LOAN MODIFICATION AGREEMENT
BETWEEN: Sento Corporation, Sento Training Corporation, Sento Consulting
Corporation and Sento Technical Services Corporation (jointly and
severally, the "Borrower"), whose address is 000 Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxxx Xxxx, Xxxx 00000;
AND: Silicon Valley Bank ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000;
DATE: April _____, 2000
This Loan Modification Agreement is entered into on the above date by
Borrower and Bank.
1. BACKGROUND. Borrower entered into an Amended and Restated Loan and
Security Agreement with Bank on December 22, 1999 (as amended and modified from
time to time, the "Loan Agreement"). Capitalized terms used in this Loan
Modification Agreement shall, unless otherwise defined in this Agreement, have
the meaning given to such terms in the Loan Agreement.
Bank and Borrower are entering into this Agreement to state the terms
and conditions of certain modifications to the Loan Agreement, as amended prior
to the date of this Agreement.
2. MODIFICATIONS TO LOAN AGREEMENT.
2.1 Borrower acknowledges and agrees that all Obligations,
including without limitation Borrower's obligation to repay amounts advanced by
Bank to Borrower on the terms of the Loan Agreement as modified by this Loan
Modification Agreement, are secured by all liens and security interests granted
by Borrower to Bank in the Loan Agreement.
2.2 Section 13.1 of the Loan Agreement is hereby amended to
substitute the following definitions for those currently set forth in the Loan
Agreement:
"BORROWING BASE" is 80% of Eligible Accounts.
"COMMITTED REVOLVING LINE" is a Credit Extension of up to $3,000,000.
"ELIGIBLE ACCOUNTS" has the meaning given in the Loan Agreement, except
that subsection (d) is hereby replaced with the following:
(a) Accounts for an Account Debtor, including affiliates,
whose total obligations to Borrower exceed 25% of all
Accounts for the amounts that exceed that percentage,
except for Gateway Corporation (US) and Network
Associates (US), whose accounts shall not exceed 50%
of all Accounts, unless Bank approves in writing;
"ELIGIBLE FOREIGN ACCOUNTS" are Accounts for which the account debtor
does not have its principal place of business in the United States but are: (1)
covered by credit insurance satisfactory to Bank, less any deductible; or (2)
supported by letter(s) of credit acceptable to Bank; or (3) that Bank approves
in writing, which as of the date hereof consists of Network Associates Europe
and Gateway Europe, subject to the limitations applicable to all "Eligible
Accounts."
"REVOLVING MATURITY DATE" is April 15, 2002.
2.3 Section 2.1.1(b) is hereby amended as follows:
The applicable interest rate is reduced from a per
annum rate of 2.00 percentage points above the Prime
Rate to 1.25 percentage points above the Prime Rate.
2.4 Section 2.1.2 of the Loan Agreement is hereby amended
as follows:
The limitation on the face amount of outstanding
letters of credit (including drawn by unreimbursed
Letters of Credit and any Letter of Credit Reserve)
is increased from not more than $2,000,000 to not
more than $3,000,000.
2.5 Section 13.1 of the Loan Agreement is hereby amended to
add the following definitions:
"TERM LOAN ADVANCE" is an advance or advances under the Term Loan
Commitment.
"TERM LOAN BORROWING BASE", for each advance under the Term Loan
Commitment, is equivalent to 100% of the invoice amount of equipment purchased
within the previous 90 days, plus charges for taxes, shipping, warranty charges,
freight discounts and installation ("Soft Costs"). However, not more than 15% of
the amount of each advance under this facility may be used to fund Soft Costs.
"TERM LOAN COMMITMENT" is equal to Term Loan Advances in an aggregate
amount of up to $500,000 pursuant to Section 2.1.5 herein.
"TERM LOAN MATURITY DATE" is defined in Section 2.1.5.
"TERM PERIOD" means that period beginning at the end of the Advance
Period and ending on the Term Loan Maturity Date during which the principal
balance outstanding under the Term Loan Commitment shall be fully amortized.
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2.6 Section 2 of the Loan Agreement is hereby amended to
add the following Section 2.1.5:
2.1.5 TERM LOAN ADVANCES.
(a) Bank will make Term Loan Advances not exceeding the
lesser of (A) the Term Loan Commitment or (B) the
Term Loan Borrowing Base. Amounts borrowed under this
Section once repaid may not be reborrowed during the
term of this Agreement. There is no prepayment
penalty associated with this facility. Bank shall
make Term Loan Advances under the Term Loan
Commitment, in accordance with the conditions
described above, during the period beginning with the
date of this Agreement, and ending on October 15,
2000. Each Term Loan Advance shall amortize
separately over thirty-six (36) months, with
thirty-six (36) equal monthly payments of principal,
plus accrued interest. The first monthly payment of
principal and interest shall be due and payable on
the first day of the first full month following the
date of the Term Loan Advance.
(b) The interest rate applicable to the Committed Term
Loan shall be a rate equal to the Prime Rate in
effect from time to time, plus 1.50%. Interest
calculations shall be made on the basis of a 360-day
year and the actual number of days elapsed. The
interest rate shall change on each date there is a
change in the Bank's Prime Rate.
(c) Borrower shall pay to Bank a fee of $2,500 for the
Committed Term Loan, which shall be fully earned and
due and payable as of the date of this Agreement.
2.7 Loan Fee. In addition to the fee for the Committed Term
Loan fee above, Borrower shall pay a fee of $30,000 for renewal and extension of
the Committed Revolving Line, which shall be fully earned and due and payable as
of the date of this Agreement. In addition, Borrower shall reimburse Bank for
all out-of-pocket expenses associated with this Agreement, including legal fees.
2.8 Sections 6.2(a), (b) and (d) of the Loan Agreement are
hereby amended as follows:
(a) Borrower will deliver to Bank: (i) as soon as
available, but no later than 30 days after the last
day of each month, a company prepared consolidated
balance sheet and income statement for Sento
Corporation covering Borrowers' consolidated
operations during the period, in a form acceptable to
Bank and certified by a Responsible Officer; (ii)
within 5 days of filing, copies of all statements,
reports and notices made available to Borrower's
security holders or to any holders of Subordinated
Debt and all reports Form 10-K and 10-Q with the
Securities and Exchange Commission; (iii) a prompt
report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result
in
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damages or costs to Borrower or any Subsidiary of
$100,000 or more; and (iv) budgets, sales
projections, operating plans or other financial
information Bank reasonably requests.
(b) Borrower will deliver to Bank within 20 days
of the last day of each month a Borrowing
Base Certificate signed by a Responsible
Officer in the form of Exhibit C, with aged
listings of accounts receivable and accounts
payable.
(d) Bank has the right to audit Borrower's
Accounts at Borrower's expense, but the
audits will be conducted no more often than
once every 12 months unless an Event of
Default has occurred and is continuing.
2.9 Section 6.6 of the Loan Agreement is hereby amended to (i)
modify the Quick Ratio covenant as set forth below, (ii) delete the Debt/Net
Worth Ratio, Tangible Net Worth and Maximum Net Losses covenants, and (iii) add
the Profitability and Debt Service Coverage covenants as set forth below.
Borrower shall maintain (a) and (b) as of the last day of each
month, and (c) as of the last day of each quarter:
(a) QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.50:1.00.
(b) PROFITABILITY. Borrower shall not incur a loss (as
defined below) for any two consecutive months, and
shall not incur an aggregate loss for any fiscal
quarter. For purposes of this covenant, "loss" means
net income after taxes of less than $0.00, as
reported on Borrower's consolidated financial
statement.
(c) DEBT SERVICE COVERAGE RATIO. A Debt Service Coverage
Ratio of not less than 1.50:100. For purposes of this
covenant, "Debt Service Coverage Ratio" means
earnings before interest, taxes, depreciation and
amortization for the quarter, annualized (multiplied
by four)("EBITDA"), divided by the current maturities
of long-term debt ("CMLTD") plus interest for the
quarter, annualized (multiplied by four).
3. CONDITIONS PRECEDENT. This Loan Modification Agreement shall not
take effect until Borrower delivers to Bank a Certified Resolution of Borrower
and such other documents and fees as Bank shall reasonably require to give
effect to the terms of this Loan Modification Agreement.
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4. NO OTHER MODIFICATIONS. Except as expressly modified by this Loan
Modification Agreement, the terms of the Loan Agreement, as amended prior to
the date of this Loan Modification Agreement, shall remain unchanged and in
full force and effect. Bank's agreement to modify the Loan Agreement pursuant
to this Loan Modification Agreement shall not obligate Bank to make any
future modifications to the Loan Agreement or any other loan document.
Nothing in this Loan Modification Agreement shall constitute a satisfaction
of any indebtedness of any Borrower to Bank. It is the intention of Bank and
Borrower to retain as liable parties all makers and endorsers of the Loan
Agreement or any other loan document. No maker, endorser, or guarantor shall
be released by virtue of this Loan Modification Agreement. The terms of this
paragraph shall apply not only to this Loan Modification Agreement, but also
to all subsequent loan modification agreements.
5. REPRESENTATIONS AND WARRANTIES.
5.1 The Borrower represents and warrants to Bank that the
execution, delivery and performance of this Agreement are within the Borrower's
corporate powers, and have been duly authorized and are not in contravention of
law or the terms of the Borrower's articles of incorporation, bylaws or of any
undertaking to which the Borrower is a party or by which it is bound.
5.2 The Borrower understands and agrees that in entering
into this Agreement, Bank is relying upon the Borrower's representations,
warranties and agreements as set forth in the Loan Agreement and other loan
documents. Borrower hereby reaffirms all representations and warranties in
the Loan Agreement, all of which are true as of the date of this Agreement.
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6. STATUTORY NOTICE. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.
BANK: BORROWER:
SILICON VALLEY BANK SENTO CORPORATION
By: By:
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Name: Name:
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Title: Title:
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SENTO TRAINING CORPORATION
By:
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Name:
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Title:
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SENTO CONSULTING CORPORATION
By:
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Name:
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Title:
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SENTO TECHNICAL SERVICES
CORPORATION
By:
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Name:
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Title:
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