Document:

exv10w27

Exhibit 10.27

AMENDMENT NO. 3 TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

     AMENDMENT NO. 3 dated as of January 29, 2010 (“Amendment”) between VIRCO MFG.
CORPORATION, a Delaware corporation (the “Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (the “Bank”), amending the Second Amended and Restated Credit Agreement dated
as of March 12, 2008 (as amended, restated, supplemented or otherwise modified, the “Credit
Agreement”) between the Borrower and the Bank. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined.

     WHEREAS, subject to the satisfaction of the conditions set forth herein, the Borrower and the
Bank have agreed to certain amendments to the Credit Agreement.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and
valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties
hereto agree as follows:

     Section 1. Amendment to Section 5.5 of the Credit Agreement. Section 5.5 of the Credit
Agreement is hereby amended and restated in its entirety as follows:

     Section 5.5. Merger, Consolidation, Transfer Of Assets.

     Merge into or consolidate with any other entity (except for a merger of a Subsidiary into, or
a consolidation of a Subsidiary with, the Borrower or a Guarantor); make any substantial change in
the nature of the business of Borrower and its Subsidiaries as conducted as of the date hereof;
acquire all or substantially all of the assets of any other entity (except by means of a merger of
a Subsidiary into, or a consolidation of a Subsidiary with, the Borrower or a Guarantor); nor sell,
lease, transfer or otherwise dispose of any assets of Borrower or any Subsidiary except:

     (a) dispositions of Inventory in the ordinary course of business;

     (b) disposition of obsolete or worn out Equipment in the ordinary course of business;

     (c) the use or transfer of money or cash equivalents in a manner that is not prohibited by the
terms of this Agreement or the other Loan Documents; and

     (d) disposition of a Subsidiary’s assets by means of a merger of a Subsidiary into, or a
consolidation of a Subsidiary with, the Borrower or a Guarantor.

     Section 2. Amendment to Section 5.10 of the Credit Agreement. Section 5.10 of the Credit
Agreement hereby is amended and restated in its entirety as follows:

     Section 5.10. Annual Clean Down.

     Permit the LC Usage Amount to exceed $7,500,000 for a period of 30 consecutive days
during each fiscal year of Borrower.

     Section 3. Amendment to Section 5.11 of the Credit Agreement. Section 5.11 of the Credit
Agreement hereby is amended and restated in its entirety as follows:

     Section 5.11 Minimum Net Income.

     For the fiscal year of the Borrower ended January 31, 2010, permit Net Income plus
federal, local and state income taxes as of the end of such fiscal year to be less than
$(500,000), and for any fiscal year of the Borrower thereafter, permit Net Income plus
federal, local and state income taxes as of the end of such fiscal year to be less than
$1.00.

 

 

     Section 4. Amendment to Section 5.13 of the Credit Agreement. The table appearing in Section
5.13 of the Credit Agreement hereby is amended and restated in its entirety as follows:

	 	 	 
	 	 	Maximum Consolidated
	Applicable Fiscal Quarter	 	Leverage Ratio
	Fiscal quarter ended 

January 31, 2010
	 	1.75 to 1.00
	 	 	 
	Fiscal quarter ended 

April 30, 2010
	 	5.00 to 1.00
	 	 	 
	Fiscal quarter ended 

July 31, 2010
	 	6.00 to 1.00
	 	 	 
	Fiscal quarter ended 

October 31, 2010
	 	1.25 to 1.00
	 	 	 
	Fiscal quarter ended 

January 31, 2011
	 	1.75 to 1.00
	 	 	 
	Fiscal quarter ended 

April 30, 2011
	 	5.00 to 1.00
	 	 	 
	Fiscal quarter ended 

July 31, 2011
	 	6.00 to 1.00
	 	 	 
	Fiscal quarter ended 

October 31, 2011
	 	1.25 to 1.00
	 	 	 
	Fiscal quarter ended 

January 31, 2012
	 	1.75 to 1.00

     Section 5. Amendments to Annex A to the Credit Agreement. (a) The following
definitions appearing in Annex A to the Credit Agreement hereby are amended and restated as
follows:

     “Line of Credit Termination Date” means March 1, 2012.

     “Maximum Line of Credit Amount” means, as of any date of determination, an
amount equal to:

     (a) for the period commencing on the Closing Date through and including March
31, 2010, $40,000,000,

     (b) for the period commencing on April 1, 2010 through and including September
30, 2010, $50,000,000,

     (c) for the period commencing on October 1, 2010 through and including October
31, 2010, $40,000,000,

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     (d) for the period commencing on November 1, 2010 through and including January
31, 2011, $20,000,000,

     (e) for the period commencing on February 1, 2011 through and including March
31, 2011, $40,000,000,

     (f) for the period commencing on April 1, 2011 through and including September
30, 2011, $50,000,000,

     (g) for the period commencing on October 1, 2011 through and including October
31, 2011, $40,000,000,

     (h) for the period commencing on November 1, 2011 through and including January
31, 2012, $20,000,000, and

     (i) for the period commencing on February 1, 2012 and thereafter, $40,000,000.

     (b) The definition of “Consolidated Current Ratio” appearing in Annex A to the Credit
Agreement is hereby deleted from Annex A.

     Section 6. Restatement of Exhibit. Exhibit A attached to the Credit Agreement hereby
is amended and restated in the form of Exhibit A attached to this Amendment.

     Section 7. Consent to Merger. Bank hereby consents to the merger of Virco MGMT. Corporation
with and into the Borrower, which merger took effect on January 31, 2010 (the “MGMT
Merger”).

     Section 8. Consent to Amendments. The Guarantor hereby acknowledges and consents to this
Amendment, and affirms and acknowledges that the Guaranty and each other Loan Document to which it
is a party remains in full force and effect and that such Person remains obligated thereunder
without defense, offset or counterclaim of any kind whatsoever, as if such Guaranty or other Loan
Document were executed and delivered to the Bank on the date hereof.

     Section 9. Representations and Warranties. To induce the Bank to enter into this Amendment,
the Borrower represents and warrants to the Bank that:

     (a) Representations and Warranties in Credit Agreement. Each of the
representations and warranties of the Borrower and its Subsidiaries contained in the Credit
Agreement, the other Loan Documents or in any document or instrument delivered pursuant to
or in connection with the Credit Agreement (i) were true and correct when made and
(ii) after giving effect to this Amendment, continue to be true and correct on the date
hereof (except to the extent that such representations and warranties relate expressly to an
earlier date).

     (b)
Authority. The execution and delivery by the Borrower of this Amendment and the
performance by the Borrower of its obligations under this Amendment (i) are within its power
and authority, (ii) have been duly authorized by all necessary proceedings, (iii) do not and
will not conflict with or result in any breach or contravention or any provision of law,
statute, rule or regulation to which the Borrower is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower so as to materially adversely
affect the assets, business or any activity of the Borrower, (iv) do not conflict with any
provision of the certificate of incorporation or bylaws of the Borrower or any agreement or
other instrument binding upon the Borrower, (v) do not and will not require any waivers,
consents or approvals by any of its creditors which have not been obtained, or (vi) do not
and will not require any approval which has not been obtained.

     (c)
Enforceability of Obligations. This Amendment and the Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its terms, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors’ rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

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     (d) No Event of Default. No Event of Default or Default has occurred and is
continuing.

     Section 10. Conditions to Effectiveness. This Amendment shall become effective on the date
when the following conditions precedent have been satisfied:

     (a) The Borrower, the Guarantor and the Bank shall have delivered an executed
counterpart of this Amendment.

     (b) The Bank shall have received each of the following documents, each duly executed by
the parties thereto and in full force and effect:

          (i) a Line of Credit Note; and

          (ii) (1) a duly executed Memorandum of Modification in substantially the form attached
hereto as Exhibit B, together with any customary Mortgage Related Documents relating
thereto, in each case in form and substance reasonably acceptable to the Bank, and (2)
either mortgage modification endorsements to, or date down endorsements to (or re-dated
title insurance policies which replace), the existing title insurance policy issued on the
Closing Date, in any case issued by a nationally recognized title insurance company
reasonably acceptable to the Bank, insuring the Lien of the Mortgage, as amended by such
amendment, as a valid first priority Lien on the Real Property Collateral described therein,
free of any other Liens except as permitted by the Loan Documents.

     (c) The Borrower and the Guarantor shall have delivered to the Bank a certificate,
signed by a duly appointed officer of such Person, dated as of the Second Amendment
Effective Date, certifying as to the incumbency of such officer, and attaching or making
certifications that no changes have been made to the copies last delivered to the Bank of,
the Governing Documents of such Person and any resolutions of such Person approving the
execution of this Amendment.

     (d) Giving effect to the consent to the MGMT Merger set forth in Section 7 hereof, no
Event of Default or Default shall have occurred and be continuing or would result after
giving effect to the transactions contemplated hereby.

     (e) The representations and warranties set forth in Section 9 hereof shall be true and
correct on the effective date of this Amendment.

     (f) No injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated herein shall have
been issued and remain in force by any Governmental Authority against the Borrower, any
Guarantor or the Bank.

     (g) The Borrower shall have paid all reasonable out-of-pocket costs and expenses of the
Bank, to the extent invoices therefor have been presented.

     (h) All other documents and legal matters in connection with the transactions
contemplated by this Amendment shall have been delivered or executed or recorded and shall
be in form and substance satisfactory to the Bank.

     Section 11. Admissions and Acknowledgments. The Borrower and the Guarantor expressly
acknowledges and agrees with each of the following:

     (a) That such Person does not dispute the validity or enforceability of any of the Loan
Documents or any of their respective obligations under any of the foregoing, or the
validity, priority, enforceability, scope or extent of any charge, Lien, security interest
or any other encumbrance of the Bank in, on or against any of the Collateral in any
judicial, administrative or other proceeding;

     (b) That such Person shall not challenge or dispute the validity of any of its
obligations under the Loan Documents to which it is party or any other obligations incurred
by such Person pursuant to the Loan Documents; and

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     (c) That the Indebtedness evidenced by the Loan Documents is secured by first priority,
non-avoidable, perfected, valid and enforceable liens on and security interests in the
Collateral, subject only to Permitted Liens.

     Section 12. Reference to and Effect on Loan Documents.

     (a) Upon the effectiveness of this Amendment, on and after the date hereof, each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of
like import, and each reference in the other Loan Documents to the Credit Agreement, shall
mean and be a reference to the Credit Agreement as amended hereby.

     (b) Except as expressly set forth herein, this Amendment shall not by implication or
otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies
of the Bank under the Credit Agreement or any other Loan Document, and shall not alter,
modify, amend or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Loan Document, all of which are
ratified and affirmed in all respects and shall continue in full force and effect.

     (c) Nothing herein shall be deemed to entitle the Borrower or any Guarantor to a
waiver, amendment, modification or other change of any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any other Loan
Document in similar or difference circumstances.

     (d) This Amendment shall be a Loan Document for all purposes.

     Section 13. Benefits of Amendment. The terms and provisions of this Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns to the extent contemplated by the Credit Agreement.

     Section 14. Interpretation. The Article and Section headings used in this Amendment are for
convenience of reference only and shall not affect the construction hereof.

     Section 15. Execution in Counterparts. This Amendment may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one and the same
Amendment. Faxed signatures of this Amendment shall be binding for all purposes.

     Section 16. Severability. If any provision of this Amendment shall be held to be invalid,
illegal or unenforceable under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such invalidity, illegality or unenforceability, which shall not
affect any other provisions hereof or the validity, legality and enforceability of such provision
in any other jurisdiction.

     Section 17. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. The arbitration provisions of Section 7.11 of the Credit
Agreement are incorporated herein by reference.

     Section 18. Expenses. The Borrower agrees to pay the reasonable out-of-pocket expenses of the
Bank, including but not limited to the reasonable fees, charges and disbursements, including but
not limited to the fees, charges and disbursements of Gibson, Dunn & Crutcher LLP, special counsel
for the Bank, incurred in connection with the preparation, negotiation, execution and delivery of
this Amendment and any subsequent waiver, amendment or modification of the Credit Agreement or any
other Loan Document and the security arrangements in connection herewith or therewith.

     Section 19. No Course of Dealing. The execution and delivery of this Amendment shall not
establish a course of dealing among the Bank, the Borrower and the Guarantors or in any other way
obligate the Bank to hereafter provide any further amendments, waivers, or consents of any kind to
the Borrower and the Guarantors.

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     Section 20. Arm’s Length Agreement. Each of the parties to this Amendment agrees and
acknowledges that this Amendment has been negotiated in good faith, at arm’s length, and not by any
means forbidden by law.

     Section 21. Entire Agreement. This Amendment together with all other instruments, agreements,
and certificates executed by the parties in connection herewith or with reference thereto, embody
the entire understanding and agreement between the parties hereto and thereto with respect to the
subject matter hereof and thereof and supercede all prior agreements, understandings, and
inducements, whether express or implied, oral or written.

[Signature Pages Follow]

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered
as of the date first set forth above.

	 	 	 	 	 
	 	

VIRCO MFG. CORPORATION,

          as the Borrower

 	 
	 	By:  	/s/ Robert E. Dose
 	 
	 	 	Name:  	Robert E. Dose 	 
	 	 	Title:  	Vice President - Finance, Secretary and
Treasurer 	 
	 
	 	VIRCO, INC.,

          as a Guarantor

 	 
	 	By:  	/s/ Robert E. Dose
 	 
	 	 	Name:  	Robert E. Dose 	 
	 	 	Title:  	Vice President - Finance, Secretary and
Treasurer 	 
	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Randy Repp
 	 
	 	 	Name:  	Randy Repp 	 
	 	 	Title:  	Senior Vice President 	 

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EXHIBIT A

FORM OF LINE OF CREDIT NOTE

[See attached.]

EXHIBIT B

FORM OF MEMORANDUM OF MODIFICATION

[See attached.]

AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE

			
	$50,000,000
	 	West Covina, California
	 
	 	Original date: July 31, 2008, as
	 
	 	amended and restated on March 27, 2009
	 
	 	Amended and Restated as of: January 29, 2010

     FOR VALUE RECEIVED, the undersigned VIRCO MFG. CORPORATION (“Borrower”) promises to
pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at San
Gabriel Valley Regional Commercial Banking Office, 1000 Lakes Drive, Suite 250, West Covina,
California, or at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum of Fifty Million
Dollars ($50,000,000), or so much thereof as may be advanced and be outstanding, with interest
thereon, to be computed on each advance from the date of its disbursement as set forth herein.

     This Revolving Line of Credit Note (this “Note”) is the Line of Credit Note issued
pursuant to the Second Amended and Restated Credit Agreement dated as of March 12, 2008 (as
amended, restated, supplemented or otherwise modified, the “Credit Agreement”) between
Borrower and Bank. Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined. Reference hereby is made to the Loan Documents for a description of the
assets in which a Lien has been granted, the nature and extent of the security and the guaranties,
the terms and conditions upon which the Liens and each guaranty were granted and the rights of the
holder of this Note in respect thereof. This Note amends and restates in its entirety the
Revolving Line of Credit Note issued by Borrower to the order of Bank on March 27, 2009 pursuant to
the Credit Agreement, which amended and restated in its entirety that certain Revolving Line of
Credit Note issued by Borrower to the order of Bank on July 31, 2008 pursuant to the Credit
Agreement, and shall not constitute a novation, extinguishment or refinancing of the amounts
outstanding on this date.

     DEFINITIONS:

     As used herein, the following terms shall have the meanings set forth after each, and any
other term defined in this Note shall have the meaning set forth at the place defined:

     (a) “Applicable Margin” means the following percentages per annum, based upon the
Consolidated EBITDA as set forth in the most recent Compliance Certificate received by Bank
pursuant to Section 4.3(f) of the Credit Agreement:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Trailing 12 month	 	 	 	 
	Tier	 	Consolidated EBITDA	 	LIBOR Margin	 	Base Rate Margin
	I
	 	<$10,000,000	 	 	 	3.50	 	 	 	1.00	 
	II
	$	10,000,000 to $14,999,999	 	 	 	3.25	 	 	 	0.75	 
	III
	 	> $15,000,000	 	 	 	3.00	 	 	 	0.50	 

Any increase or decrease in the Applicable Margin resulting from a change in the Consolidated
EBITDA for any relevant period shall become effective as of the first Business Day immediately
following the date a Compliance Certificate is delivered pursuant to Section 4.3(f); provided, however, that if a Compliance
Certificate is not delivered when due in accordance with such Section, then Pricing Tier 1 shall
apply as of the first Business Day

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after the date on which such Compliance Certificate was required to have been delivered. The Applicable Margin in effect from the Second Amendment Effective Date
through the date that the Compliance Certificate (and audited financial statements) required to be
delivered for the fiscal year ended January 31, 2009 is delivered to Bank shall be determined based
upon Pricing Tier 1.

     (b) “Base Rate” means, for any day, a fluctuating rate equal to the highest of: (i)
the Prime Rate in effect on such day, (ii) a rate determined by Bank to be 1.50% above Daily One
Month LIBOR, and (iii) the Federal Funds Rate plus 1.50%.

     (c) “Daily One Month LIBOR” means, for any day, the rate of interest equal to LIBOR
then in effect for delivery for a one (1) month period.

     (d) “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers for the immediately preceding day, as published by the
Federal Reserve Bank of New York; provided that if no such rate is so published on any day, then
the Federal Funds Rate for such day shall be the rate most recently published.

     (e) “Fixed Rate Term” means a period commencing on a Business Day and continuing for
one (1), two (2), three (3), six (6), nine (9) or twelve (12) months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a
principal amount less than $1,000,000; and provided further, that no Fixed Rate Term shall extend
beyond the Line of Credit Termination Date. If any Fixed Rate Term would end on a day which is not
a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.

     (f) “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/8 of 1%) and determined pursuant to the following formula:

	 	 	 	 	 	 	 

	 

	 	LIBOR =
	 	Base LIBOR	 	 
	 

	 	 	 	 

100% - LIBOR Reserve Percentage
	 	 

     (i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank (A) for the purpose of calculating effective rates of interest for loans
making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates of interest
for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of
funds on said date for a period of time approximately equal to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to which such
Fixed Rate Term applies, or (B) for the purpose of calculating effective rates of interest
for loans making reference to Daily One Month LIBOR, as the Inter-Bank Market Offered Rate
in effect from time to time for delivery of funds for one (1) month in amounts approximately
equal to the principal amount of such loans. Borrower understands and agrees that Bank may
base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank
Market.

     (ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted
by Bank for expected changes in such reserve percentage during the term of this Note.

     
(d) “Prime Rate” means at any time the rate of interest most recently announced within
Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one
of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto, and is videnced by the recording thereof after its announcement in such internal publication or
publications as Bank may designate.

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INTEREST:

     (a) Interest. The outstanding principal balance of this Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per
annum equal to the Base Rate in effect from time to time plus the Applicable Margin or (ii) at a
fixed rate per annum determined by Bank equal to LIBOR in effect on the first day of the applicable
Fixed Rate Term plus the Applicable Margin. When interest is determined in relation to the Base
Rate, each change in the rate of interest hereunder shall become effective on the date each Base
Rate change is announced within Bank. With respect to each LIBOR selection hereunder, Bank is
hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable
thereto and any payments made thereon on Bank’s books and records (either manually or by electronic
entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence
of the accuracy of the information noted.

     (b) Selection of Interest Rate Options. At any time any portion of this Note bears
interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed
Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation
to the Base Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any
portion of this Note bears interest determined in relation to the Base Rate, Borrower may convert
all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate
Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the
end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate
option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR
selection, the length of the applicable Fixed Rate Term; provided, however, that if an Event of
Default has occurred and is continuing, Borrower may not elect to continue or convert any Advance
outstanding hereunder into a LIBOR rate loan. Any such notice may be given by telephone (or such
other electronic method as Bank may permit) so long as, with respect to each LIBOR selection,
(A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than
three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to
10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if
Bank, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a
fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Bank,
the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Base Rate interest selection for such advance or the principal
amount to which such Fixed Rate Term applied.

     (c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand,
in addition to any other amounts due or to become due hereunder, any and all (i) withholdings,
interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any Governmental Authority and related in any manner to LIBOR, and (ii) future, supplemental,
emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal
Deposit Insurance Corporation, or similar requirements or costs imposed by any Governmental
Authority or resulting from compliance by Bank with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority and related in any manner
to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of
the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable
allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

     (d) Payment of Interest. Interest accrued on this Note shall be payable on the first
day of each month, commencing April 1, 2009.

     (e) Default Interest. From and after the maturity date of this Note, or such earlier
date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest until paid in full at an increased
rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent
(4%) above the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

     (a) Borrowing and Repayment. Borrower may from time to time during the term of this
Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of
the limitations, terms and

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conditions of this Note and of any document executed in connection with
or governing this Note; provided however, that the total outstanding borrowings under this Note
shall not at any time exceed the principal amount set forth above or such lesser amount as shall at
any time be available hereunder, as set forth in the Credit Agreement. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced hereunder by the holder
hereof less the amount of principal payments made hereon by or for any Borrower, which balance may
be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note
shall be due and payable in full on Line of Credit Termination Date.

     (b) Advances. Advances hereunder, to the total amount of the principal sum stated
above, may be made by the holder at the oral or written request of (i) Robert A. Virtue, Robert
Dose, Doug Virtue or Bassey Yau, any one of them acting alone, who are authorized to request
Advances and direct the disposition of any Advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any person, with
respect to Advances deposited to the credit of any deposit account of Borrower, which advances,
when so deposited, shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to request Advances may
have authority to draw against such account. The holder shall have no obligation to determine
whether any person requesting an Advance is or has been authorized by Borrower.

     (c) Application of Payments. Each payment made on this Note shall be credited first,
to any interest then due and second, to the outstanding principal balance hereof. All payments
credited to principal shall be applied first, to the outstanding principal balance of this Note
which bears interest determined in relation to the Base Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in relation to LIBOR,
with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

     (a) Base Rate. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to the Base Rate at any time, in any amount and without penalty.

     (b) LIBOR. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount of $1,000,000;
provided, however, that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding principal balance
thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such
portion of this Note shall become due and payable at any time prior to the last day of the Fixed
Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for each month from the
month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:

     (i) Determine the amount of interest which would have accrued each month on the amount
prepaid at the interest rate applicable to such amount had it remained outstanding until the
last day of the Fixed Rate Term applicable thereto.

     (ii) Subtract from the amount determined in (i) above the amount of interest which
would have accrued for the same month on the amount prepaid for the remaining term of such
Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such
term and in a principal amount equal to the amount prepaid.

     (iii) If the result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.

     Borrower acknowledges that prepayment of such amount may result in Bank incurring additional
costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above described
prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment
costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due,
the amount of such prepayment fee shall thereafter bear interest until paid at a rate per

10

 

annum two percent (2%) above the Base Rate in effect from time to time (computed on the basis of a 360 day
year, actual days elapsed). Each change in the rate of interest on any such past due prepayment
fee shall become effective on the date each Base Rate change is announced within Bank.

     (c) The principal Indebtedness evidenced hereby shall be payable as follows and without set
off, counterclaim or reduction of any kind:

     (i) the amount, if any, by which the LC Usage Amount at any time exceeds the lesser of
the Maximum Line of Credit Amount or the Borrowing Base, in either case, at such date shall
be payable immediately; and

     (ii) the principal Indebtedness evidenced hereby shall be payable on the Line of Credit
Termination Date

EVENTS OF DEFAULT:

     Any default in the payment or performance of any obligation under this Note, or any defined
event of default under the Credit Agreement, shall constitute an “Event of Default” under this
Note.

MISCELLANEOUS:

     (a) Obligations Joint and Several. Should more than one person or entity sign this
Note as a Borrower, the obligations of each such Borrower shall be joint and several.

     (b) Governing Law. This Note shall be governed by and construed in accordance with
the laws of the State of California.

[Signature Page Follows]

11

 

     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

	 	 	 	 	 
	 	

VIRCO MFG. CORPORATION

 	 
	 	By:  	 	 
	 	 	Title:	 	 
	 	 	 	 
	 

12

 

THIS INSTRUMENT PREPARED BY:

Gibson Dunn & Crutcher LLP

3161 Michelson Drive, 12th Floor

Irvine, CA 92612

Attn: Lesley V. Wasser

AND WHEN RECORDED MAIL TO:

Commercial Banking Group (AU #2702)

201 Third Street, 8th Floor

San Francisco, CA 94013

Attn: Records Management / Team 2

Loan No. 8079119402

 

MEMORANDUM OF MODIFICATION AGREEMENT

(SHORT FORM)

THIS MEMORANDUM OF MODIFICATION AGREEMENT (SHORT FORM) (“Agreement”) is made and entered into as of
January 29, 2010, by and between Wells Fargo Bank, National Association (“Lender”), and VIRCO MFG.
CORPORATION, a Delaware corporation (“Borrower”).

R E C I T A L S:

	A.	 	Pursuant to the terms of a that certain Second Amended and Restated Credit Agreement dated as
of March 12, 2008 (as amended, restated, supplemented or otherwise modified, the “Credit
Agreement”), Lender made a loan to Borrower in the principal amount of up Sixty-Five Million
and No/100 Dollars ($65,000,000) (the “Loan”). The Loan is evidenced by that certain Amended
and Restated Revolving Line of Credit Note dated as of even date herewith, executed by
Borrower in favor of Lender, in the principal amount of the Loan (as amended, restated,
supplemented or otherwise modified, the “Note”), which Note amends and restates in its
entirety the Revolving Line of Credit Note executed by Borrower in favor of Lender on March
27, 2009, which amended and restated in its entirety that certain Revolving Line of Credit
Note executed by Borrower in favor of Lender on July 31, 2008, and is further evidenced by the
documents described in the Credit Agreement as “Loan Documents”. The Note is secured by,
among other things, that certain Mortgage with Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing dated January 26, 2004 (as amended, restated,
supplemented or otherwise modified, the “Original Mortgage”) to and for the benefit of Lender,
which was recorded and filed in the Official Records of the County of Faulkner, Arkansas (the
“Official Records”) on January 28, 2004, as Document No. 2004-1700 and re-recorded and filed
February 27, 2004, as Document No. 2004-3958, and modified by that certain Modification
Agreement (Secured Loan) executed by Borrower on January 27, 2005, which was recorded and
filed in the Official Records on February 3, 2005, as Document No. 2005-2338, and by that
certain Modification Agreement (Secured Loan) executed by Borrower on December 8, 2005, which
was recorded and filed in the Official Records on December 15, 2005, as Document No.
2005-27794, and by that certain Modification Agreement (Secured Loan) executed by Borrower on
March 26, 2007, which was recorded and filed in the Official Records on April 10, 2007, as
Document No. 2007-7273.
	 
	B.	 	The Original Mortgage was amended and restated by that certain Amended and Restated Mortgage
with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing dated
March 12, 2008 (as amended, restated, supplemented or otherwise modified, the “Amended and
Restated Mortgage”) and recorded and filed in the Official Records on March 18, 2008 as
Document No. 2008-4858, and re-recorded and filed October 16, 2008, as Document No.
2008-20134; as modified by that certain Partial Release Deed dated September 29, 2008 and
recorded and filed in the Official Records on October 6, 2008 as Document No. 2008-19527.

13

 

	C.	 	The Amended and Restated Mortgage was amended and restated by that certain Second Amended and
Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture
Filing dated as of March 26, 2009 (as amended, restated, supplemented or otherwise modified,
the “Second Amended and Restated Mortgage”) and recorded and filed in the Official Records on
April 9, 2009 as Document No. 2009-6306.
	 
	D.	 	On July 31, 2008, Borrower and Lender entered into that certain Amendment No. 1 to Second
Amended and Restated Credit Agreement (the “First Modification Agreement”), which modified and
amended certain provisions of the Loan Documents.
	 
	E.	 	On March 27, 2009, Borrower and Lender entered into that certain Amendment No. 2 to Second
Amended and Restated Credit Agreement (the “Second Modification Agreement”), which modified
and amended certain provisions of the Loan Documents.
	 
	F.	 	Borrower and Lender have entered into that certain Amendment No. 3 to Second Amended and
Restated Credit Agreement of even date herewith (the “Third Modification Agreement”), pursuant
to which Borrower and Lender agreed to modify certain terms and provisions of the Loan
Documents.
	 
	G.	 	Unless otherwise defined, capitalized terms used herein shall have the meanings attributed to
such terms in the Loan Documents.

NOW, THEREFORE, the parties hereto agree as follows:

1. Memorandum of Third Modification Agreement. This instrument is a memorandum of the
Third Modification Agreement, and the same is by this reference incorporated herein and made a part
hereof as if set forth herein in its entirety.

2. Third Modification Agreement. Borrower and Lender entered into the Third Modification
Agreement pursuant to which, among other things, the Line of Credit Termination Date was extended
and the Maximum Line of Credit Amount was modified.

3. Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall constitute one and the
same instrument.

[Signatures follow on next page]

14

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first
above written.

	 	 	 	 	 
	 	                                   “LENDER”

WELLS FARGO BANK,

NATIONAL ASSOCIATION

 	 
	 	By:  	 	 
	 	 	Randy Repp 	 
	 	 	Its: Senior Vice President 	 
	 
	 	                             “BORROWER”

VIRCO MFG. CORPORATION,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Robert E. Dose 	 
	 	 	Its: Vice President - Finance, Secretary and Treasurer 	 
	 

(ALL SIGNATURES MUST BE ACKNOWLEDGED)

15

 

	 	 	 	 	 

	STATE OF CALIFORNIA	 	)
	 
	 	 	 	 
	COUNTY OF 
	 	 	 	)
	 
	 	 	 

On                                                              before me,       
                                  , a Notary Public,
personally appeared                                                             , who proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

WITNESS my hand and official seal.

Signature                                                             

(Seal)

	 	 	 	 	 

	STATE OF CALIFORNIA	 	)
	 
	 	 	 	 
	COUNTY OF 
	 	 	 	)
	 
	 	 	 

On                                                              before me,          
                               , a Notary Public,
personally appeared                                                             , who proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

WITNESS my hand and official seal.

Signature                                                             

(Seal)

16exv10w1

Exhibit 10.1

AMENDMENT AGREEMENT

     THIS AMENDMENT AGREEMENT (this “Amendment”) is dated as of April 12, 2010, among

     (a) (i) BROOKSIDE TECHNOLOGY HOLDINGS CORP., a Florida corporation (“Parent”); (ii)
BROOKSIDE TECHNOLOGY PARTNERS, INC., a Texas corporation (“BTP”); U.S. VOICE & DATA, LLC, an
Indiana limited liability company (“USVD”); STANDARD TEL ACQUISITIONS, LLC, a Florida
limited liability company (“STN Acquisition Sub”); TRANS-WEST NETWORK SOLUTIONS, INC. d/b/a
STANDARD TEL, a California corporation (“Trans-West”); and STANDARD TEL NETWORKS, LLC, a
California limited liability company (“STN”) (STN, Trans-West, STN Acquisition Sub, USVD and
BTP hereinafter collectively called “Borrowers” and individually called a “Borrower”); and
(iii) all other Credit Parties (defined in the Loan Agreement (defined below));

     (b) CHATHAM CREDIT MANAGEMENT III, LLC, a Georgia limited liability company as agent
for all Lenders (defined below; in such capacity, the “Administrative Agent”) and as agent
for the Chatham Lenders (defined below; in such capacity, the “Chatham Agent”; the
Administrative Agent and the Chatham Agent are collectively referred to herein as the
“Agent”); and

     (c) (i) CHATHAM INVESTMENT FUND III, LLC, a Georgia limited liability company (“Chatham
Fund III”), and CHATHAM INVESTMENT FUND III QP, LLC, a Georgia limited liability company
(“Chatham Fund III QP”; Chatham Fund III QP and Chatham Fund III are collectively referred
to herein as the “Chatham Lenders”) and (ii) all other financial institutions which are or
hereafter become parties to the Loan Agreement as a Lender.

WITNESSETH:

     WHEREAS, the Borrowers, the Agent and certain lenders from time to time (including, without
limitation, the Chatham Lenders, collectively, the “Lenders”) are parties to that certain Credit
Agreement dated as of September 23, 2008 (as previously amended, including, without limitation, by
the May 29, 2009 letter agreement between the Agent and the Borrowers (the “May Letter”) and the
August 13, 2009 letter agreement between the Agent and the Borrowers (the “August Letter”), the
“Loan Agreement”);

     WHEREAS, the Parent has informed the Agent and the Lenders that the Existing Defaults (defined
on Schedule 1 hereto) have occurred and are continuing;

     WHEREAS, Parent has requested that Agent and Lenders waive the Existing Defaults and amend
certain terms and conditions of the Loan Agreement, and the Agent and the Lenders have so agreed,
subject to the terms and conditions hereof; and

     NOW, THEREFORE, for and in consideration of the above premises and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto,
the parties hereto agree as follows:

     1. Definitions; Amendment a Loan Document. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Loan Agreement shall have the
meaning assigned to such term in the Loan Agreement. Each reference to “hereof”, “hereunder”,
“herein” and “hereby” and each other similar reference and each reference to “this Agreement” and
each other similar reference contained in the Loan Agreement shall from and after the date hereof
refer to the Loan Agreement as amended hereby. This Amendment is a Loan Document.

-4-

 

     2. Conditions Precedent; Application of Additional Equity; Application of Remaining Cash
Collateral. (a) This Amendment shall become effective only upon (each of the following to be
in form and substance satisfactory to the Agent in all respects) delivery to the Agent of: (i) this
Amendment executed by the parties hereto, the Acknowledgement of Holders of Existing Subordinated
Notes attached hereto executed by the parties thereto and an amended and restated Term Note
executed by the Borrowers substantially in the form attached hereto as Exhibit C (the “Amended
Note”) evidencing the current outstanding principal balance of the Term Loan after giving effect to
(A) the addition to principal balance of the Term Loan of (1) all PIK Interest accrued through the
date of this Amendment in the amount of $456,174.02, (2) all previously earned fees not paid in
cash relating to any previous amendments, modifications or defaults under the Loan Agreement in the
amount of $155,000 and (3) that portion of interest on the Loans accrued at the Default Rate
through February 28, 2010 and not previously paid in cash in the amount of $146,108.00 (“Default
Interest”) and (B) the prepayment of the Term Loan by the application of the remaining Cash
Collateral in an amount equal to $361,096.85 (the “Cash Collateral Balance”) as set forth in
Section 2(c) below, (ii) evidence that the Equity Investor Note has been converted to
non-mandatorily redeemable equity of the Parent, (iii) the amended and restated Warrant executed by
the Parent Company substantially in the form attached hereto as Exhibit A (the “Warrant
Amendment”), (iv) evidence that the Parent has obtained, on terms and conditions satisfactory to
the Agent in all respects, additional equity in immediately available funds in the Parent’s
operating account in an amount equal to at least $3,000,000 net of any broker or other fees, to be
used as set forth in the letter from Borrowers to Agent dated as of even date herewith (such
letter, the “Additional Equity Letter”; such equity, the “Additional Equity”), (v) an executed copy
of the payoff letter (a copy of the form and the amount of payoff thereof having been provided to
the Agent) for the Existing Subordinated Note payable to Randy Rogers, and (vi) payment to the
Agent’s counsel, in accordance with the wire instructions attached hereto as Exhibit B, Agent’s and
Lenders’ attorney fees incurred in connection with this Amendment in an amount equal to $12,500.
In the event that the Borrowers satisfy all other conditions precedent in this Section 2 other than
the execution and delivery of the Amended Note to the Agent on the Third Amendment Date, this
Amendment shall nevertheless be effective so long as the Borrowers execute and deliver the Amended
Note to the Agent on or before 6:00 pm (Atlanta, Georgia time) on April 15, 2010, the failure of
the Borrowers to do so on such date constituting an Event of Default.

     (b) The Borrowers shall use the proceeds of the Additional Equity (i) in accordance with the
Additional Equity Letter and (ii) after the application thereof in accordance with the Additional
Equity Letter, for Borrowers’ working capital needs incurred in the ordinary course of business.

     (c) The Borrowers hereby authorize and direct the Agent to apply the Cash Collateral Balance
to the payment of the outstanding principal balance of the Term Loan.

     3. Waiver of Existing Defaults, Amendments and Agreements. Upon satisfaction of the
terms and conditions to effectiveness set forth in Section 2 hereof and effective commencing on and
after the date of this Amendment:

     (a) The Agent and each Lender hereby waives the Existing Defaults, all rights and remedies
related to, or arising as a result of, the Existing Defaults, and, subject to the second paragraph
below in this subpart (a), all Default Interest for the months of March and April of 2010. Further,
so long as interest on the Loans for the month of March 2010 is paid in immediately available funds
on April 12, 2010, Agent and each Lender hereby waive any default caused by the late payment
thereof on the Third Amendment Date. Further, Agent and each Lender hereby waive the requirement
under Section 4.5(b) that Borrower Representative deliver the items required by such section within
90 days after December 31, 2009; provided, however, the Borrowers agree to deliver to the Agent and
the Lenders on or before April 30, 2010, the financial statements required under Section 4.5(b) for
the year ending December 31, 2009. Further, the Agent and each Lender hereby waive any requirement
under Section 1.5 of the Loan Agreement that the Loans be prepaid with the proceeds of the
Additional Equity or the equity to be issued to the Equity Investor as a result of the conversion
of the Equity Investor Note. Further, the Agent and each Lender further agree that, as of the date
of this Agreement, the Borrowers do not owe Agent or any Lender any further fees or expenses
relating to any previous amendments or modifications, or any previous defaults disclosed by the
Borrowers in writing to the Agent, under the Loan Agreement before the Third Amendment Date which
have not previously been paid or been added to the principal balance of the Term Loan pursuant to
Section 2 above (including, but not limited to, any filing fees, recording fees, and expenses of
Agent’s counsel relating to any such previous amendments or modifications, or to any such previous
defaults disclosed by the Borrowers in writing to the

-5-

 

Agent), nor is there any further PIK Interest or Default Interest that is due as of the Third
Amendment Date which has not previously been paid or been added to the principal balance of the
Term Loan pursuant to Section 2 above.

     In the event that the Additional Equity is not funded and received by the Parent in
immediately available funds on April 12, 2010, then that portion of interest on the Loans accrued
at the Default Rate after February 28, 2010 not previously paid in cash shall be due and payable on
the Third Amendment Date.

     (b) Section 1.1(a) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     (a) Term Loan. Each Term Loan Lender agrees, severally and not jointly, to
lend to Borrowers in one draw, on the Closing Date, its Pro Rata Share of such Term Loan
Lender’s applicable Term Loan Commitment of the “Term Loan” in a principal amount equal to
Seven Million Dollars ($7,000,000). Borrowers shall jointly and severally repay the Term
Loan through periodic payments of principal (“Scheduled Installments”) equal to $79,000 each
commencing on April 1, 2011 and on each Interest Payment Date thereafter, and with a final
payment of the entire remaining principal balance thereof on the Commitment Termination
Date; provided, however, the Borrowers may make any monthly principal payment in the amount
of $79,000 for any month during the period from the Third Amendment Date through March 1,
2011, that is not required by this Section 1.1(a) (any such non-required principal payment,
a “Nonscheduled Payment”), any such Nonscheduled Payment to be applied to the Term Loan in
the inverse order of maturities thereof. The principal balance of the Term Loan shall be
due and payable in its entirety on the Commitment Termination Date. Amounts borrowed under
this Section 1.1(a) and repaid may not be reborrowed. Payments of principal of each of the
Term Loan shall reduce the Term Loan Commitment applicable to the Term Loan in the amount of
any such payment.

     The Term Loan shall be evidenced by promissory notes substantially in the form of
Exhibit 1.1(a) (as amended, modified, extended, substituted or replaced from time to time,
each a “Term Note” and, collectively, the “Term Notes”), and, except as provided in Section
1.7, all of the Borrowers shall jointly execute and deliver each Term Note to the applicable
Term Loan Lender. Each Term Note shall represent the joint and several obligation of each
Borrower to pay the amount of the applicable Term Loan Lender’s portion of the Term Loan,
together with interest thereon.

     (c) Section 1.2(b) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     (b) In addition to the foregoing, the Term Loan shall also bear interest at a rate per
annum equal to two percent (2.00%) that shall be payable-in-kind on (and added to) the
outstanding principal amount of the Term Loan (“PIK Interest”), and be payable monthly in
arrears on each applicable Interest Payment Date as an increase to the principal amount of
the Term Loan on such date without any further action on part of Agent, any Lender or any
Borrower, and all such PIK Interest shall be paid in full at maturity of the Term Loan.

     (d) Section 1.3(c) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     (c) Intentionally Deleted.

     (e) Without limiting any other term or provision of this Amendment, as a part of the
consideration of Agent and Lenders (i) waiving the Existing Defaults as set forth in Section 3(a)
of this Amendment above and (ii) agreeing to postpone the Scheduled Installments as set forth in
Section 3(b) of this Amendment above, Section 3.5(c) of the Loan Agreement is hereby amended and
restated in its entirety as follows:

     (c) Parent Company may make regularly scheduled payments of (but no prepayments of)
principal and interest under the Existing Subordinated Notes, as in effect on the Closing
Date, so long as (i) before and after giving effect thereto, no Default or Event of Default
exists, (ii) without limitation of the preceding clause (i), on a pro forma basis, giving
effect to such payment as if made in the last Fiscal Month for which financial statements
have been reported to Agent and Lenders, Borrowers remain in compliance with (1) all
Financial Covenants set forth in this Agreement effective on and after the Third Amendment

-6-

 

Date and (2) and, as in effect under this Agreement as of the Closing Date, a Fixed
Charge Coverage Ratio of at least 1.75:1 and a Leverage Ratio of not more than 3.0:1, (iii)
after giving effect to such payment as made, Borrowers are in compliance with the Restricted
Payment Test; (iv) prior to April 1, 2011, the Borrowers have made Nonscheduled Payments for
the prior and current month when such Existing Subordinated Notes payment is to be made, and
(v) such payment is otherwise then permitted to be paid pursuant to the applicable Existing
Notes Subordination Agreement; provided, however, Parent Company may make principal and
interest payments under the Existing Subordinated Notes during the 30 day period after the
Third Amendment Date in an aggregate amount not exceeding $18,549.38 as follows: (x) to
Michael W Nole an amount equal to $2,904.05; and (y) to Burt and Ruth Kleinsmith an amount
equal to $15,645.33;

     (f) Section 3.5(e) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     (e) Parent Company may pay dividends on the Preferred A Stock solely in kind in
additional Stock and Parent Company may not pay any cash dividends on the Preferred A Stock
unless and until all Obligations are paid in full in cash;

     (g) Section 4.2 of the Loan Agreement is hereby amended and restated in its entirety as
follows (and the financial covenants relating to EBITDA set forth on Schedule A to each of the May
Letter and the August Letter are hereby replaced in their entirety by the following):

     4.2 (a) Minimum Monthly EBITDA. Commencing with the Fiscal Month ending April
30, 2010, Parent Company and its Subsidiaries, on a consolidated basis, at the end of each
Fiscal Month, will achieve a minimum EBITDA of at least the amounts described below for the
corresponding periods below, calculated on a cumulative to-date basis for the period from
April 2010 through and including March 2011.

-7-

 

	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Month	 	Amount	 	Fiscal Month	 	Amount
	 
	January 2010
	 	NA	 	 	January 2011	 	$	(400,000	)
	February 2010
	 	NA	 	 	February 2011	 	$	(250,000	)
	March 2010
	 	NA	 	 	March 2011	 	$	(100,000	)
	April 2010
	 	$	(500,000	)	 	April 2011	 	NA	 
	May 2010
	 	$	(750,000	)	 	May 2011	 	NA	 
	June 2010
	 	$	(1,000,000	)	 	June 2011	 	NA	 
	July 2010
	 	$	(1,000,000	)	 	July 2011	 	NA	 
	August 2010
	 	$	(1,000,000	)	 	August 2011	 	NA	 
	September 2010
	 	$	(1,000,000	)	 	September 2011	 	NA	 
	October 2010
	 	$	(850,000	)	 	October 2011	 	NA	 
	November 2010
	 	$	(700,000	)	 	November 2011	 	NA	 
	December 2010
	 	$	(550,000	)	 	December 2011	 	NA	 

     (b) Minimum Monthly EBITDA. Commencing with the Fiscal Month ending April 30,
2011, Parent Company and its Subsidiaries, on a consolidated basis, at the end of each
Fiscal Month, will achieve a minimum EBITDA of at least the amounts described below for the
corresponding periods below, calculated on a trailing twelve month basis.

[the remainder of this page is intentionally deleted]

-8-

 

	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Month	 	Amount	 	Fiscal Month	 	Amount
	 
	January 2011
	 	NA	 	 	January 2012	 	$	2,700,000	 
	February 2011
	 	NA	 	 	February 2012	 	$	2,850,000	 
	March 2011
	 	NA	 	 	March 2012	 	$	3,000,000	 
	April 2011
	 	$	600,000	 	 	April 2012	 	$	3,100,000	 
	May 2011
	 	$	1,050,000	 	 	May 2012	 	$	3,200,000	 
	June 2011
	 	$	1,500,000	 	 	June 2012	 	$	3,300,000	 
	July 2011
	 	$	1,750,000	 	 	July 2012	 	$	3,350,000	 
	August 2011
	 	$	2,000,000	 	 	August 2012	 	$	3,400,000	 
	September 2011
	 	$	2,250,000	 	 	September 2012	 	$	3,350,000	 
	October 2011
	 	$	2,350,000	 	 	October 2012	 	NA	 
	November 2011
	 	$	2,450,000	 	 	November 2012	 	NA	 
	December 2011
	 	$	2,550,000	 	 	December 2012	 	NA	 

     (h) Section 4.3 of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     4.3 Minimum Fixed Charge Coverage Ratio. Commencing with the Fiscal Month
ending April 30, 2011, Parent Company and its Subsidiaries shall maintain, on a consolidated
basis, at the end of each Fiscal Month, a Fixed Charge Coverage Ratio of at least the
amounts described below for the corresponding periods below, calculated (i) on a cumulative
to-date basis for the period from April 2011 through and including March 2012 and (ii) for
all periods after March 2012, on a trailing twelve month basis.

[the remainder of this page is intentionally deleted]

-9-

 

	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Month	 	Ratio	 	Fiscal Month	 	Ratio
	 
	January 2011
	 	NA	 	 	January 2012	 	 	1.50	 
	February 2011
	 	NA	 	 	February 2012	 	 	1.50	 
	March 2011
	 	NA	 	 	March 2012	 	 	1.50	 
	April 2011
	 	 	1.00	 	 	April 2012	 	 	1.50	 
	May 2011
	 	 	1.00	 	 	May 2012	 	 	1.50	 
	June 2011
	 	 	1.00	 	 	June 2012	 	 	1.50	 
	July 2011
	 	 	1.25	 	 	July 2012	 	 	1.50	 
	August 2011
	 	 	1.25	 	 	August 2012	 	 	1.50	 
	September 2011
	 	 	1.25	 	 	September 2012	 	 	1.50	 
	October 2011
	 	 	1.25	 	 	October 2012	 	NA	 
	November 2011
	 	 	1.25	 	 	November 2012	 	NA	 
	December 2011
	 	 	1.25	 	 	December 2012	 	NA	 

     (i) Section 4.4 of the Loan Agreement is hereby amended and restated in its entirety as
follows (and the financial covenants relating to liquidity set forth on Schedule A to each of the
May Letter and the August Letter are hereby replaced by the following):

     4.4 Minimum Liquidity. Commencing with the Fiscal Month ending April 30, 2010,
Parent Company and its Subsidiaries, on a consolidated basis, at all times will maintain
minimum Liquidity (defined below) of at least the amounts described below for the
corresponding periods below. “Liquidity” means, for any date of determination, unrestricted
cash and cash equivalents less trade payables over 60 days outstanding (including, without
limitation, to Mitel and NEC).

[the remainder of this page is intentionally deleted]

-10-

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Month	 	Amount	 	Fiscal Month	 	Amount	 	Fiscal Month	 	Amount
	 
	January 2010
	 	NA	 	 	January 2011	 	$	550,000	 	 	January 2012	 	$	350,000	 
	February 2010
	 	NA	 	 	February 2011	 	$	500,000	 	 	February 2012	 	$	350,000	 
	March 2010
	 	NA	 	 	March 2011	 	$	500,000	 	 	March 2012	 	$	350,000	 
	April 2010
	 	$	1,500,000	 	 	April 2011	 	$	500,000	 	 	April 2012	 	$	350,000	 
	May 2010
	 	$	1,400,000	 	 	May 2011	 	$	500,000	 	 	May 2012	 	$	350,000	 
	June 2010
	 	$	1,300,000	 	 	June 2011	 	$	500,000	 	 	June 2012	 	$	350,000	 
	July 2010
	 	$	1,150,000	 	 	July 2011	 	$	500,000	 	 	July 2012	 	$	350,000	 
	August 2010
	 	$	1,000,000	 	 	August 2011	 	$	500,000	 	 	August 2012	 	$	350,000	 
	September 2010
	 	$	950,000	 	 	September 2011	 	$	500,000	 	 	September 2012	 	NA	 
	October 2010
	 	$	850,000	 	 	October 2011	 	$	500,000	 	 	October 2012	 	NA	 
	November 2010
	 	$	750,000	 	 	November 2011	 	$	500,000	 	 	November 2012	 	NA	 
	December 2010
	 	$	650,000	 	 	December 2011	 	$	500,000	 	 	December 2012	 	NA	 

     (j) Section 6.1(b) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

     (b) Default in Other Agreements. (1) Any Credit Party or any of its
Subsidiaries fails to pay when due or within any applicable grace period any principal or
interest on Indebtedness (other than the Loans) or any Contingent Obligations or (2) any
breach or default of any Credit Party or any of its Subsidiaries, or the occurrence of any
condition or event, with respect to any Indebtedness (other than the Loans) or any
Contingent Obligations, if the effect of such failure, breach, default or occurrence is to
cause or to permit the holder or holders then to cause, Indebtedness and/or Contingent
Obligations having an aggregate principal amount in excess of One Hundred Thousand Dollars
($100,000) to become or be declared due prior to their stated maturity or (3) any breach or
default of any Credit Party or any of its Subsidiaries under the terms of any Equity
Document; or

     (k) Upon and after the payment of the Cash Collateral Balance toward the Term Loan as provided
in Section 2(c) above, the Cash Collateral Agreement is hereby terminated.

     (l) The address designated “With a copy to” with respect to the Agent contained in Section 9.3
of the Loan Agreement and any other address designated “with a copy to” with respect to the Agent
contained any corresponding provision in any other Loan Document, is hereby deleted and substituted
therefor is the following address:

-11-

 

	 	 	 

	With a copy to:

	 	BURR & FORMAN LLP

171 Seventeenth Street, NW

Suite 1100

Atlanta, Georgia 30363

Attn: Ed Snow

Fax: (404) 685-4295

Electronic address: esnow@burr.com

     (m) Each of the following definitions contained in Annex A to the Loan Agreement is hereby
amended and restated in its entirety as follows:

     “Change of Control” means (1) the occurrence of any Change of Control or Change
of Control Event (as each term is defined in the Second Securities Purchase and Loan
Conversion Agreement) or (2) the occurrence of any one or more of the following events: (a)
less than a majority of the members of the Board of Directors of Parent Company shall be
persons who either (i) were serving as directors on the Closing Date or (ii) were nominated
as directors and approved by the vote of the majority of the directors who are directors
referred to in clause (i) above or this clause (ii); or (b) a “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than the Equity Investor and/or one
or more of its Affiliates shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of Stock of
Parent Company representing more than twenty percent (20%) of the combined ordinary voting
power of the Stock of Parent Company for the election of directors or shall have the right
to elect a majority of the Board of Directors of Parent Company; provided, that, a Change of
Control shall not include any of the foregoing that results solely from the issuance of
shares of Stock of Parent Company upon exercise of warrants of Parent Company outstanding as
of the Closing Date and disclosed in Schedule 5.4(b); provided, further, that such warrants
are not amended or modified on or after the Closing Date; and provided, further, that the
exercise price or other purchase price thereunder is not reduced, adjusted or otherwise
modified and the number of equity shares issued or issuable thereunder is not increased
(whether by operation of law or in accordance with the relevant governing documents or
otherwise) on or after the Closing Date; or (c) Parent Company ceases to beneficially and of
record own and control, directly, free and clear of all Liens (other than Liens in favor of
Agent) one hundred percent (100%) of the issued and outstanding Stock of each Borrower; or
(d) the holders of the equity interests of any Credit Party or any Subsidiary of any Credit
Party approve any plan or proposal for the liquidation or dissolution of such Credit Party
or Subsidiary, as the case may be.

     “Commitment Termination Date” means September 23, 2012.

     “Equity Documents” means the collective reference to (i) that certain
Securities Purchase Agreement dated as of September 14, 2007, between Parent Company and the
Equity Investor, (ii) the Second Securities Purchase Agreement, (iii) that certain Investor
Rights Agreement dated as of September 14, 2007, between Parent Company and the Equity
Investor and (iv) all other material agreements, documents and instruments executed and/or
delivered pursuant thereto or in connection therewith, in each case, as amended, restated,
amended and restated, supplemented or otherwise modified and in effect from time to time, to
the extent permitted hereunder.

     (n) The following new definitions are hereby added to Annex A to the Loan Agreement as
follows:

     “Second Securities Purchase and Loan Conversion Agreement” means that certain
Securities Purchase and Loan Conversion Agreement dated on or about the Third Amendment Date
between the Parent Company and the Equity Investor, as amended or otherwise modified from
time to time.

     “Third Amendment Date” means April 12, 2010.

     (o) The May Letter is hereby amended as follows: (i) the 1.0% increases to the Warrants under
Section 2(b) of the May Letter and the 5.0% increases to the Warrants under Section 5 of the May
Letter are hereby waived, (ii) Section 2(h) is hereby deleted and in lieu thereof is inserted the
phrase “(h) Intentionally Deleted” and

-12-

 

(iii) Section 2(f) is hereby deleted and in lieu thereof is inserted the phrase “(f)
Intentionally Deleted”. All other terms and conditions of the May Letter are hereby
ratified and reaffirmed.

     (p) The August Letter is hereby amended as follows: (i) Section 2(d) is hereby deleted and in
lieu thereof is inserted the phrase “(d) Intentionally Deleted”, (ii) Section 2(i) is
hereby deleted and in lieu thereof is inserted the phrase “(i) Intentionally Deleted” and
(iii) Section 2(h) is hereby amended and restated in its entirety as follows: “(h)
Intentionally Deleted”.

     All other terms and conditions of the August Letter are hereby ratified and reaffirmed.

     (q) Under the terms of the Chatham Fee Letter, the Additional Warrants are hereby waived.

     4. Restatement of Representations and Warranties. Each Credit Party hereby represents
and warrants that, as of the date of this Amendment, and after giving effect to the terms of this
Amendment, there exists no Default or Event of Default. Each Credit Party hereby restates and
renews each and every representation and warranty heretofore made by it in the Loan Agreement and
the other Loan Documents as fully as if made on the date hereof, except to the extent (i) expressly
waived or amended in Section 3 above and (ii) that such representations and warranties expressly
relate solely to an earlier date (in which case such representations and warranties shall have been
true and complete on and as of such earlier date).

     5. Effect of Amendment; No Novation or Mutual Departure. Each Credit Party expressly
acknowledges and agrees that: (i) there has not been, and this Amendment does not constitute or
establish, a novation with respect to the Loan Agreement or any of the Loan Documents or any debt
or other obligations owed by any of the Credit Parties to Agent or any Lender. The waiver and
amendments set forth in Section 3 above shall be deemed to have prospective application only,
unless otherwise specifically stated herein. Notwithstanding the foregoing, the agreements of Agent
and the Lenders contained in this Amendment shall not (i) apply to any other past, present or
future noncompliance with any provision of the Loan Agreement or any of the other Loan Documents,
(ii) impair or otherwise adversely affect the Agent’s or any Lender’s right at any time to exercise
any right or remedy in connection with the Loan Agreement or any of the other Loan Documents, or
(iii) except as expressly set forth in Section 3 above, (1) amend, modify or otherwise alter any
provision of the Loan Agreement or any of the other Loan Documents, or (2) constitute a mutual
departure from the strict terms, covenants, conditions and agreements contained in the Loan
Agreement or any of the other Loan Documents other than as expressly agreed to in Section 3 above
and (3) affect or limit the Agent’s or any Lender’s right to require payment of debt and other
obligations owing from the any of the Credit Parties to the Agent or any Lender under, or to
require strict performance of the strict terms, covenants, conditions and agreements contained in
the Loan Agreement and the other Loan Documents, to exercise any and all rights, powers and
remedies under the Loan Agreement or the other Loan Documents or at law or in equity, or to do any
and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of
Default.

     6. Credit Party’s Ratification, Reaffirmation and Release of Agent and Lenders. Each
Credit Party hereby restates, ratifies and reaffirms each and every term, covenant and condition
set forth in the Loan Agreement and the other Loan Documents effective as of the date hereof. Each
Credit Party acknowledges, agrees, represents and warrants that the Loan Agreement and the other
Loan Documents, as amended and affected by this Amendment, constitute legal, valid, binding and
enforceable obligations of each Credit Party as of this date, free from any defense, counterclaim,
offset or recoupment. Each Credit Party hereby waives, releases and discharges Agent and each
Lender and each of their directors, officers, employees, agents and attorneys from any and all
claims, demands, actions or causes of action arising out of or in any way relating to the Loans and
the other Obligations, the Loan Agreement and the other Loan Documents and any documents,
agreements, dealings, or other matters connected with the Loans or any other Obligations,
including, without limitation, all known and unknown matters, claims, transactions, or things
occurring prior to the date of this Amendment related to the Loans or any other Obligations.

     7. Counterparts; Section References. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts and transmitted by facsimile
or emailed PDF file copy to the other parties, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken together, shall constitute but one
and the same instrument. Section titles and references

-13-

 

used in this Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.

     8. Further Assurances. Each Credit Party agrees to take such further actions as the
Agent shall reasonably request in connection with this Amendment to evidence the agreements
contained in this Amendment.

     9. Governing Law. This Amendment shall be governed by and construed and interpreted
in accordance with, the laws of the State of Georgia.

[SIGNATURES CONTAINED ON FOLLOWING PAGES]

-14-

 

     IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the parties hereto
as of the day and year first above written.

	 	 	 	 	 
	BORROWERS:

BROOKSIDE TECHNOLOGY PARTNERS, INC.

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	CEO 	 
	 
	STANDARD TEL ACQUISITIONS, LLC

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	Managing Member 	 
	 
	U.S. VOICE & DATA, LLC

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	Managing Member 	 
	 
	STANDARD TEL NETWORKS, LLC

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	Managing Member 	 
	 
	TRANS-WEST NETWORK SOLUTIONS, INC.

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	CEO 	 
	 
	PARENT:

BROOKSIDE TECHNOLOGY HOLDINGS CORP.

 	 
	By:  	 	 
	 	Name:  	Michael Nole 	 
	 	Title:  	CEO 	 
	 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

-15-

 

	 	 	 	 	 
	AGENT:

CHATHAM CREDIT MANAGEMENT III, LLC,

as Agent

 	 
	By:  	Chatham Capital Holdings, Inc.
 	 
	Its:	      Manager 	 
	 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	LENDERS:

CHATHAM CREDIT MANAGEMENT III, LLC, not individually, but as agent for

CHATHAM INVESTMENT FUND III, LLC and CHATHAM INVESTMENT FUND III QP, LLC

 	 
	By:  	Chatham Capital Holdings, Inc.
 	 
	Its: 	     Manager 	 
	 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

-16-

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