EXHIBIT 10.11

 

KBANK

 

CHANGE IN TERMS AGREEMENT

 

Principal

$700,000.00

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Loan Date

10-28-2004

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Maturity

02-15-2005

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Loan No.

220583814

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Call / Coll

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Account

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Officer

PK

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Initials

OJ/SMH

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References in the shaded area are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing “””””” has been omitted due to text length limitations.

 

Borrower:    Avatech Solutions Subsidiary, Inc.    Lender:    K Bank      10715
Red Run Blvd, Ste 101         7F Gwynns Mill Court      Owings Mills, MD 21117
        Owings Mills, MD 21117

 

Principal Amount: $700,000.00   Initial Rate: 7.500%   Date of Agreement: April
5 , 2005

 

DESCRIPTION OF EXISTING INDEBTEDNESS. Original Promissory Note dated 10/28/2004
in the original amount of $700,00.00 amended on 12/21/04 between Avatech
Solutions Subsidiary, Inc. and K Bank.

 

DESCRIPTION OF COLLATERAL. All Inventory, Chattel Paper, Accounts, Equipment and
General Intangibles.

 

DESCRIPTION OF CHANGE IN TERMS. 1. The maturity date of this Note has been
extended until October 15, 2005.

 

2. Due to the extension of the maturity date, the bank will require the borrower
to pay monthly interest payments, due consecutively on the 15th of each month.

 

All other terms and conditions of the Original Note and Original Loan Documents
remain in full force and effect.

 

PROMISE TO PAY. Avatech Solutions Subsidiary, Inc. (“Borrower”) promises to pay
to K Bank (“Lender”), or order, in lawful money of the United States of America,
the principal amount of Seven Hundred thousand and 00/100 Dollars ($700,000.00)
or so much as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance.

 

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on February 15, 2005. Unless otherwise agreed
to or required by applicable law, payments will be applied first to any accrued
unpaid interest; then to principal; then to any unpaid collection costs; and
then to any late charges. Interest on this Agreement is computed on a 365/360
simple interest basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender’s address shown above or at such other place
as lender may designate in writing.

 

VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an independent index which is the Wall
Street Prime rate (the “Index”). The index is not necessarily the lowest rate
charged by the Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notice to
Borrower. Lender will tell Borrower the current index rate upon Borrower’s
request. The interest rate change will not occur more often than each day.
Borrower understands that Lender may take loans based on other rates as well.
The index currently is 5.500% per annum. The interest rate to be applied to the
unpaid principal balance of the Note will be at a rate of 2.000 percentage
points over the index, adjusted if necessary for any minimum and maximum rate
limitations described below, resulting in an initial rate of 7.500% per annum.
Notwithstanding the foregoing, the variable interest rate or rates provided for
in the Note will be subject to the following minimum and maximum rates. NOTICE:
Under no circumstances will the interest rate on the Note be less than 7.500%
per annum or more than the maximum rate allowed by applicable law.

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PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower or Borrower’s obligation to continue to make payments.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked “paid in full”, “without recourse”, or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Agreement, and Borrower will remain
obligated to pay any further amount owed to lender. All written communications
concerning disputed amounts, including ay check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or
that is tendered with other conditions or limitations or as full satisfaction of
a disputed amount must be mailed or delivered to: K Bank, 7F GWYNNS MILL COURT,
OWINGS MILLS, MD 21117.

 

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $100.00, whichever is greater.

 

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, at Lender’s option, and if permitted by applicable law, Lender may add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). Upon default, Lender, at its option, may, if permitted under
applicable law, increase the variable interest rate on this Agreement to 4.000
percentage points over the index. The interest rate will not exceed the maximum
permitted by applicable law.

 

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

 

Payment Default. Borrower fails to make any payment when due under the
Indebtedness.

 

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower defaults under any loan, extension
of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower’s property or Borrower’s ability to perform Borrower’s
obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either nor or at the
time made or furnished or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s existence as a going
business, or a trustee or receiver is appointed for Borrower or for all or a
substantial portion of the assets of Borrower, or Borrower makes a general
assignment for the benefit of Borrower’s creditors, or Borrower files for
bankruptcy, or an involuntary bankruptcy petition is filed against Borrower and
such involuntary petition remains undismissed for sixty (60) days.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, Agreement of even date,
so that repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Indebtedness. This
includes a garnishment of any of Borrower’s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Borrower as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture proceeding
and deposits with lender monies or a surety bond for the creditor or forfeiture
proceeding, in any amount determined by lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness evidenced by this Note.

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Change in Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.

 

Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.

 

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all its accrued unpaid interest, together with all
other applicable fees, costs and charges, if any, immediately due and payable,
and then Borrower will pay that amount.

 

attorneys’ fees; expenses. Subject to any limits under applicable law, upon
default, Borrower agrees to pay Lender’s attorneys’ fees and all of Lender’s
other collection expenses, whether or not there is a lawsuit, including without
limitation legal expenses for bankruptcy proceedings.

 

JURY WAIVER. LENDER AND BORROWER EACH HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO WHICH LENDER OR BORROWER MAY BE PARTIES, ARISING UT OF, OR IN
ANY WAY PERTAINING TO, THIS AGREEMENT. IT IS AGREED THAT THIS WAIVER CONSTITUTES
A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY LENDER
AND BORROWER, AND LENDER AND BORROWER EACH HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
BORROWER FURTHER REPRESENTS THAT BORROWER HAS BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF BORROWER’S OWN FREE WILL, AND THAT BORROWER HAS HAD THE OPPORTUNITY
TO DISCUSS THIS WAIVER WITH COUNSEL.

 

GOVERNING LAW. This Agreement will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Maryland. This
Agreement has been accepted by Lender in the State of Maryland.

 

CONFESSED JUDGMENT. UPON THE OCCURRENCE OF A DEFAULT, BORROWER HEREBY AUTHORIZES
ANY ATTORNEY DESIGNATED BY LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR BORROWER IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR HEARING
AGAINST BORROWER IN FAVOR OF LENDER FOR, AND IN THE AMOUNT OF, THE UNPAID
BALANCE OF THE PRINCIPAL AMOUNT OF THIS AGREEMENT, ALL INTEREST ACCRUED AND
UNPAID THEREON, ALL OTHER AMOUNTS PAYABLE BY BORROWER TO LENDER UNDER THE TERMS
OF THIS AGREEMENT OR ANY OTHER AGREEMENT, DOCUMENTS, INSTRUMENT EVIDENCING,
SECURING OR GUARANTYING THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT, COSTS OF
SUIT, AND ATTORNEYS’ FEES OF FIFTEEN PERCENT (15%) OF THE UNPAID BALANCE OF THE
PRINCIPAL AMOUNT OF THIS AGREEMENT AND INTEREST THEN DUE HEREUNDER.

 

Borrower hereby releases, to the extent permitted by applicable law, all errors
and all rights of exemption, appeal, stay of execution, inquisition, and other
rights to which Borrower may otherwise be entitled under the laws of the United
States or of any state or possession of the United States now in force and which
may hereafter be enacted. The authority and power to appear for and enter
judgment against Borrower shall not be exhausted by one or more exercises
thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one or
more occasions or from time to time in the same or different jurisdictions as
often as Lender shall deem necessary or desirable, for all of which this
Agreement shall be a sufficient warrant.

 

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $28.00 if Borrower
makes a payment on Borrower’s loan and the check with which Borrower pays is
dishonored on the second presentment.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would

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be prohibited by law. Borrower authorizes Lender, to th extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze
all such accounts to allow Lender to protect Lender’s charge and setoff rights
provided in this paragraph.

 

LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested only in writing by Borrower or as provided
in this paragraph. All communications, instructions, or directions by telephone
or otherwise to lender are to be directed to Lender’s office shown above. The
following persons currently are authorized to request advances and authorize
payments under the line of credit until Lender receives from Borrower, at
Lender’s address shown above, written notice of revocation of their authority:
Christopher D. Olander, Exec. V.P. of Avatech Solutions Subsidiary, Inc, Donald
R. Walsh, Chief Exec Officer; Karen L. Strayer, Tax and Compliance Mgr.; and
Catherine Dodson, Controller. Borrower agrees to be liable for all sums either:
(A) advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower’s accounts with Lender. The unpaid principal balance
owing on this Agreement at any time may be evidenced by endorsements on this
Agreement or by Lender’s internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Agreement if: (A)
Borrower or any guarantor is in default under the terms of this Agreement or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Agreement; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s
guarantee of this Agreement or any other loan with Lender; or (D) Borrower has
applied funds provided pursuant to this Agreement other than those authorized by
Lender.

 

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender’s right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.

 

GUARANTORS ACKNOWLEDGEMENT. The undersigned Guarantors hereby acknowledge that
the Note evidencing the indebtedness of Avatech Solutions Subsidiary, Inc. to K
Bank, the same dated 10/28/2004 and to which they are Guarantors, has been
modified by this Change in Terms Agreement of even date, so that the aforesaid
note, which is the subject of the Guaranty is the same as that attached hereto.

 

CONSENT TO JURISDICTION. Borrower irrevocably submits to the jurisdiction of any
state or federal court sitting in the State of Maryland over any suit, action,
or proceeding arising out of or relating to this Agreement. Borrower irrevocably
waives, to the fullest extent permitted by law, any objection that Borrower may
now or hereafter have to the laying of venue of any such suit, action, or
proceeding brought in any such court and any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment in any such suit, action, or proceeding brought in any
such court shall be conclusive and binding upon Borrower and may be enforced in
any court in which Borrower is subject to jurisdiction by a suit upon such
judgment provided that service of process is effected upon Borrower as provided
in this Agreement or as otherwise permitted by applicable law.

 

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on
transfer of Borrower’s interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their heirs, personal representatives, successors
and assigns. If ownership of the Collateral becomes vested in a person other
than Borrower, Lender, without notice to Borrower, may deal with Borrower’s
successors with reference to this Agreement and the Indebtedness by way of
forbearance or extension without releasing Borrower from the obligations of this
Agreement or liability under the indebtedness.

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NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: K Bank 7F GWYNNS
MILL COURT OWINGS MILLS, MD 21117.

 

MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this
fact will not affect the rest of the Agreement. Borrower does not agree or
intend to pay, and Lender does not agree or intend to contract for, charge,
collect, take, reserve or receive (collectively referred to herein as “charge or
collect”), any amount in the nature of interest or in the nature of a fee for
this loan, which would in any way or event (including demand, prepayment, or
acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the law
of the State of Maryland (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be applied
first to reduce the principal balance of this loan, and when the principal has
been paid in full, be refunded to Borrower. Lender may delay or forgo enforcing
any o fits rights or remedies under this Agreement without losing them. Borrower
and any other person who signs, guarantees or endorses this Agreement, to the
extent allowed by law, waives presentment, demand for payment, and notice of
dishonor. Upon any change in the terms of this Agreement, and unless otherwise
expressly stated in writing, no party who signs this Agreement, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender’s security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.

 

APPLICABLE LENDING LAW. This loan is being made under the terms and provisions
of Subtitle 9 of Title 12 of the Maryland Commercial Law Article.

 

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT.

 

THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

CIT SIGNERS:

 

AVATECH SOLUTIONS SUBSIDIARY, INC.     By:  

    /s/ Christopher D. Olander

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  (Seal)     Christopher D. Olander, Executive Vice President of         Avatech
Solutions Subsidiary, Inc.     AVATECH SOLUTIONS, INC.     By:  

    /s/ Christopher D. Olander

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  (Seal)     Christopher D. Olander, Executive Vice President of         Avatech
Solutions, Inc.     X  

    /s/ William James Hindman

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  (Seal)     William James Hindman, Guarantor **    

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** Notary Required