ELEVENTH Amendment
to
Loan and security agreement
THIS ELEVENTH AMENDMENT to Loan and Security Agreement (this
"Amendment") is entered into this 11th day of August, 2006, by and between
Silicon Valley Bank ("Bank") and Sento Corporation, a Utah corporation, Sento
Technical Services Corporation, a Utah corporation and Xtrasource Acquisition,
Inc., a Delaware corporation (collectively "Borrower") whose address is 000 Xxxx
Xxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000.
RECITALS
A. Bank and Borrower have entered into that certain Loan and Security
Agreement dated as of April 15, 2003, as amended by that certain Amendment to
Loan Documents by and between Bank and Borrower dated April 29, 2003, as amended
by that certain Amendment to Loan Documents by and between Bank and Borrower
dated as of August 7, 2003, as amended by that certain Amendment to Loan
Documents by and between Bank and Borrower dated as of May 11, 2004, as amended
by that certain Amendment to Loan Documents by and between Bank and Borrower
dated as of July 29, 2004, as amended by that certain Amendment to Loan
Documents by and between Bank and Borrower dated as of March 22, 2005, as
amended by that certain Amendment to Loan Documents by and between Bank and
Borrower dated as of March 31, 2005, as amended by that certain Amendment to
Loan Documents by and between Bank and Borrower dated as of July 22, 2005, as
amended by that certain Amendment to Loan Documents by and between Bank and
Borrower dated as of January 26, 2006, as amended by that certain Amendment to
Loan Documents dated as of March 20, 2006, as amended by that certain Amendment
to Loan Documents dated as of June 23, 2006 (as the same may from time to time
be further amended, modified, supplemented or restated, collectively, the "Loan
Agreement"). The Amendment to Loan Documents dated January 26, 2006, included a
Third Amended and Restated Schedule to Loan and Security Agreement (the
"Schedule").
B. Bank has extended credit to Borrower for the purposes permitted in
the Loan Agreement.
C. Borrower has requested that Bank amend the Loan Agreement to (i)
modify certain of the financial covenants; (ii) modify the interest rate for the
Accounts Loan, and (iii) make certain other revisions to the Loan Agreement as
more fully set forth herein.
D. Bank has agreed to so amend certain provisions of the Loan
Agreement, but only to the extent, in accordance with the terms, subject to the
conditions and in reliance upon the representations and warranties set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.
2. Amendments to Third Amended and Restated Schedule to Loan and Security
Agreement.
2.1 Section 1 (Credit Limit). The first paragraph of Paragraph 1 of
Section 1 is amended by deleting the existing first paragraph and replacing it
with the following:
"1. Accounts Loans. An amount not to exceed (a) the lesser of
(i) $3,000,000 at any one time outstanding (the "Maximum
Credit Limit"), or (ii) 80% (the "Advance Rate") of the amount
of Borrower's Eligible Accounts (as defined in Section 8
above); minus (b) the principal amount of all term loans due
to Silicon, subject to a maximum of $1,000,000; provided
however, that the term debt shall no longer be deducted after
Borrower has received equity contributions or Subordinated
Debt in the aggregate amount of not less than $2,000,000 from
and after August 1, 2006. The term "Subordinated Debt" means
indebtedness incurred by Borrower subordinated to all of
Borrower's now or hereafter Obligations to Silicon (pursuant
to a subordination, intercreditor, or other similar agreement
in form and substance satisfactory to Silicon entered into
between Silicon and the other creditor), on terms acceptable
to Silicon."
2.2 Section 2 (Interest Rate). The first paragraph of Section 2 is
amended by deleting the existing paragraph and replacing it with the following:
"With respect to the Accounts Loans:
A rate equal to the following: (i) if the Liquidity Coverage
ratio is less than 1.5 to 1.0, then the interest rate is the
Prime Rate in effect from time to time, plus 1.50% per annum;
and (ii) if the Liquidity Coverage ratio is equal to or
greater than 1.5 to 1.0, then the interest rate is the Prime
Rate in effect from time to time, plus 1.00% per annum. If any
change in the interest rate is due to a change in the
Liquidity Coverage ratio, the change shall take effect on the
first day of the month following the month for which the
Liquidity Coverage Ratio was calculated. Interest shall be
calculated on the basis of a 360-day year for the actual
number of days elapsed. "Prime Rate" means the rate announced
from time to time by Silicon as its "prime rate;" it is a base
rate upon which other rates charged by Silicon are based, and
it is not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate."
2.3 Section 5 (Financial Covenants). The Liquidity Coverage and
Tangible Net Worth covenants are amended by deleting the existing covenants and
replacing them with the following:
"Liquidity Coverage: Commencing with the month ending July 31,
2006, through September 30, 2006, Borrower
shall maintain Liquidity Coverage of not
less than 1.0 to 1.0. Commencing with the
month ending October 31, 2006, Borrower
shall maintain Liquidity Coverage of not
less than 1.5 to 1.0.
Tangible Net Worth: Through July 31, 2006, Borrower shall
maintain a Tangible Net Worth of not less
than $5,500,000, increasing by 75% of
quarterly positive Net Income from January
1, 2006, effective as of the last month of
each quarter. In no event will the Tangible
Net Worth covenant be reduced due to any net
loss.
Commencing with the month ending August 31,
2006, Borrower shall maintain a Tangible Net
Worth of not less than $4,500,000,
increasing by 75% of quarterly positive Net
Income from August 1, 2006, and 75% of any
Subordinated Debt incurred by Borrower or
equity or capital contributed to Borrower
after August 1, 2006, effective as of the
last month of each quarter. In no event will
the Tangible Net Worth covenant be reduced
due to any net loss."
3. Limitation of Amendments.
3.1 The amendments set forth in Section 2, above, are effective for the
purposes set forth herein and shall be limited precisely as written and shall
not be deemed to (a) be a consent to any amendment, waiver or modification of
any other term or condition of any Loan Document, or (b) otherwise prejudice any
right or remedy which Bank may now have or may have in the future under or in
connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and as part of
the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as herein
amended, are hereby ratified and confirmed and shall remain in full force and
effect.
4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the
representations and warranties contained in the Loan Documents are true,
accurate and complete in all material respects as of the date hereof (except to
the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of
Default has occurred and is continuing;
4.2 Borrower has the power and authority to execute and deliver this
Amendment and to perform its obligations under the Loan Agreement, as amended by
this Amendment;
4.3 The organizational documents of Borrower delivered to Bank on the
Effective Date remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;
4.4 The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, have been duly authorized;
4.5 The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not and will not contravene (a) any law or regulation
binding on or affecting Borrower, (b) any contractual restriction with a Person
binding on Borrower, (c) any order, judgment or decree of any court or other
governmental or public body or authority, or subdivision thereof, binding on
Borrower, or (d) the organizational documents of Borrower;
4.6 The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on either Borrower, except as already has been obtained or
made; and
4.7 This Amendment has been duly executed and delivered by Borrower and
is the binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
5. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
6. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto, and (b)
Borrower's payment of an amendment fee in an amount equal to $10,000.00 and
Bank's out-of-pocket expenses.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
BANK BORROWER
Silicon Valley Bank Sento Corporation
By: /s/ Xxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxxx
--------------- -------------------
Name: Xxx Xxxxxxx Name: Xxxxxxx Xxxxxxx
Title: Senior Relationship Manager Title: SVP & CFO
Sento Technical Services Corporation
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: SVP & CFO
Xtrasource Acquisition, Inc.
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: SVP & CFO
