Replacement Note, the Loan Agreement or any other Loan Document
and any legal proceeding arising hereunder or thereunder.
(3) No failure or delay on the part of the Bank in
exercising any right, power or privilege under this Third
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 Third Replacement Revolver Note,
the Loan Agreement or any Loan 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 of
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 requirements 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 Third 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 Third Replacement Revolver Note, in
respect to 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
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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.
(1) 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 LIBOR 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 LIBOR 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 LIBOR Rate.
(2) 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 of adjustment of which determines the LIBOR Rate for such
Interest Period and requires Bank to cease so maintaining funds
actually so 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 LIBOR Rate. In addition,
within five (5) 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
(1) 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,
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<PAGE >
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 or indemnity rather than interest.
(2) In the event that for any reason one or more of the
provisions of this Third 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 Third Replacement Revolver Note, but
this Third 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 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 Third Replacement Revolver
Note is binding upon the 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 Third Replacement Revolver Note may not be
charged 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 Third 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 Stat
of New Jersey.
19. Captions. The captions or headings of the sections in this
Third Replacement Revolver Note are for convenience only and
shall not control or effect the meaning or construction of any
term or provision of this Third Replacement Revolver Note.
20. Replacement Note. This Third Replacement Revolver Note is a
modification and replacement of a certain Revolver Note of the
Borrower to the Bank dated October 27, 1994, the Replacement
Revolver Note of the Borrower to the Bank dated November 1, 1996
and the Second Replacement Revolver Note of the Borrower to the
Bank dated October 26, 1996 [which should have been dated 1998]
(collectively, the "Original Notes"). The indebtedness that is
evidenced by this Third Replacement Revolver Note represents in
part the same indebtedness as that evidenced by the Original
Notes, and this Third Replacement Revolver Note shall not in any
way whatsoever constitute a cancellation or novation with respect
to the indebtedness evidenced by the Original Notes.
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<PAGE >
IN WITNESS WHEREOF, the Borrower has executed this Third
Replacement Revolver Note as of the date and year first above
written.
ATTEST: DATARAM CORPORATION,
a New Jersey corporation
By:___________________________ By:___________________________
___________________________ ___________________________
Print Name and Title Print Name and Title
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<PAGE >
SCHEDULE TO THIRD REPLACEMENT 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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