QAD INC
EXHIBIT 10.1
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<TYPE>EX-10.1
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<DESCRIPTION>EXHIBIT 10.1
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<P ALIGN="RIGHT"><FONT SIZE=2><B>EXHIBIT 10.1  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kl2003_first_amendment_to_loan_and_security_agreement"> </A>
<A NAME="toc_kl2003_1"> </A></FONT> <FONT SIZE=2><B>FIRST AMENDMENT<BR>  TO LOAN AND SECURITY AGREEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "First Amendment") is made as of December&nbsp;13, 2001, by and between </FONT> <FONT SIZE=2><B>FOOTHILL CAPITAL CORPORATION</B></FONT><FONT SIZE=2>, a
California corporation ("Lender"), and </FONT><FONT SIZE=2><B>QAD&nbsp;INC.</B></FONT><FONT SIZE=2>, a Delaware
corporation ("Borrower"), with reference to the following facts: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;The
parties hereto have entered into that certain Loan and Security Agreement, dated as of September&nbsp;8, 2000, as amended by letter agreements dated
January&nbsp;23, 2001, and November&nbsp;21, 2001 (as amended, the "Loan Agreement"), and other Loan Documents. (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;B.&nbsp;&nbsp;The
parties wish to make certain modifications to the Loan Documents, all on the terms and conditions set forth herein. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, the parties hereto agree as follows: </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Amendments to Loan Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Effective as of the Effective Date, the Loan Agreement shall be
amended as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.1&nbsp;The
following definition is added to Section&nbsp;1.1 of the Loan Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Tangible Net Worth</I></FONT><FONT SIZE=2>" means, as of the date of calculation: (a)&nbsp;Net Worth, </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2>
(b)&nbsp;the then outstanding principal balance of Indebtedness subordinated to the Obligations pursuant to a subordination agreement acceptable to Lender in its sole and absolute discretion, </FONT> <FONT SIZE=2><I>less</I></FONT><FONT SIZE=2>
(c)&nbsp;such of Borrower's assets as
are treated as intangible pursuant to GAAP, including: (i)&nbsp;obligations in excess of $500,000 in the aggregate owing by officers, directors, shareholders, employees, Subsidiaries, Affiliates or
any other Person in which any such officer, director, shareholder, employee, Subsidiary or Affiliate owns any interest and (ii)&nbsp;any asset which is intangible or lacks intrinsic or marketable
value or collectibility, including deferred maintenance; prepaid expenses; deferred income taxes; capitalized research and development costs; goodwill; noncompetition agreements; the Intellectual
Property; any other patents, trademarks, trade names, copyrights, patents, patent rights or licenses; and franchises." </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.2&nbsp;The
definition of Amortization Reserve in </FONT><FONT SIZE=2><I>Section&nbsp;1.1</I></FONT><FONT SIZE=2> of the Loan Agreement is deleted. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.3&nbsp;Section&nbsp;2.2(b)
of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"The
Term Loan shall be repaid in equal quarterly principal installments of $750,000, commencing January&nbsp;31, 2002; </FONT><FONT SIZE=2><I>provided,
however</I></FONT><FONT SIZE=2>, that if on the applicable quarterly payment date, Borrower's aggregate unrestricted cash and Cash Equivalents is: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"(i)
Greater than $40,000,000, then the applicable quarterly principal payment shall be $375,000; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"(ii)
Less than $40,000,000 but greater than $30,000,000, then the applicable quarterly principal payment shall be $500,000." </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.4&nbsp;Sections
2.2(c) and 2.2(d) of the Loan Agreement are deleted. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;1.5&nbsp;Section&nbsp;7.20(a)(i)&nbsp;of the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><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>
</UL>
</UL>
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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Applicable Amount</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>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$9,500,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>For the 12 month period<BR>
ending January 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$10,300,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>For the 12 month period<BR>
ending April 30, 2002</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$12,000,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>For the 12 month period<BR>
ending July 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$13,600,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>For the 12 month period<BR>
ending October 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$14,900,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>For the 12 month period<BR>
ending January 31, 2003"</FONT></TD>
</TR>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.6&nbsp;Section&nbsp;7.20(a)(ii)&nbsp;of
the Loan Agreement is deleted and replaced by the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</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>
</UL>
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<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Applicable Amount</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>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$11,840,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>January 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$13,520,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>April 30, 2002</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$14,640,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>July 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$15,920,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>October 31, 2002</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>$17,360,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>January 31, 2003"</FONT></TD>
</TR>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.7&nbsp;The
Compliance Certificate, the form of which is attached to the Loan Agreement as </FONT><FONT SIZE=2><I>Exhibit&nbsp;C-1</I></FONT><FONT SIZE=2>,
is replaced by </FONT><FONT SIZE=2><I>Exhibit&nbsp;C-1</I></FONT><FONT SIZE=2> hereto. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Intellectual Property.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Borrower confirms that it is current in its obligations under the Loan
Documents with respect to the Intellectual Property, including reports to Foothill and registration of copyrights. Without limiting the foregoing, Borrower confirms that it has complied with:
(x)&nbsp;Section&nbsp;6.4 of the Loan Agreement; and (y)&nbsp;Section&nbsp;1(e) of the Intellectual Property Security Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Conditions to Effectiveness.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The effectiveness of this First Amendment is subject to the receipt by
Lender of the following, and the date on which Lender receives all of the following shall be the "Effective Date:" </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.1&nbsp;Counterparts
of this First Amendment, executed by each of the parties hereto; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.2&nbsp;Borrower
has paid Lender all of Lender's attorneys' fees and costs as described in Section&nbsp;4.8 hereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Miscellaneous.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Loan Documents Confirmed.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Except as expressly amended hereby, the Loan Agreement and the other Loan
Documents shall remain unchanged and in full force and effect. This First Amendment is hereby incorporated into the Loan Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Choice of Law.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;EXCEPT AS OTHERWISE EXPRESSLY PROVIDED, THIS FIRST AMENDMENT AND ALL OTHER DOCUMENTS
BEING EXECUTED CONCURRENTLY HEREWITH SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, </FONT></P>

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

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<UL>

<P><FONT SIZE=2>
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Sole Parties.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;This First Amendment is made exclusively for the benefit of and solely for the
protection of the parties hereto, and no other person or persons shall have the right to enforce the provisions hereof by action or legal proceedings or otherwise. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.4</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Interpretation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Whenever the context so requires, all words used in the singular will be construed
to have been used in the plural, and vice versa, and each gender will include any other gender. The headings used in this First Amendment are inserted solely for the convenience of reference and are
not part of, nor intended to govern, limit or aid in the construction of, any term or provision hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.5</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Counterparts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;This First Amendment may be executed in one or more counterparts, each of which shall
be an original but all of which shall constitute one and the same instrument. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.6</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Further Assurances.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;From time to time, each party will execute and deliver in recordable form, if
necessary, such further instruments and will take such other action as the other party reasonably may request in order to discharge and perform their obligations and agreements under this First
Amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.7</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Time of Essence.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Time is of the essence in this First Amendment. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.8</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;Attorneys' Fees and Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The Borrower agrees that all of Lender's attorneys' fees and costs in
drafting and negotiating this First Amendment are part of the Obligations and are payable on demand. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties have executed this First Amendment as of the date first written above. </FONT></P>

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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B>FOOTHILL CAPITAL CORPORATION,</B></FONT><FONT SIZE=2><BR>
a California corporation</FONT></TD>
</TR>
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<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
/s/&nbsp;</FONT><FONT SIZE=2>JOHN NOCITA</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><HR NOSHADE></TD>
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<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Vice President</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><HR NOSHADE></TD>
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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><B>QAD&nbsp;INC.,</B></FONT><FONT SIZE=2><BR>
a Delaware corporation</FONT></TD>
</TR>
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<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
/s/&nbsp;</FONT><FONT SIZE=2>KATHLEEN M. FISHER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
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<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><HR NOSHADE></TD>
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<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Executive Vice President and<BR>
Chief Financial Officer</FONT></TD>
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<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_kn2003_1_4"> </A> </FONT> <FONT SIZE=2><B>EXHIBIT C-1<BR>
Amended Compliance Certificate<BR>
FORM OF AMENDED COMPLIANCE CERTIFICATE  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[on
Borrower's letterhead] </FONT></P>

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<TD WIDTH="5%"><FONT SIZE=2>To:</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Foothill Capital Corporation<BR>
2450 Colorado Avenue, Suite 3000 West<BR>
Santa Monica, California 90404<BR>
Attn: Business Finance Division Manager</FONT></TD>
</TR>
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<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>Re:</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Compliance Certificate dated ___________________________</FONT></TD>
</TR>
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<P><FONT SIZE=2>Ladies and Gentlemen: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to that certain Loan and Security Agreement, dated as of September&nbsp;8, 2000, as amended (the "</FONT><FONT SIZE=2><I>Loan Agreement</I></FONT><FONT SIZE=2>")
between QAD&nbsp;Inc., a Delaware corporation ("</FONT><FONT SIZE=2><I>Borrower</I></FONT><FONT SIZE=2>") and Foothill Capital Corporation, a California corporation
("</FONT><FONT SIZE=2><I>Lender</I></FONT><FONT SIZE=2>"). Capitalized terms used in this Compliance Certificate have the meanings set forth in the Loan Agreement unless specifically defined herein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to </FONT><FONT SIZE=2><I>Section&nbsp;6.3</I></FONT><FONT SIZE=2> of the Loan Agreement, the undersigned officer of Borrower hereby certifies that: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;The
financial information of Borrower furnished in </FONT><FONT SIZE=2><I>Schedule&nbsp;1 </I></FONT><FONT SIZE=2>attached hereto, has been prepared in
accordance with GAAP (except for year-end adjustments and the lack of footnotes, in the case of financial statements delivered under </FONT><FONT SIZE=2><I>Section&nbsp;6.3(a)  </I></FONT><FONT SIZE=2>of the Loan Agreement) and fairly presents the
financial condition of Borrower. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;Such
officer has reviewed the terms of the Loan Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the
transactions and condition of Borrower during the accounting period covered by the financial statements delivered pursuant to </FONT><FONT SIZE=2><I>Section&nbsp;6.3 </I></FONT><FONT SIZE=2>of the
Loan Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;Such
review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any
event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on </FONT><FONT SIZE=2><I>Schedule&nbsp;2 </I></FONT><FONT SIZE=2>attached hereto,
specifying the nature and period of existence thereof and what action Borrower has taken, is taking, or proposes to take with respect thereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;Borrower
is in timely compliance with all representations, warranties, and covenants set forth in the Loan Agreement and the other Loan Documents, except as set
forth on </FONT><FONT SIZE=2><I>Schedule&nbsp;2 </I></FONT><FONT SIZE=2>attached hereto. Without limiting the generality of the foregoing, Borrower is in compliance with the covenants contained in </FONT> <FONT SIZE=2><I>Section&nbsp;7.20
</I></FONT><FONT SIZE=2>of the Loan Agreement as demonstrated on </FONT><FONT SIZE=2><I>Schedule&nbsp;3 </I></FONT><FONT SIZE=2>hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this _____ day of ____________, 20___. </FONT></P>

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QAD&nbsp;Inc., a Delaware corporation as Borrower</FONT></TD>
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By:</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 1  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;<BR></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 2  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;<BR></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 3  </B></FONT></P>

<P><FONT SIZE=2><B>1. </B></FONT><FONT SIZE=2><B><I>Minimum EBITDA.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower's
EBITDA for the __________________ ending __________________, __________________ is $_______, which amount [</FONT><FONT SIZE=2><B>is/is
not</B></FONT><FONT SIZE=2>] greater than or equal to the amount set forth in Section&nbsp;7.20(a)(i)&nbsp;of the Loan Agreement for the corresponding period. </FONT></P>

<P><FONT SIZE=2><B>2. </B></FONT><FONT SIZE=2><B><I>Minimum Tangible Net Worth.</I></B></FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Tangible Net Worth of Borrower, as of the last day of the fiscal quarter ending __________________, __________________, is $_______, which amount
[</FONT><FONT SIZE=2><B>is/is not</B></FONT><FONT SIZE=2>] greater than or equal to the amount set forth in Section&nbsp;7.20(a)(ii)&nbsp;of the Loan Agreement for the
corresponding period. </FONT></P>

</UL>

<P><FONT SIZE=2><B>3. </B></FONT><FONT SIZE=2><B><I>Maximum Deferred Maintenance Revenue.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
ratio of (A)&nbsp;consolidated Deferred Maintenance Revenue of Borrower and its Subsidiaries to (B)&nbsp;Borrower's and the Subsidiaries' consolidated Maintenance Revenue as
of the fiscal quarter ended _______, is _______:1.0, which [</FONT><FONT SIZE=2><B>is/is not</B></FONT><FONT SIZE=2>] greater than or equal to the ratio set forth in
Section&nbsp;7.20(a)(iii)&nbsp;of the Loan Agreement for the corresponding period. </FONT></P>

<P><FONT SIZE=2><B>4. </B></FONT><FONT SIZE=2><B><I>Maximum Covered Revenues.</I></B></FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Revenues of Borrower derived from software owned by Borrower, for which copyright registrations have been made with the Copyright Office and for which copies
thereof have been
delivered to Lender, as of the last day of the fiscal quarter ending __________________, ________, is calculated as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;Borrower's
License Revenues derived from software owned by Borrower: </FONT></P>

</UL>
</UL>
<P ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$__________________ </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Borrower's
License Revenues derived from software owned by Borrower, for which copyright registrations have been made with the Copyright Office and for which
copies thereof have been delivered to Lender: </FONT></P>

</UL>
</UL>
<P ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$__________________ </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Item
(ii)&nbsp;divided by Item (i)&nbsp;("Ratio") </FONT></P>

</UL>
</UL>
<P ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;_____% </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The
Ratio set forth above [</FONT><FONT SIZE=2><B>is/is not</B></FONT><FONT SIZE=2>] greater than or equal to the percentage set forth in
Section&nbsp;7.20(a)(iv)&nbsp;of the Loan Agreement. </FONT></P>

</UL>

<P><FONT SIZE=2><B>5. </B></FONT><FONT SIZE=2><B><I>Maximum Capital Expenditures.</I></B></FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
aggregate amount of capital expenditures made or committed to be made to date in the current fiscal year is $__________________. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The
aggregate amount set forth above [</FONT><FONT SIZE=2><B>is/is not</B></FONT><FONT SIZE=2>] less than or equal to the amount set forth
in Section&nbsp;7.20(b)(i)&nbsp;of the Loan Agreement for the corresponding period. </FONT></P>

</UL>
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