QAD INC
EXHIBIT 10.4
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<TYPE>EX-10.4
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<DESCRIPTION>EXHIBIT 10.4
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<P ALIGN="RIGHT"><FONT SIZE=2><B>Exhibit 10.4  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[FOOTHILL
CAPITAL LETTERHEAD]<BR>
<BR>
July&nbsp;31, 2002 </FONT></P>


<P><FONT SIZE=2>QAD&nbsp;Inc.<BR>
6450 Via Real<BR>
Carpinteria, California 93102<BR>
Attn: Christopher L. Greco, Treasury Manager </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>Re:</FONT></DT><DD><FONT SIZE=2><I>Amendment to Loan and Security Agreement</I></FONT></DD></DL>
</UL>

<P><FONT SIZE=2>Dear
Mr.&nbsp;Greco: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to that certain Loan and Security Agreement, dated as of September&nbsp;8, 2000, by and between Foothill Capital Corporation ("Lender") and QAD&nbsp;Inc.
("Borrower"), as amended (as so amended, the "Loan Agreement"). Capitalized terms, which are used herein but not defined herein, shall have the meanings ascribed to them in the Loan Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower
has requested Lender's consent for Borrower to incur certain obligations in connection with the development of certain real property, to sell other real property, and to
re-set the covenants set forth in the following sections of the Loan Agreement: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2><I>Section&nbsp;7.20(a)(i)</I></FONT><FONT SIZE=2>&nbsp;(Minimum EBITDA);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2><I>Section&nbsp;7.20(a)(ii)</I></FONT><FONT SIZE=2>&nbsp;(Tangible Net Worth); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2><I>Section&nbsp;7.20(b)(i)</I></FONT><FONT SIZE=2>&nbsp;(Capital Expenditures). </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
their respective signatures below, Lender and Borrower hereby agree to the following: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Effective
as of Borrower's compliance with the Conditions (as defined below), the Loan Agreement shall be amended as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;The
following terms are added to </FONT><FONT SIZE=2><I>Section&nbsp;1.1 </I></FONT><FONT SIZE=2>of the Loan Agreement: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>"</FONT><FONT
SIZE=2><I>California Development Plan</I></FONT><FONT SIZE=2>" means Borrower's plan for development of the Ortega Hill Property. </FONT></P>

<P><FONT SIZE=2>"</FONT><FONT
SIZE=2><I>Ortega Hill Property</I></FONT><FONT SIZE=2>" means Borrower's Real Property commonly known as 2111 Ortega Hill Road, Summerland, California 93067." </FONT></P>

<P><FONT SIZE=2>"Mark
Hill Property" means Borrower's Real Property commonly known as 6390 Via Real Carpinteria, CA 93013. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;The
term "Permitted Dispositions" in </FONT><FONT SIZE=2><I>Section&nbsp;1.1</I></FONT><FONT SIZE=2> of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>"</FONT><FONT
SIZE=2><I>Permitted Dispositions</I></FONT><FONT SIZE=2>" means (a)&nbsp;sales or other dispositions by Borrower of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of Borrower's business, (b)&nbsp;sales by Borrower of Inventory to buyers in the ordinary course of business, (c)&nbsp;the use or transfer of money or Cash Equivalents by Borrower
in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents, (d)&nbsp;the licensing by Borrower, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of Borrower's business, (e)&nbsp;sale of the Real Property Collateral so long as there has not occurred any Event of Default
which is continuing, and (f)&nbsp;the transfer to Caltrans of approximately one-quarter acre of the Ortega Hill Property, for use as a bike trail, as described in the California
Development Plan." </FONT></P>

</UL>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Section&nbsp;7.20(a)(i)</I></FONT><FONT SIZE=2>&nbsp;of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2><B>Minimum EBITDA</B></FONT><FONT SIZE=2>. EBITDA, measured on a fiscal quarter-end basis, of not less than the required amount set forth in the following table for
the applicable period set forth opposite thereto:   </FONT></P>
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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
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<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1><B>Applicable Amount<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Applicable Period</B></FONT><HR NOSHADE></TH>
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<TD WIDTH="48%"><FONT SIZE=2>$3,600,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>For the 12 month period ending July 31, 2002</FONT></TD>
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$1,900,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
For the 12 month period ending October 31, 2002</FONT></TD>
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<TD WIDTH="48%"><FONT SIZE=2><BR>
($2,300,000)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
For the 12 month period ending January 31, 2003"</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Section&nbsp;7.20(a)(ii)</I></FONT><FONT SIZE=2>&nbsp;of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>"</FONT><FONT
SIZE=2><B>Tangible Net Worth.</B></FONT><FONT SIZE=2> Tangible Net Worth of at least the required amount set forth in the following table as of the applicable date set forth opposite
thereto: </FONT></P>
</UL>
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<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1><B>Applicable Amount<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Applicable Date</B></FONT><HR NOSHADE></TH>
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<TD WIDTH="48%"><FONT SIZE=2>$6,032,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>July 31, 2002</FONT></TD>
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$2,687,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
October 31, 2002</FONT></TD>
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<TD WIDTH="48%"><FONT SIZE=2><BR>
$3,683,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
January 31, 2003"</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Section&nbsp;7.20(b)(i)</I></FONT><FONT SIZE=2>&nbsp;of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>"(b)
Make: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Capital Expenditures. </I></FONT><FONT SIZE=2>Capital expenditures in any fiscal year in excess of the amount set forth in the following table
for the applicable period: </FONT></P>
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<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1><B>Applicable Amount<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Applicable Period</B></FONT><HR NOSHADE></TH>
</TR>
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<TD WIDTH="48%"><FONT SIZE=2>$14,000,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Fiscal Year 2003</FONT></TD>
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$21,000,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
Fiscal Year 2004</FONT></TD>
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$7,000,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
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Fiscal Year 2005"</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Borrower
wishes to develop the Ortega Hill Property. In connection with the development of the Ortega Hill Property, Borrower plans to do all of the following, all in
accordance with the California Development Plan, a copy of which has been delivered to Lender: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;construction
of two new buildings on the Ortega Hill Property; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;demolition
of the west wing (approximately 8,000 square feet) of the existing building on the Ortega Hill Property, in order to clear the site for the two buildings
described in clause&nbsp;(i) (the "Demolition"); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;incur
additional Indebtedness of no more than $20,000,000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;guarantee
Indebtedness of no more than $20,000,000. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;Lender
consents to the Demolition; and </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Schedule&nbsp;5.20 is amended to add the debt described in clause&nbsp;(iii) above; and</I></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Schedule&nbsp;7.6 </I></FONT><FONT SIZE=2>is amended to add the guarantee described in clause&nbsp;(iv) above. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;Lender
hereby consents to the sale of the Mark Hill Property Collateral, so long as: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Prior
to and after giving effect to such sale, no Event of Default has occurred which is continuing; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;Borrower
causes 25% of the sales proceeds or $500,000, whichever is less, from the sale of the Mark Hill Property to be delivered to Lender within two business days
from the close of escrow. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>Upon
the delivery to Lender of the sums described in clause&nbsp;(ii), Lender shall deliver the original unrecorded Mortgage to Borrower. The sums described in clause&nbsp;(ii) shall be applied
first to interest due on the Term Loan, with the remainder to the outstanding principal balance of the Term Loan (in the inverse order of the maturity of the installments due thereunder). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Lender
is willing to enter into this letter amendment, provided that Borrower complies with the following conditions precedent (collectively, the "Conditions") no later
than July&nbsp;31, 2002, time being of the essence: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;Borrower
executes and delivers a copy of this letter agreement to Lender; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;Borrower
pays Lender a non-refundable fee of $35,000. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the satisfaction of the Conditions Lender hereby agrees to the amendments to the Loan Agreement provided herein; provided, however, that this letter agreement
is not a waiver of the same provisions of the Loan Agreement in any other instance or of any Default of Event of Default. Lender is not obligated to provide this or any other consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;This
letter agreement constitutes an amendment to the Loan Agreement. Except as expressly set forth herein, the Loan Documents shall remain in full force and effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;This
letter may be executed in any number of counterparts which, when taken together, shall constitute but one agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please
indicate your agreement to the foregoing by executing a copy of this letter in the space below. </FONT></P>

<P><FONT SIZE=2>Sincerely,
</FONT></P>

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<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>FOOTHILL CAPITAL CORPORATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="4%"><FONT SIZE=2><BR>
By</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN NOCITA</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> John Nocita</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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<TD WIDTH="4%"><FONT SIZE=2><BR>
Its</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
Vice President</FONT><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
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CONSENTED AND AGREED TO:</FONT></TD>
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&nbsp;</FONT></TD>
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<TD COLSPAN=2><FONT SIZE=2><BR>
QAD&nbsp;INC.</FONT></TD>
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&nbsp;</FONT></TD>
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By</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>KATHLEEN M. FISHER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Kathleen M. Fisher</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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Its:</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
Executive Vice President</FONT><HR NOSHADE><FONT SIZE=2>Chief Financial Officer</FONT><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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