| We were notified by Silicon Valley Bank on October 7, 2004 that we were not in compliance with two restrictive financial covenants that require us to maintain a certain quick ratio and a minimum tangible net worth, each as defined in the loan agreement. We subsequently established a certificate of deposit in the amount of approximately $2.2 million, which was equal to the then outstanding loan balance. As a result, we were notified by Silicon Valley Bank on October 11, 2004 that we had cured the default within the cure period. The restricted balance declines as we make payments under the term loan agreement. As a result, we have reflected restricted cash of $2.0 million on our December 31, 2004 balance sheet. As of March 2005, we were not in compliance with both of these restrictive financial covenants and, as such, continue to maintain the balance of restricted cash as collateral for our term loan balance with Silicon Valley Bank in accordance with the terms of the loan agreement. In addition, at December 31, 2004, approximately $568,000 of other restricted cash is held in investment accounts that serve as collateral for standby letters of credit for certain of our capital and operating lease obligations. |
