**Exhibit 10**

 

LOANMODIFICATION AGREEMENT

 

                                                This Loan ModificationAgreement is entered into as of October    , 2002, by andbetween SENTO CORPORATION AND SENTO TECHNICAL SERVICES CORPORATION (jointly andseverally, the “Borrower”) and Silicon Valley Bank (“Bank”).

 

1.                                       DESCRIPTION OF EXISTINGINDEBTEDNESS:  Among other indebtednesswhich may be owing by Borrower to Bank, Borrower is indebted to Bank pursuantto, among other documents, an Amended and Restated  Loan and Security Agreement, dated December 22, 1999, as may beamended from time to time, (the “Loan Agreement”).  The Loan Agreement provided for, among other things, a CommittedRevolving Line in the original principal amount of Two Million Dollars($2,000,000) and a Committed Equipment Line in the original principal amount ofOne Hundred Thousand Dollars ($100,000). Pursuant to a Loan Modification Agreement dated April 28, 2000, theCommitted Revolving Line was increased to Three Million Dollars ($3,000,000) anda Term Loan Commitment was incorporated, in the original principal amount ofFive Hundred Thousand Dollars ($500,000). Additionally, pursuant to a Loan Modification Agreement dated November7, 2000, the Term Loan Commitment was increased to Two Million Dollars($2,000,000).  Defined terms used butnot otherwise defined herein shall have the same meanings as in the LoanAgreement.

 

Hereinafter, all indebtednessowing by Borrower to Bank shall be referred to as the “Indebtedness.”

 

2.                                       DESCRIPTION OF COLLATERAL ANDGUARANTIES.  Repayment of the Indebtednessis secured by the Collateral as described in the Loan Agreement.  Hereinafter, the above-described securitydocuments and guaranties, together with all other documents securing repaymentof the Indebtedness shall be referred to as the “Security Documents”.  Hereinafter, the Security Documents,together with all other documents evidencing or securing the Indebtedness shallbe referred to as the “Existing Loan Documents”.

 

3.                                       DESCRIPTION OF CHANGE IN TERMS.

 

A.Modifications to Loan Agreement.

 

1.                                       Sub-section (a) of Section2.1.1 of the Loan Agreement is deleted and replaced with the following:

 

“Throughthe month ending January 31, 2003, Bank will make Advances not exceeding thelesser of (A) the Committed Revolving Line or (B) (i) the Borrowing Base, minus(ii) the outstanding amount of the Term Loan Commitment and the outstandingamount of the Committed Equipment Line.”

 

2.                                       Sub-section (b) of Section2.1.1 of the Loan Agreement is deleted and replaced with the following:

 

“InterestRate.  Advances accrue interest on theoutstanding principal balance at a per annum rate equal to 1.50 percentagepoints above the Prime Rate.  After anEvent of Default, Obligations accrue interest at 5 percent above the rate effectiveimmediately before the Event of Default. The interest rate increases or decreases when the Prime Ratechanges.  Interest is computed on a 360day year for the actual number of days elapsed.”

 

----

 

3.                                       Section 6.6 of the LoanAgreement is deleted and replaced with the following:

 

“Borrowerwill maintain as of the last day of each month, beginning with the September2002 month-end:

 

(a)                                  Quick Ratio (Adjusted).  A ratio of Cash on deposit with Bank plusAccounts Receivable to the outstanding principal indebtedness under allObligations owed to Bank of at least: 2.00 to 1.00.

 

(b)                                 Tangible Net Worth.  A Tangible Net Worth of at least$4,600,000.”

 

4.                                       Sub-section (d) of Section 6.2of the Loan Agreement is deleted and replaced with the following:

 

“Bankhas the right to audit Borrower’s Accounts at Borrower’s expense, but theaudits will be conducted no more often than once every 6 months unless an Eventof Default has occurred and is continuing.”

 

 

5.                                       The following is added assub-section (e) to Section 6.2 of the Loan Agreement:

 

“Within20 days after the last day of each month, Borrower will deliver to Bank areport of its Deferred Revenue for each customer.”

 

6.                                       Section 6.5 of the LoanAgreement is deleted and replaced with the following:

 

“Borrowerwill maintain with Bank its primary depository, operating and investmentaccounts.  Borrower has an existinginvestment account with Solomon Smith Barney, and Borrower agrees that any cashin such account, including cash available upon maturity of investments in suchaccount, will be promptly invested through the investment account at Bank.  Borrower shall not renew or extend thematurity of its investments with or through Solomon Smith Barney.”

 

7.                                       Section 7.8 is amended byadding the following to the existing provisions of that section:

 

“Borrowershall not prepay any of the 7% Convertible Subordinated Debentures (the“Debentures”) issued pursuant to the Private Placement Memorandum dated January31, 2000, without the prior written consent of Bank, which may be given orwithheld in its sole discretion.”

 

8.                                       The period at the end ofSection 8.8 shall be replaced with a semi-colon, and the following Sections 8.9and 8.10 shall be added to the Loan Agreement as follows:

 

----

 

“8.9                           The occurrence of an event ofdefault under any Debenture;

 

“8.10                     Borrower fails to extend thematurity date of the Debentures or fails to restructure, refinance or convertto equity the indebtedness due under the Debentures on or before January 31,2003, in all cases on terms satisfactory to Bank in its sole discretion.”

 

9.                                       The following defined termsunder Section 13.1 are hereby amended to read as follows:

 

                                                                                                                                                ““Borrowing Base” is 75% ofEligible Accounts.

 

“CommittedRevolving Line” is a Credit Extension of up to $2,000,000.00.

 

                                                                                                                                                “Revolving Maturity Date” isJanuary 31, 2003.

 

“SubordinatedDebt” is debt incurred by Borrower subordinated to Borrower’s debt to Bank (andidentified as subordinated by Borrower and Bank), and, as of September 2002,including the outstanding indebtedness under the Debentures.”

 

4.                                       CONSISTENT CHANGES.  The Existing Loan Documents are herebyamended wherever necessary to reflect the changes described above.

 

5.                                       PAYMENT OF LOAN FEE.  Borrower shall pay to Bank a fee in theamount of Five Thousand and 00/100 Dollars ($5,000.00) (the “Loan Fee”) plus allout-of-pocket expenses.

 

6.                                       NO DEFENSES OF BORROWER.  Borrower (and each guarantor and pledgorsigning below) agrees that, as of the date hereof, it has no defenses againstthe obligations to pay any amounts under the Indebtedness.

 

7.                                       CONTINUING VALIDITY.  Borrower (and each guarantor and pledgorsigning below) understands and agrees that in modifying the existingIndebtedness, Bank is relying upon Borrower’s representations, warranties, andagreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant tothis Loan Modification Agreement, the terms of the Existing Loan Documentsremain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Indebtedness pursuantto this Loan Modification Agreement in no way shall obligate Bank to make anyfuture modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute asatisfaction of the Indebtedness.  It isthe intention of Bank and Borrower to retain as liable parties all makers andendorsers of Existing Loan Documents, unless the party is expressly released byBank in writing.  No maker, endorser, orguarantor will be released by virtue of this Loan Modification Agreement.  The terms of this paragraph apply not onlyto this Loan Modification Agreement, but also to all subsequent loanmodification agreements.

 

----

 

8.                                       WAIVER OF FINANCIAL COVENANTDEFAULTS.  Bank hereby waives Borrower’sexisting default under the Loan Agreement by virtue of Borrower’s failure to complywith the Quick Ratio (Adjusted) and Tangible Net Worth covenants for the monthsof July and August 2002 and the Profitability covenant for the month of August2002.  Bank’s waiver of Borrower’scompliance with these covenants shall apply only to the foregoing periods.  Accordingly, Borrower shall be in compliancewith the Quick Ratio (Adjusted) and Tangible Net Worth covenants, as amendedherein.

 

Bank’sagreement to waive the above-described default (1) in no way shall be deemed anagreement by the Bank to waive Borrower’s compliance with the Quick Ratio(Adjusted) and Tangible Net Worth covenants as of all other dates and (2) shallnot limit or impair the Bank’s right to demand strict performance of thesecovenants as of all other dates and (3) shall not limit or impair the Bank’sright to demand strict performance of all other covenants as of any date.

 

9.                                       CONDITIONS.  The effectiveness of this Loan ModificationAgreement is conditioned upon Borrower’s payment of the Loan Fee.

 

                                                This Loan ModificationAgreement is executed as of the date first written above.

 
| BORROWER:                             |                 |   | BANK:  |
|---------------------------------------|----------------------|--------|--------|
|                                  |                 |   |   |   |
| SENTO CORPORATION                     | SILICON  VALLEY BANK |
|                                  |                 |   |   |   |
| By:                                   |                 | By:    |   |   |
| Name:                                 |                 | Name:  |   |   |
| Title:                                |                 | Title: |   |   |
|                                  |                 |   |   |   |
| SENTO TECHNICAL SERVICES  CORPORATION |                 |
|                                  |                 |   |   |   |
| By:                                   |                 |   |   |   |
| Name:                                 |                 |   |   |   |
| Title:                                |                 |   |   |   |

 

----