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:
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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:
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Borrower shall
maintain minimum Modified Net Income, tested monthly, as
follows:
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(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.
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For purposes of
the foregoing financial covenants, the following term shall have
the following meaning:
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“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.
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3. Conditional
Modification . The modifications made in
Section 2 hereof are subject to each of the following conditions:
(a) satis
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