stbernard_8k1-ex1002.htm


    Exhibit 10.2

     

    MODIFICATION
NO. 1

    


    TO

    


    LOAN
AND SECURITY AGREEMENT

    


    


    This
Modification No. 1 to
Loan and Security Agreements (this
“Modification”)
is entered into this 27 day of February, 2009, by and between St. Bernard
Software, Inc., a Delaware corporation with its principal place of business at
15015 Avenue of Science, San Diego, CA 92128 (“Borrower”) and Partners
for Growth II, L.P. (“PFG”).

     

    Recitals

     

    A.           Borrower
and PFG have entered into that certain Loan and Security Agreement dated as of
July 21, 2008, as amended, restated, or otherwise modified from time to time
(the “Loan
Agreement”), together with such documents, instruments and security
agreements as were executed reasonably contemporaneously with or in connection
with the Loan Agreement, the “Loan
Documents”), pursuant to which PFG has extended and conditionally-agreed
to make available to Borrower certain advances of money.

     

    B.           Borrower
has requested that PFG temporally modify the Modified Net Income covenant set
forth in Section 5 of the Schedule to the Loan Agreement for the reporting
periods ending February 28, 2009 and March 31, 2009.

     

    C.           Subject
to the representations and warranties of Borrower herein and upon the terms and
conditions set forth in this Modification, PFG is willing to modify the Loan
Agreement as set forth herein.

     

    agreement

     

    1.    
Description
of Existing Indebtedness.  Among other Obligations and
indebtedness which may be owing by Borrower to PFG, Borrower is indebted to PFG
pursuant to, among other documents, the Loan Agreement, which provides for a
revolving line of credit in up to a principal amount of One Million Dollars Five
Hundred Thousand Dollars ($1,500,000), of which $750,000 in principal
Indebtedness is outstanding on the date hereof.  Defined terms used
but not otherwise defined herein shall have the same meanings as set forth in
the Loan Agreement.

     

    2.    
Modification
of Loan Agreement.  Section 5 of the Schedule is hereby amended
to read in its entirety as follows:

     

    
      
        	
                

                  5.  FINANCIAL
      COVENANTS

                

              	
                 

              


      

    

    
      	
               
      

            	
              (Section
      5.1):

            	
              Borrower
      shall comply with the following financial covenant.  Compliance
      shall, except as to periods expressly not tested below, be tested as of the end
      of each month, on a rolling
      three-month basis, except as otherwise specifically provided
      below:

            


    

    


    
      
        
           


        

        
          1

          
            

          

        

        
           


        

      

    

    


    
      	
               
      

            	
              Modified
      Net Income:

            


    

     

    
      	
               
      

            	
              Borrower
      shall maintain minimum Modified Net Income, tested monthly, as
      follows:

            


    

     

     

    
      	
               
      

            	
              (a)  At
      closing, Modified Net Income of greater than $0.

               

              
                (b)  
      July through December 2008, Modified Net Income of greater than
      $0.

                 

                (c)  
      January 2009, Modified Net Income of ($500,000).  For example only,
      for the one month ended January 2009, Borrower could have a Modified Net
      Income loss of up to $500,000.

                 

                (d) 
      February and March 2009, not tested, but monthly Modified Net Income for
      such months included in later three-month rolling
      calculations.

                 

                (e)  
      April 2009 through the Maturity Date, Modified Net Income of greater than
      $0.

                 

                The
      minimum Modified Net Income requirements of clauses (a) through (e) may be
      modified as follows: Twenty-five percent (25%) of Modified Net Income from
      the calendar quarter immediately prior to the calendar quarter being
      measured may be applied towards meeting the minimum Modified Net Income
      requirement in the currently-measured calendar quarter, up to a maximum
      $500,000 loss for such quarter.  For example only, if Borrower
      generates $1,000,000 in Modified Net Income for the calendar quarter of
      April, May and June, then Borrower could apply $250,000 [25% x $1,000,000]
      towards meeting the minimum Modified Net requirement covenant in the July,
      August and September quarter.  July, August and September would still
      be measured on a rolling three month basis, but each rolling three month
      test could not produce a Modified Net Loss of greater than $250,000 for
      each month the covenant is
measured.

              

            


    

    


    
      	
               
      

            	
              Definitions.

            	
              For
      purposes of the foregoing financial covenants, the following term shall
      have the following meaning:

            


    

    


    
      	
               
      

            	
              “Modified
      Net Income” means total Billings less GAAP expenses of COGS, operating
      expenses, plus amortization of stock based compensation, depreciation,
      estimates for bad debt and other non-cash accounting charges such as
      impairment of goodwill or long lived
assets.

            


    

    


     

    


    
      
        
           


        

        
          2

          
            

          

        

        
           


        

      

    

    


    3.    
Conditional
Modification.   The modifications made in Section 2 hereof
are subject to each of the following conditions: (a) satisfaction of the terms
of Section 6 hereof; (b) there being no Default or Event of Default under the
Loan Documents, and (c) there being no default or Event of Default under
Borrower’s loans with Silicon Valley Bank, or in the alternative, at all times
there is in effect a duly executed forbearance or waiver agreement between
Borrower and Silicon Valley Bank under which Silicon Valley Bank agrees waive
any and all existing defaults (noticed or unnoticed) and to forbear from
exercising remedies under the Senior Loan Documents.

     

    4.    
Borrower’
Representations And Warranties.  Borrower represents and
warrants that:

     

    (a)    
immediately upon giving effect to this Modification (i) 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 (ii) no Event of
Default has occurred and is continuing;

     

    (b)    
Borrower has the corporate power and authority to execute and deliver
this Modification and to perform its obligations under the Loan Agreement, as
amended by this Modification;

     

    (c)    
the certificate of incorporation, bylaws and other organizational
documents of Borrower delivered to PFG on the date of the Loan Agreement remain
true, accurate and complete and have not been amended, supplemented or restated
and are and continue to be in full force and effect;

     

    (d)    
the execution and delivery by Borrower of this Modification and the
performance by Borrower of its obligations under the Loan Agreement has been
duly authorized by all necessary corporate action on the part of
Borrower;

     

    (e)    
this Modification has been duly authorized, executed and delivered by
Borrower and constitutes a binding obligation of Borrower, enforceable against
Borrower, 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;

     

    (f)    
this Modification does not require the consent of any third party or such
consent has been secured; and

     

    (g)    
as of the date hereof, it has no defenses against the obligations to pay
any amounts under the Obligations and it has no claims of any kind against
PFG.  Borrower acknowledges that PFG has acted in good faith and has
conducted in a commercially reasonable manner its relationships with Borrower in
connection with this Modification and in connection with the Loan
Documents.

     

    


    
      
        
           


        

        
          3

          
            

          

        

        
           


        

      

    

    


    Borrower
understands and acknowledges that PFG is entering into this Modification in
reliance upon, and in partial consideration for, the above representations and
warranties, and agrees that such reliance is reasonable and
appropriate.

     

    5.    
Limitation.  The
conditional modifications set forth in this Modification shall be limited
precisely as written and shall not be deemed (a) to be a forbearance, waiver or
modification of any other term or condition of the Loan Agreement or of any
other instrument or agreement referred to therein or to prejudice any right or
remedy which PFG may now have or may have in the future under or in connection
with any Loan Document or any instrument or agreement referred to therein; (b)
to constitute a modification or waiver of any rate of interest applicable to
outstanding monetary Obligations, (c) to be a consent to any future amendment or
modification, forbearance or waiver to any instrument or agreement the execution
and delivery of which is consented to hereby, or to any waiver of any of the
provisions thereof; or (d) to limit or impair PFG’s right to demand strict
performance of all terms and covenants as of any date.  Except as
expressly amended hereby, the Loan Documents shall continue in full force and
effect.

     

    6.    
Effectiveness.  Subject
to the satisfaction of the conditions precedent set forth below, this
Modification shall become effective on the date hereof, but shall continue to be
subject to the satisfaction of all the following conditions:

     

    6.1    
Execution and
Delivery.  Borrower shall have duly authorized, executed and
delivered this Modification to PFG.

     

    6.2    
Update to
Representations. To the extent required to make the Representations true
and correct in all material respects as of the date hereof, Borrower shall
promptly update the Representations.

     

    6.3    
Payment of Amendment
Fee.  Borrower shall have paid upon execution hereof an
Amendment Fee to PFG in the amount of $5,000.

     

    6.4    
Payment of PFG
Expenses.  Borrower shall have paid upon demand all PFG costs
and expenses (including all reasonable attorneys’ fees and reasonable expenses)
incurred in connection with this Modification.

     

    7.    
Counterparts.  This
Modification may be signed in any number of counterparts, and by different
parties hereto in separate counterparts, with the same effect as if the
signatures to each such counterpart were upon a single
instrument.  All counterparts shall be deemed an original of this
Modification.

     

    8.    
Integration;
Construction.  This Modification, the Loan Agreement and any
documents executed in connection herewith or therewith or pursuant hereto or
thereto contain the entire agreement between the parties with respect to the
subject matter hereof and supersede all prior agreements, understandings, offers
and negotiations, oral or written, with respect thereto and no extrinsic
evidence whatsoever may be introduced in any judicial or arbitration proceeding,
if any, involving this Modification; except that any financing statements or
other agreements or instruments filed by PFG with respect to Borrower shall
remain in full force and effect. The title of this Agreement and section
headings are for the readers’ convenience only and shall be ignored for purposes
of integration into the Loan Agreement.

     

    


    
      
        
           


        

        
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    9.    
Governing
Law; Venue.  THIS MODIFICATION
SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA.  Borrower and PFG each submit to the
exclusive jurisdiction of the State and Federal courts in San Francisco County,
California.

     

    


     

    


     

    [Signature
Page Follows]

     

     

     

     

     

     

     

     

     

     

     

     

    


    
      
        
           


        

        
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    IN WITNESS WHEREOF, the parties hereto
have caused this Modification to be executed as of the date first written
above.

     

    


    Borrower:

     

    
      	
              ST.
      BERNARD SOFTWARE, INC.

               

              By
      /s/  John T.
      Burke                        
      

              CFO

              By
      /s/  Thalia
      Gietzen                        

               Corporate
      Controller

            	
              PARTNERS
      FOR GROWTH II, L.P.

               

              By
      /s/ Andrew
      Kahn                                   
      

              Name:
      Andrew Kahn

              Title: 
      Manager, Partners for Growth II, LLC

              Its General
      Partner

               

               

            


    

    


     

     

     

     

     

     

     

     

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