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10.12 First and Second Amendments to Loan and Security Agreement with Coast
Business Credit
First Amendment to Loan and Security Agreement
Borrower: Virtual Technology Corporation
Address: 0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Borrower: GTI Acquisition Corporation
Address: 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxxx, XX 00000
Borrower: T2 Acquisition Corporation
Address: 0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Date: December 10, 1999
THIS FIRST AMENDMENT TO THE LOAN AND SECURITY AGREEMENT is entered into as of
the above date between COAST BUSINESS CREDIT, a division of Southern Pacific
Bank ("Coast"), a California corporation, with offices at 00000 Xxxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and Virtual Technology
Corporation, GTI Acquisition Corporation and T2 Acquisition Corporation (jointly
and severally, the "Borrower") whose chief executive offices are located
respectively at the above addresses ("Borrower's Addresses"). This Amendment
shall for all purposes be deemed to be a part of the Loan and Security Agreement
("Loan Agreement"), and the same is an integral part of the Loan Agreement.
CONSENT AND APPROVAL
1. Coast hereby consents and approves Borrower's request to add T2
Acquisition Corporation, a Minnesota Corporation ("T2") as a co-borrower,
jointly and severally liable for all Obligations under the Loan Agreement and
all documents related thereto (collectively, "Loan Documents").
2. T2 agrees to be bound by all of the terms and conditions in the Loan
Documents, and to be liable, jointly and severally, for all Obligations
thereunder whether now existing or hereinafter arising.
AMENDMENT
1. The Loan Documents are hereby amended in all respects to define
Borrower to include, jointly and severally, T2. All other terms and conditions,
as amended, shall remain the same, and are hereby ratified and affirmed.
2. Section 2.1 (b) of the Schedule shall be amended as follows:
"Inventory Loans, subject to an appraisal acceptable to Coast, in an
amount not to exceed the lesser of:
(1) Fifty percent (50%) of the value of Virtual Technology Corporation
and GTI Acquisition Corporation's Eligible Inventory (as defined in Section 1 of
the Agreement), calculated at the lower of cost or market value and determined
on a first-in, first-out basis, plus
(2) Forty-five percent (45%) of the value of T2 Acquisition
Corporation's Eligible Inventory (as defined in Section 1 of the Agreement),
calculated at the lower of cost or market value and determined on a first-in,
first-out basis, or
(3) Five Million Dollars ($5,000,000.00), plus"
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3. Section 2 of the Schedule is hereby amended to add the
following sub-paragraph at the end of the existing section:
"The availability of the Inventory Loans advanced against T2's Eligible
Inventory, as set forth in Section 2.1 (b) (2), is subject to Coast's receipt of
a final appraisal of the T2 Inventory being not less than fifty percent (50%) of
Orderly Liquidation Value."
4. Section 3.2 of the Schedule entitled "Facility Fee" is hereby
amended to substitute "$6,000" in place of "$5,000".
5. Section 8.1 of the Schedule is hereby amended to add the following
sub-paragraphs:
17. Virtual Technology Corporation ("VTC") shall execute and issue an
additional warrant to Coast with respect to shares of voting common stock of VTC
representing 250,000 shares of common stock with a term of three (3) years and
an aggregate exercise price equal to the average stock price of the past thirty
(30) trading days immediately preceding the date of the First Amendment to the
Loan and Security Agreement. The warrant shall include standard and customary
issuer representations, warranties and such other provisions as Coast shall
require, in form and substance acceptable to Coast.
18. Borrower shall as of January 1, 2000, and at all times thereafter,
maintain a minimum consolidated Tangible Net Worth of not less than a negative
Three Million Five Hundred Thousand Dollars ($3,500,000.00), measured monthly."
6. Section 8.3 of the Schedule is hereby amended to add the following
sub-paragraph:
"Quarterly inventory appraisals (desktop only), as soon as available,
and in any event within forty-five (45) days after the end of each fiscal
quarter of Borrower."
7. Section 9.1 of the Schedule entitled "Maturity Date" is hereby amended
to substitute "March 31, 2003" in place of "March 31, 2002".
8. Section 9.1 of the Schedule entitled "Early Termination Fee" is hereby
amended to read as follows:
"An amount equal to the greater of (i) an amount equal to all interest
due and payable during the six (6) months immediately preceding the effective
date of termination, or (ii) an amount equal to the average monthly interest due
and payable based on the greater of the six (6) month monthly interest
immediately preceding the effective date of termination or, if the effective
date of termination is less than six (6) months from the Closing Date, an amount
equal to the average monthly interest due hereunder multiplied by the number of
full or partial months from the effective date of termination to the Maturity
Date, or (iii) an amount equal to the average monthly interest accrued during
the six (6) months immediately preceding the effective date of termination
multiplied by the number of full or partial months from the effective date of
termination to the Maturity Date."
VARIANCE FROM FINANCIAL COVENANTS
1. Coast hereby consents and agrees to waive Borrower's failure to comply
with the minimum consolidated Tangible Net Worth provision set forth in Section
8.1 (13) of the Schedule for the months September, 1999 and October, 1999, and
only as to those two months.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF FIRST AMENDMENT
1. T2 shall comply with each and every condition precedent contained in
the Loan Documents.
2. Borrowers' execution and return of this First Amendment.
3. Borrowers' execution and return of a Stock Pledge, in form and
substance acceptable to Coast, pledging all of the stock of T2 as additional
Collateral (as defined in Section 1 of the Loan and Security Agreement).
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4. Borrower shall pay Coast a Restructuring Fee by way of an additional
Warrant, in form and substance acceptable to Coast, for an additional 200,000
shares of VTC, as set forth above under Amendment Section 5.
5. Borrower shall pay Coast a Waiver Fee by way of an additional Warrant,
in form and substance acceptable to Coast, for an additional 50,000 shares of
VTC, as set forth above under Amendment Section 5.
6. Borrowers' execution and return of a Security Agreement in Patent and
Trademarks, in form and substance acceptable to Coast, assigning rights in and
to all trademarks acquired from Tech Squared, Inc.
7. Borrowers' delivery of a fully executed assignment from Tech Squared,
Inc. to T2 of Tech Squared, Inc.'s trademarks.
8. Coast's receipt and approval of a fully executed copy of the Asset
Purchase Agreement and all Schedules and Exhibits thereto between T2 and Tech
Squared, Inc.
9. Confirmation, in form and substance acceptable to Coast, that all
conditions to the Tech Squared, Inc. Asset Purchase Agreement have been
satisfied and title to all assets transferred to T2.
10. Coast's receipt and approval of an Opinion of Counsel, in form and
substance satisfactory to Coast, in connection with the transaction contemplated
in this First Amendment.
11. Confirmation, in form and substance acceptable to Coast, of Borrower's
receipt in December 1999 of an equity infusion of not less than Two Million
Dollars ($2,000,000.00).
EXCEPT AS EXPRESSLY PROVIDED FOR HEREIN, ALL OF THE TERMS AND CONDITIONS OF THE
LOAN AGREEMENT AND ALL OTHER DOCUMENTS AND AGREEMENTS BETWEEN COAST AND
BORROWER, AS AMENDED, SHALL CONTINUE IN FULL FORCE AND EFFECT AND THE SAME ARE
HEREBY RATIFIED AND AFFIRMED. THE WAIVERS CONTAINED HEREIN DO NOT CONSTITUTE A
WAIVER OF ANY OTHER PROVISION OR TERM OF THE LOAN AGREEMENT NOR ANY RELATED
DOCUMENT OR AGREEMENT, NOR AN AGREEMENT TO WAIVE ANY TERM OR CONDITION OF THE
LOAN AGREEMENT NOR ANY RELATED DOCUMENT OR AGREEMENT IN THE FUTURE.
Borrower:
VIRTUAL TECHNOLOGY CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------------------
Xxxxxxx Xxxxxxxx, President
And by: /s/ Xxxx X. Xxxxxxxxx
------------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial Officer
Borrower:
GTI ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------------------
Xxxxxxx Xxxxxxxx, President
And by: /s/Xxxx X. Xxxxxxxxx
------------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial Officer
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Coast:
COAST BUSINESS CREDIT
By: /s/ Xxxx Xxxxxx
----------------------------------------------------
Xxxx Xxxxxx, Vice President
The undersigned hereby agrees to be bound by all of the terms and conditions set
forth in the Loan Documents, and further expressly agrees to be liable, jointly
and severally, for all outstanding Obligations existing as of the date hereof
and arising hereafter.
Borrower:
T2 ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------------------------
Xxxxxxx Xxxxxxxx, President and
Chief Executive Officer
And by: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial
Officer, Secretary and Treasurer
Second Amendment to Loan and Security Agreement
Borrower: Virtual Technology Corporation
Address: 0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Borrower: GTI Acquisition Corporation
Address: 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxxx, XX 00000
Borrower: T2 Acquisition Corporation
Address: 0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Date: December 15, 1999
THIS SECOND AMENDMENT TO THE LOAN AND SECURITY AGREEMENT is entered into as of
the above date between COAST BUSINESS CREDIT, a division of Southern Pacific
Bank ("Coast"), a California corporation, with offices at 00000 Xxxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and Virtual Technology
Corporation, GTI Acquisition Corporation and T2 Acquisition Corporation (jointly
and severally, the "Borrower") whose chief executive offices are located
respectively at the above addresses ("Borrower's Addresses"). This Amendment
shall for all purposes be deemed to be a part of the Loan and Security Agreement
("Loan Agreement"), and the same is an integral part of the Loan Agreement.
RECITALS
1. Coast and Borrower entered into a First Amendment to the Loan and
Security Agreement as of December 10, 1999.
2. Condition Precedent to Effectiveness of First Amendment No. 11
("Condition No. 11") requires Borrower's receipt in December 1999 of an equity
infusion of not less than Two Million Dollars ($2,000,000.00).
3. Borrower has requested that Coast extend additional credit as if the
First Amendment is effective even though Borrower, to date, is unable to satisfy
Condition No. 11.
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LIMITED AND CONDITIONAL WAIVER FROM FINANCIAL COVENANTS
1. Coast hereby consents and agrees to a limited, conditional waiver of
Condition No. 11 as follows:
(a) Coast will deem the First Amendment effective upon Coast's receipt, in
form and substance acceptable to Coast, of Borrower's receipt of an equity
infusion of not less than One Million Dollars ($1,000,000.00) in December 1999.
CONDITION OF WAIVER
1. On or before December 31, 1999, Borrower shall confirm its receipt, in
form and substance acceptable to Coast, of a total equity infusion in December
1999 of not less than Two Million Dollars ($2,000,000.00), inclusive of the One
Million Dollars ($1,000,000.00) that is a condition precedent to the
effectiveness of this Amendment.
AGREEMENT OF THE PARTIES
1. Coast and Borrower agree that Borrower's failure to satisfy Condition
of Waiver No. 1, above, shall be an Event of Default under the Loan Agreement.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECOND AMENDMENT
1. Borrowers' execution and return of this Second Amendment.
2. Coast's receipt of confirmation, in form and substance acceptable to
Coast, of Borrower's receipt of an equity infusion of not less than One Million
Dollars ($1,000,000.00) in December 1999.
EXCEPT AS EXPRESSLY PROVIDED FOR HEREIN, ALL OF THE TERMS AND CONDITIONS OF THE
LOAN AGREEMENT AND ALL OTHER DOCUMENTS AND AGREEMENTS BETWEEN COAST AND
BORROWER, AS AMENDED, SHALL CONTINUE IN FULL FORCE AND EFFECT AND THE SAME ARE
HEREBY RATIFIED AND AFFIRMED. THE WAIVERS CONTAINED HEREIN DO NOT CONSTITUTE A
WAIVER OF ANY OTHER PROVISION OR TERM OF THE LOAN AGREEMENT NOR ANY RELATED
DOCUMENT OR AGREEMENT, NOR AN AGREEMENT TO WAIVE ANY TERM OR CONDITION OF THE
LOAN AGREEMENT NOR ANY RELATED DOCUMENT OR AGREEMENT IN THE FUTURE.
Borrower:
VIRTUAL TECHNOLOGY CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxx, President
And by: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial Officer
Borrower:
GTI ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxx, President
And by: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial Officer
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Borrower:
T2 ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxx, President
and Chief Executive Officer
And by: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxxxx, Chief Financial
Officer, Secretary and Treasurer
Coast:
COAST BUSINESS CREDIT
By: /s/ Xxxxx Xxxxxxx
------------------------------------------------
Xxxxx Xxxxxxx, Vice President
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