Exhibit 10.3

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Second Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of June 24, 2005, by and between Venture Banking Group, a
division of Greater Bay Bank N.A. (“Bank”) and FOCUS ENHANCEMENTS, INC.
(“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated
as of November 15, 2004, as amended (the “Agreement”).  Borrower and Bank desire
to amend certain provisions of the Agreement, all in accordance with the terms
of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             AMENDMENTS TO AGREEMENT.  THE AGREEMENT IS HEREBY AMENDED AS
FOLLOWS:

 

(A)           THE FOLLOWING NEW DEFINED TERMS ARE ADDED TO SECTION 1.1 IN THEIR
PROPER ALPHABETICAL ORDER:

 

“Committed Bridge Line” means a credit extension of up to Two Million Five
Hundred Thousand Dollars ($2,500,000).

 

“Bridge Advance” or “Bridge Advances” means a loan advance under the Committed
Bridge Line.

 

“Bridge Maturity Date” means December 24, 2006.

 

(B)           A NEW SECTION 2.1.2 IS ADDED TO THE AGREEMENT, WHICH SHALL READ AS
FOLLOWS:

 

2.1.2        Bridge Advances.

 

(a)           Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Bridge Advances to Borrower in an aggregate outstanding
amount not to exceed the Committed Bridge Line.  Subject to the terms and
conditions of this Agreement, amounts borrowed pursuant to this Section 2.1.2
may be repaid and reborrowed at any time prior to the Bridge Maturity Date.

 

(b)           Whenever Borrower desires a Bridge Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Bridge Advance is to be made.  Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto.  Bank is authorized to make Bridge
Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank’s discretion such Bridge Advances are necessary to meet
Obligations which have become due and remain unpaid.  Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered by Bank as a result of such
reliance.  Bank will credit the amount of Bridge Advances made under this
Section 2.1.2 to Borrower’s deposit account.  Borrower shall deliver to Bank a
promissory note in substantially the form of Exhibit C-2.

 

(c)           The Committed Bridge Line shall terminate on the Bridge Maturity
Date, at which time all Bridge Advances under this Section 2.1.2 shall be
immediately due and payable.

 

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(C)           SECTION 2.3(A) IS AMENDED BY ADDING THE FOLLOWING AT THE END
THEREOF:

 

Except as set forth in Section 2.3(b), any Bridge Advances shall bear interest
on the average daily balance thereof at a per annum rate equal to the Prime Rate
plus one percent (1.0%).

 

(D)           EXHIBIT C-2 SHALL BE IN THE FORM OF EXHIBIT C-2 ATTACHED HERETO.

 

2.             LIMITED WAIVER.  BANK HEREBY WAIVES BORROWER’S OBLIGATION TO
COMPLY WITH SECTION 6.8 OF THE AGREEMENT FOR THE FISCAL QUARTERS ENDING JUNE 30,
2005 AND SEPTEMBER 30, 2005.  SUCH WAIVER DOES NOT CONSTITUTE A WAIVER (I) OF
COMPLIANCE WITH THAT SECTION AS OF ANY OTHER DATES, (II) OF ANY OTHER FAILURE BY
BORROWER TO COMPLY WITH THE AGREEMENT OR ANY OTHER EVENTS OF DEFAULT, NOW
EXISTING OR HEREAFTER ARISING, OR (III) BANK’S RIGHT TO REQUIRE COMPLIANCE AT
ALL TIMES WITH THE TERMS AND CONDITIONS OF THE AGREEMENT.  BANK RESERVES ALL
RIGHTS UNDER THE AGREEMENT AND UNDER APPLICABLE LAW.  ALL OTHER TERMS AND
CONDITIONS OF THE AGREEMENT OF OR RELATING TO THE COMMITTED REVOLVING LINE
REMAIN IN FULL FORCE AND EFFECT.

 

3.             CONDITIONS PRECEDENT TO EFFECTIVENESS.  THIS AMENDMENT SHALL
BECOME EFFECTIVE ONLY UPON:

 

(A)           RECEIPT BY THE BANK OF THE FOLLOWING (EACH OF WHICH SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO BANK):

 

(I)            COUNTERPARTS OF THIS AMENDMENT DULY EXECUTED ON BEHALF OF THE
BORROWER AND THE BANK;

 

(II)           COPIES OF RESOLUTIONS OF THE BOARD OF DIRECTORS OR OTHER
AUTHORIZING DOCUMENTS OF BORROWER, AUTHORIZING THE EXECUTION AND DELIVERY OF
THIS AMENDMENT;

 

(III)          A PROMISSORY NOTE EVIDENCING THE AMOUNTS OWING UNDER
SECTION 2.1.2 OF THE AGREEMENT;

 

(IV)          A CREDIT APPLICATION FROM CARL BERG;

 

(V)           AN AFFIRMATION OF GUARANTY AND INTERCREDITOR AGREEMENT BY CARL
BERG;

 

(B)           BANK SHALL HAVE RECEIVED A LOAN FACILITY FEE IN THE AMOUNT OF
TWELVE THOUSAND FIVE HUNDRED DOLLARS ($12,500), PLUS AN AMOUNT EQUAL TO ALL BANK
EXPENSES INCURRED IN CONNECTION WITH THIS AMENDMENT; AND

 

(C)           COMPLETION OF SUCH OTHER MATTERS AND DELIVERY OF SUCH OTHER
AGREEMENTS, DOCUMENTS AND CERTIFICATES AS BANK MAY REASONABLY REQUEST.

 

4.             REPRESENTATION AND WARRANTIES.  BORROWER REPRESENTS AND WARRANTS
THAT THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THE AGREEMENT ARE TRUE AND
CORRECT AS OF THE DATE OF THIS AMENDMENT, AND THAT NO EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING.

 

5.             MISCELLANEOUS.

 

(A)           SUCCESSORS AND ASSIGNS.  THIS AMENDMENT SHALL BE BINDING UPON AND
SHALL INURE TO THE BENEFIT OF BORROWER AND BANK AND THEIR RESPECTIVE SUCCESSORS
AND ASSIGNS; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT AUTHORIZE ANY
ASSIGNMENT BY BORROWER OF ITS RIGHTS OR DUTIES HEREUNDER.

 

(B)           ENTIRE AGREEMENT.  THIS AMENDMENT AND THE LOAN DOCUMENTS CONTAIN
THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND SUPERSEDE ANY OTHER ORAL OR
WRITTEN AGREEMENTS OR UNDERSTANDINGS.

 

(C)           COURSE OF DEALING; WAIVERS.  NO COURSE OF DEALING ON THE PART OF
BANK OR ITS OFFICERS, NOR ANY FAILURE OR DELAY IN THE EXERCISE OF ANY RIGHT BY
BANK, SHALL OPERATE AS A WAIVER THEREOF, AND ANY SINGLE OR PARTIAL

 

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EXERCISE OF ANY SUCH RIGHT SHALL NOT PRECLUDE ANY LATER EXERCISE OF ANY SUCH
RIGHT.  BANK’S FAILURE AT ANY TIME TO REQUIRE STRICT PERFORMANCE BY BORROWER OF
ANY PROVISION SHALL NOT AFFECT ANY RIGHT OF BANK THEREAFTER TO DEMAND STRICT
COMPLIANCE AND PERFORMANCE.  ANY SUSPENSION OR WAIVER OF A RIGHT MUST BE IN
WRITING SIGNED BY AN OFFICER OF BANK.

 

(D)           LEGAL EFFECT.  EXCEPT AS AMENDED BY THIS AMENDMENT, THE LOAN
DOCUMENTS REMAIN IN FULL FORCE AND EFFECT.  IF ANY PROVISION OF THIS AMENDMENT
CONFLICTS WITH APPLICABLE LAW, SUCH PROVISION SHALL BE DEEMED SEVERED FROM THIS
AMENDMENT, AND THE BALANCE OF THIS AMENDMENT SHALL REMAIN IN FULL FORCE AND
EFFECT.  UNLESS OTHERWISE DEFINED, ALL CAPITALIZED TERMS IN THIS AMENDMENT SHALL
HAVE THE MEANING SET FORTH IN THE AGREEMENT.

 

(E)           COUNTERPARTS.  THIS AMENDMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH
TOGETHER SHALL CONSTITUTE ONE INSTRUMENT.

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

 

 

FOCUS ENHANCEMENTS, INC.

 

 

 

 

 

By

/s/ Gary Williams

 

 

 

 

Title

VP of Finance & CFO

 

 

 

 

 

 

VENTURE BANKING GROUP, A DIVISION OF
GREATER BAY BANK N.A.

 

 

 

 

 

By

/s/ Todd Racine

 

 

 

 

Title

Vice President

 

 

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