**EXHIBIT 10.1**

 

**LOAN MODIFICATION AGREEMENT**

 

This Loan ModificationAgreement is entered into as of April 15, 2002, by and between SENTOCORPORATION, and SENTO TECHNICAL SERVICES CORPORATION (jointly and severallythe “Borrower”) and Silicon Valley Bank (“Bank”).

 

1.             DESCRIPTION OF EXISTINGINDEBTEDNESS:  Among otherindebtedness which may be owing by Borrower to Bank, Borrower is indebted toBank pursuant to, among other documents, an Amended and Restated Loan andSecurity Agreement, dated December 22, 1999, as may be amended from time totime, (the “Loan Agreement”).  The LoanAgreement provided for, among other things, a Committed Revolving Line in theoriginal principal amount of Two Million Dollars ($2,000,000) and a CommittedEquipment Line in the original principal amount of One Hundred Thousand Dollars($100,000).  Pursuant to a LoanModification Agreement dated April 28, 2000, the Committed Revolving Line wasincreased to Three Million Dollars ($3,000,000) and a Term Loan Commitment wasincorporated, in the original principal amount of Five Hundred Thousand Dollars($500,000). Additionally, pursuant to a Loan Modification Agreement datedNovember 7, 2000, the Term Loan Commitment was increased to Two Million Dollars($2,000,000). Defined terms used but not otherwise defined herein shall havethe same meanings as set forth in the Loan Agreement.

 

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

 

2.             DESCRIPTION OF COLLATERAL.  Repayment of the Indebtedness is secured bythe Collateral as described in the Loan Agreement.

 

Hereinafter, theabove-described security documents and guaranties, together with all otherdocuments securing repayment of the Indebtedness shall be referred to as the“Security Documents”.  Hereinafter, theSecurity Documents, together with all other documents evidencing or securingthe Indebtedness shall be referred to as the “Existing Loan Documents”.

 

3.             DESCRIPTION OF CHANGE IN TERMS.

 

A.            Modification(s)to Loan Agreement.

 

1.                                       Sub-letter (a)under Section 2.1.1 entitled “Revolving Advances” is hereby amended to read asfollows: 

 

(a)           Through the monthending October 31, 2002, Bank will make Advances not exceeding the lesser of(A) the Committed Revolving Line or (B) (i) the Borrowing Base, minus (ii) theoutstanding amount of the Term Loan Commitment and the outstanding amount ofthe Committed Equipment Line. Beginning with the month ending November 30,2002, Bank will make Advances not exceeding the lesser of (A) the CommittedRevolving Line or (B) the Borrowing Base. Amounts borrowed under this Section may be repaid and reborrowed duringthe term of this Agreement.

 

2.                                       Section 6.5entitled “Primary Accounts” is hereby amended to read as follows:

 

Borrower will maintain with Bank its primary depository and operatingaccounts and at least 50% of all investment account balances of Borrower.

 

3.                                       Section 6.6entitled “Financial Covenants” is hereby amended in its entirety to read asfollows:

 

Borrower will maintain as of the last day of each month (unlessotherwise noted):

 

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(i)                                     Adjusted QuickRatio.  A ratio of Quick Assets toCurrent Liabilities minus Deferred Revenue of at least 1.50 to 1.00.

 

(ii)                                  Debt ServiceCoverage.  Borrower will maintain, as ofthe last day of each quarter, a Debt Service Coverage Ratio of not less than1.50 to 1.00, provided, however, the Debt Service Coverage covenant shall notbe tested for the quarter ending June 30, 2002. For purposes of this covenant,“Debt Service Coverage Ratio” means the sum of quarterly net income beforetaxes, amortization, depreciation and interest expense divided by the sum of25% of current maturities of long-term debt (“CMLTD”) plus interest for thequarter.

 

(iii)                               Tangible Net Worth.  Beginning with the month ending April 30,2002 and through the month ending August 31, 2002, a Tangible Net Worth of atleast $4,500,000, provided, however, the Tangible Net Worth covenant shall notbe tested for the month ending September 30, 2002 and thereafter.

 

(iv)                              Profitability.  Borrower shall not incur a loss (as definedbelow) for any two consecutive months, and shall not incur an aggregate lossfor any fiscal quarter, provided, however, the Profitability covenant shall notbe tested for the month ending April 30, 2002 through the month ending June 30,2002.  For purposes of this covenant,“loss” means net income after taxes of less than $0.00, as reported onBorrower’s consolidated financial statement.

 

4.                                       The followingdefined terms under Section 13.1 entitled “Definitions” are hereby amended toread as follows:

 

Sub-letter (d) under defined term “Eligible Accounts” is hereby amendedto read as follows:

 

(d) Accounts from an Account Debtor, including affiliates, whose totalobligations to Borrower exceed 25% of all Accounts for the amounts that exceedthat percentage, except for Intuit, Inc. and Network Associates (US), whoseaccounts shall not exceed 50% of all Accounts, unless Bank approves in writing.

 

“Eligible Foreign Accounts” are Accounts for which the account debtordoes 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 approvesin writing, which as of the date hereof consists of Network Associates Europe,subject to the limitations applicable to all “Eligible Accounts.”

 

“Revolving Maturity Date” is April 14, 2003.

 

“Tangible Net Worth” is, on any date, (a) the consolidated total assetsof Borrower and its Subsidiaries, minus (b) any amounts attributable to(i) goodwill, (ii) intangible items such as unamortized debt discount andexpense, Patents, trade and service marks and names, Copyrights and researchand development expenses except prepaid expenses, and including as intangibleitems inter-company receivables from foreign Subsidiaries and any investmentsby Borrower in foreign Subsidiaries, (iii) reserves not already deducted fromassets, and (iv) Total Liabilities plus (c) Subordinated Debt.

 

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B.            Waiver-of Financial Covenant Default(s)

 

1.                                        Bank hereby waives Borrower’s existing defaultunder the Loan Agreement by virtue of Borrower’s failure to comply with theDebt Service Coverage covenant as of quarter ended March 30, 2002. Bank’swaiver of Borrower’s compliance of this covenant shall apply only to theforegoing period. Accordingly, Borrower shall be in compliance with thiscovenant, as amended herein.

 

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 above-describedcovenant as of all other dates and (2) shall not limit or impair the Bank’sright to demand strict performance of this covenant as of all other dates and(3) shall not limit or impair the Bank’s right to demand strict performance ofall other covenants as of any date.

 

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

 

5.             NO DEFENSES OF BORROWER.  Borrower agrees that, as of the date hereof,it has no defenses against the obligations to pay any amounts under theIndebtedness.

 

6.             PAYMENT OF LOAN FEE.  Borrower shall pay Bank a fee in the amountof Fifteen Thousand Dollars ($15,000.00) (“Loan Fee”) plus all out-of-pocketexpenses.

 

7.             CONTINUING VALIDITY.  Borrower understands and agrees that inmodifying the existing Indebtedness, Bank is relying upon Borrower’srepresentations, warranties, and agreements, as set forth in the Existing LoanDocuments.  Except as expressly modifiedpursuant to this Loan Modification Agreement, the terms of the Existing LoanDocuments remain unchanged and in full force and effect.  Bank’s agreement to modifications to theexisting Indebtedness pursuant to this Loan Modification Agreement in no wayshall obligate Bank to make any future modifications to the Indebtedness.  Nothing in this Loan Modification Agreementshall constitute a satisfaction of the Indebtedness.  It is the intention of Bank and Borrower to retain as liableparties all makers and endorsers of Existing Loan Documents, unless the partyis expressly released by Bank in writing. Unless expressly released herein, no maker, endorser, or guarantor willbe 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.             CONDITIONS.  The effectiveness of this Loan ModificationAgreement is conditioned upon payment of the Loan Fee.

 

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This LoanModification Agreement is executed as of the date first written above.

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

** **

** **

**SENTOTECHNICAL SERVICES CORPORATION**

 
| By:    |   |   |
|--------|--------|--------|
| Name:  |   |   |
| Title: |   |   |
|        |        |        |  |

 

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**SILICON VALLEY BANK**

 

**PRO FORMA INVOICE FOR LOAN CHARGES**

 

|           |   |                                  |   |
|----------------|--------|---------------------------------------|--------|
| BORROWER:      |   | SENTO  CORPORATION                    |   |
|           |   | SENTO  TECHNICAL SERVICES CORPORATION |
|           |   |                                  |   |
| LOAN  OFFICER: |   | Ron C.  Sherman                       |   |
|           |   |                                  |   |
| DATE:          |   | April 15,  2002                       |   |

 

|   |   | Loan Fee           | $      | 15,000.00 |   |
|--------|--------|--------------------|--------|-----------|--------|
|   |   | Documentation  Fee | $      | 750.00    |   |
|   |   |               |   |      |   |
|   |   |               |   |      |
|   |   | TOTAL FEE  DUE     | $      | 15,750.00 |   |

 

Please indicate the method ofpayment:

 

{ } A check for the total amount is attached.

 

{ } DebitDDA#                         forthe total amount.

 

 

|     |   |
|----------|--------|
| Borrower | (Date) |
|          |        |  |

 

 

|                              |   |
|-----------------------------------|--------|
| Silicon  Valley Bank              | (Date) |
| Account  Officer’s Signature |   |
|                                   |        |  |

 

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**COMPLIANCE CERTIFICATE**

 

TO:                                                                         SILICON VALLEY BANK

3003Tasman Drive

SantaClara, CA 95054

 

FROM:                                                      SENTOCORPORATION

SENTO TECHNICAL SERVICES CORPORATION

 

The undersigned authorized officer of SENTO CORPORATION, and SENTOTECHNICAL SERVICES CORPORATION (jointly and severally the “Borrower”) certifiesthat under the terms and conditions of the Loan and Security Agreement betweenBorrower and Bank (the “Agreement”), (i) Borrower is in complete compliance forthe period ending                      withall required covenants except as noted below and (ii) all representations andwarranties in the Agreement are true and correct in all material respects onthis date. Attached are the required documents supporting the certification.The Officer certifies that these are prepared in accordance with GenerallyAccepted Accounting Principles (GAAP) consistently applied from one period tothe next except as explained in an accompanying letter or footnotes. TheOfficer acknowledges that no borrowings may be requested at any time or date ofdetermination that Borrower is not in compliance with any of the terms of the Agreement,and that compliance is determined not just at the date this certificate isdelivered.

 

**Please indicate compliance status by circling Yes/Nounder “Complies” column.**

 
| **Reporting  Covenant**                        |   | **Required**                        |      |       |   | **Complies** |
|------------------------------------------------|--------|-------------------------------------|-----------|------------|--------|--------------|
| Interim consolidated financial statements + CC |   | Monthly within 30 days              |      |       |   | Yes          | No |
| 10-Q, 10-K                                     |   | Within 5 days after filing with SEC |      |       |   | Yes          | No |
| A/R, A/P & BBC                             |   | Monthly within 20 days              |      |       |   | Yes          | No |
| A/R Audit                                      |   | Annually                            |      |       |   | Yes          | No |
|                                           |   |                                |      |       |   |         |   |
| **Financial  Covenant**                        |   | **Required**                        |      | **Actual** |   | **Complies** |
| Maintain on a Monthly Basis:                   |   |                                |      |       |   |         |   |
| Minimum Quick Ratio (Adjusted)                 |   | 1.50:1.00                           |      |       | :1.00  |         | Yes | No |
| Profitability                                  |   | $                                   | 0         | *          |   | $            |   | Yes | No |
| Minimum Tangible Net Worth                     |   | $                                   | 4,500,000 | **         |   | $            |   | Yes | No |
|                                           |   |                                |      |       |   |         |   |
| Maintain on a Quarterly Basis:                 |   |                                |      |       |   |         |   |
| Debt Service Coverage Ratio***                 |   | 1.50:1.00                           |      |       | :1.00  |         | Yes | No |

 

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*Borrowershall not incur a loss for any two consecutive months, and shall not incur anaggregate loss for any fiscal quarter, provided, however, the Profitabilitycovenant shall not be tested for the month ending April 30, 2002 through themonth ending June 30, 2002, For purposes of this covenant, “loss” shall meannet income after taxes of less than $0.00, as reported on Borrower’sconsolidated financial statements.

**Tangible Net Worth to betested for the months ending April 30, 2002 through August 31, 2002.

***TheDebt Service Coverage covenant shall not be tested for the quarter ending June30, 2002.

Borrower only has deposit accounts located at thefollowing institutions:

** **

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| **Comments  Regarding Exceptions:**See  Attached. | **BANK USE ONLY**   |
|---------------------------------------------------|---------------------|
|                                              | Received by:        |   |
| Sincerely,                                        |                | AUTHORIZED SIGNER |
|                                              | Date:               |   |
|                                              |                |   |
| **BORROWER:**                                     | Verified:           |   |
|                                              |                | AUTHORIZED SIGNER |
| **SENTO  CORPORATION**                            | Date:               |   |
|                                              |                |   |
|                                              | Compliance  Status: | Yes     No |
|                                              | By:                 |   |   |   |
|                                              | Name:               |   |   |   |
|                                              | Title:              |   |   |   |
|                                                   |                     |  |  |  |  |  |  |  |  |  |

 

**SENTO TECHNICAL SERVICES CORPORATION**

 
| By:    |   |   |
|--------|--------|--------|
| Name:  |   |   |
| Title: |   |   |
|   |   |   |
|   |   |   |
| Date:  |   |   |
|        |        |        |  |  |

 

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**BORROWING BASE CERTIFICATE**

COLLATERALSCHEDULE

** **
| Borrower: |   | Sento Corporation                     |   | Lender: | Silicon Valley Bank |
|-----------|--------|---------------------------------------|--------|---------|---------------------|
|      |   | Sento Technical Services  Corporation |   |    |                |

 

Commitment Amount:         $300,000,000

 

ACCOUNTS RECEIVABLE

 

| 1.                                                                            | Accounts Receivable Book Value as of  | $                                                     |
|-------------------------------------------------------------------------------|---------------------------------------|-------------------------------------------------------|
| 2.                                                                            | Additions (please explain on reverse) | $                                                     |
| 3.                                                                            | TOTAL ACCOUNTS RECEIVABLE             | $                                                     |
|                                                                          |                                  |                                                  |
| ACCOUNTS RECEIVABLE  DEDUCTIONS (without duplication)                         |                                  |
|                                                                          | a.                                    | Amounts over  90 days due                             | $ |   |
|                                                                          | b.                                    | Balance of 50% over 90 day  accounts                  | $ |   |
|                                                                          | c.                                    | Excess 25% Concentration  Limit*                      | $ |   |
|                                                                          | d.                                    | Foreign Accounts**                                    | $ |   |
|                                                                          | e.                                    | Governmental Accounts                                 | $ |   |
|                                                                          | f.                                    | Contra Accounts                                       | $ |   |
|                                                                          | g.                                    | Promotion or Demo Accounts                            | $ |   |
|                                                                          | h.                                    | Intercompany/Employee  Accounts                       | $ |   |
|                                                                          | i.                                    | Other (please explain on  reverse)                    | $ |   |
| 4.                                                                            |                                  | TOTAL ACCOUNTS RECEIVABLE  DEDUCTION                  | $ |
| 5.                                                                            |                                  | Eligible Accounts (#3 minus  #4)                      | $ |
| 6.                                                                            | LOAN VALUE OF ACCOUNTS (80% of #5)    | $                                                     |
| “Intuit, Inc. and Network  Associates (US) accounts shall not exceed 50% |                                  |
| “Network Associates Europe.                                              |                                  |
|                                                                          |                                  |
| BALANCE                                                                       |                                  |
| 7.                                                                            |                                  | Maximum Loan Amount                                   | $ |
| 8.                                                                            |                                  | Total Funds Available Lesser of #6 or #7              | $ |
| 9.                                                                            |                                  | Present balance owing on Line of Credit               | $ |
| 10.                                                                           |                                  | Outstanding under Sublimits ( ) Term Loan  Commitment | $ |
| RESERVE POSITION (#8 minus  #9 and #10)                                       | $                                     |
|                                                                               |                                       |                                                       |  |  |  |

 

*The undersigned represents and warrants that the foregoingis true, complete and correct, and that the information reflected in thisBorrowing Base Certificate complies with the representations and warranties setforth in the Amended and Restated Loan and Security Agreement between theundersigned and Silicon Valley Bank.*

** **

COMMENTS:

** **

 

** **

 
| **SENTO CORPORATION** | **SENTO TECHNICAL SERVICES CORPORATION** |
|-----------------------|------------------------------------------|
|                  |                                     |
| By:                   |                                     |   | By: |   |   |
| Name:                 |                                     |   | Name: |   |   |
| Title:                |                                     |   | Title: |   |   |
|                  |                                     |   |   |   |   |
| Date:                 |                                     |   |   |   |   |
|                       |                                          |  |  |  |  |  |  |  |  |  |  |

** **
|   | BANK USE ONLY  |
|--------|----------------|
|   |           |
|   | Rec’d By: |   |
|   |           | Auth. Signer |
|   | Date:          |   |
|   |           |
|   | Verified       |   |
|   |           | Auth. Signer |
|   | Date:          |   |

 

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