FIFTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
Exhibit 10.39.7
FIFTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT is entered into as of December 29, 2009 (this “Amendment”) among
DIGITAL RECORDERS, INC., a North Carolina corporation (“Digital”), TWINVISION OF NORTH
AMERICA, INC., a North Carolina corporation (“TwinVision” and, together with Digital, the
“Borrowers”), DRI CORPORATION, a North Carolina corporation (“Guarantor” and,
together with the Borrowers, the “Loan Parties”), and BHC INTERIM FUNDING III, L.P., a
Delaware limited partnership (“Lender”), to that certain Loan and Security Agreement dated
as of June 30, 2008 (as amended, modified, supplemented or restated from time to time, the
“Loan Agreement”) among the Loan Parties and Lender. Terms which are capitalized in this
Amendment and not otherwise defined shall have the meanings ascribed to such terms in the Loan
Agreement.
WHEREAS, the Loan Parties have requested that Lender agree to modify certain terms of the Loan
Agreement, and the Lender is willing to do so, on the terms and subject to the satisfaction of the
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Loan
Parties and Lender hereby agree as follows:
Section One. Definitions. Terms which are capitalized in this Amendment and
not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement as
amended by this Amendment.
Section Two. Amendment to Loan Agreement. Effective upon satisfaction of the
conditions precedent set forth in Section Four hereof, the Loan Agreement is hereby amended
as follows:
(a) Section 6.18(A) (Aggregate Indebtedness) of the Loan Agreement is hereby deleted in its
entirety and the following is hereby substituted therefor:
Aggregate Indebtedness. The aggregate principal amount of all
Indebtedness of Parent and its consolidated Subsidiaries, including the Obligations,
shall not exceed at any time during or at the end of each fiscal quarter $19,000,000
(or the equivalent thereof in any foreign currency); provided, that, the
aggregate principal amount of all Subsidiaries of the Foreign Subsidiaries shall not
exceed at any time during or at the end of (i) each fiscal quarter, other than the
fiscal quarter ending on December 31, 2009, $6,000,000 (or the equivalent thereof in
any foreign currency) and (ii) the fiscal quarter ending on December 31, 2009,
$6,200,000 (or the equivalent thereof in any foreign currency); provided,
further, that, in addition thereto (i) Mobitec AB shall be permitted to
issue to the seller of the fifty percent (50%) of Mobitec Brazil that Mobitec AB
does not own as of the date hereof a promissory note in a principal amount not to
exceed $1,950,000 (or the equivalent thereof in a foreign currency) if such note is
unsecured and subordinated to the Obligations on terms and conditions satisfactory
to Lender in its sole discretion and (ii) Mobitec Australia
shall be permitted to enter into a working capital facility in a principal
amount not to exceed $1,000,000 (or the equivalent thereof in a foreign currency) on
terms and conditions satisfactory to Lender in its sole discretion.
(b) Section 6.18(D) (Leverage Ratio) of the Loan Agreement is hereby deleted in its entirety
and the following is hereby substituted therefor:
(D) Leverage Ratio. Loan Parties shall maintain as of the end of each
fiscal quarter set forth below a ratio of (i) Funded Debt of the Loan Parties on a
Consolidated Basis outstanding on the last day of such fiscal quarter to (ii) EBITDA
of the Loan Parties on a Consolidated Basis for the twelve month period ending on
the last day of such fiscal quarter of not greater than the ratio set forth below
opposite the last day of such fiscal quarter:
| Fiscal Quarter Ending: | Leverage Ratio: | |||
September 30, 2009 |
5.25:1.0 | |||
December 31, 2009 |
5.0:1.0 | |||
March 31, 2010 |
6.75:1.0 | |||
June 30, 2010 |
8.25:1.0 | |||
September 30, 2010 |
7.0:1.0 | |||
December 31, 2010 and each
fiscal quarter ending thereafter |
5.5:1.0 | |||
Section Three. Representations and Warranties. To induce Lender to enter into
this Amendment, the Loan Parties hereby warrant and represent to Lender as follows:
(a) all of the representations and warranties contained in the Loan Agreement and each other
Loan Document to which the Loan Parties are a party continue to be true and correct in all material
respects as of the date hereof, as if repeated as of the date hereof, except for such
representations and warranties which, by their terms, are expressly made only as of a previous
date;
(b) the execution, delivery and performance of this Amendment by each of the Loan Parties is
within their corporate powers, has been duly authorized by all necessary corporate action on their
part, and each of the Loan Parties has received all necessary consents and approvals (if any are
required) for the execution and delivery of this Amendment;
(c) the Organizational Documents of Borrowers and Guarantor previously delivered to Lender by
the Loan Parties have not been amended or modified in any respect as of the date hereof; except
that the Organizational Document of Guarantor have been modified by the Articles of Amendment to
Articles of Incorporation of DRI;
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(d) upon execution of this Amendment, the Loan Agreement as amended by this Amendment shall
constitute the legal, valid and binding obligation of the Loan Parties, enforceable against the
Loan Parties in accordance with their terms as so amended, except as such enforceability may be
limited by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights generally and
(ii) general principles of equity;
(e) except as set forth herein or as the Loan Parties or their representatives shall have
notified Lender of in writing, none of the Loan Parties are in default under any indenture,
mortgage, deed of trust, or other material agreement or material instrument to which they are a
party or by which they may be bound which could have a Material Adverse Effect;
(f) neither the execution and delivery of this Amendment, nor the consummation of the
transactions herein contemplated, nor compliance with the provisions hereof will (i) violate any
law or regulation applicable to any of the Loan Parties, (ii) cause a violation by any of the Loan
Parties of any order or decree of any court or government instrumentality applicable to them, (iii)
conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage,
deed of trust, or other material agreement or material instrument to which any of the Loan Parties
is a party or by which they may be bound, or (iv) result in the creation or imposition of any lien,
charge, or encumbrance upon any property of any of the Loan Parties, except in favor of Lender, to
secure the Obligations;
(g) no Default or Event of Default has occurred and is continuing; and
(h) since the date of the Loan Parties’ most recent financial statements delivered to Lender,
no change or event has occurred which has had, or is reasonably likely to have, a Material Adverse
Effect.
Section Four. Conditions Precedent. This Amendment shall become effective on
the date on which the following conditions precedent are satisfied, as determined by Lender in its
sole discretion:
(a) Lender shall have received this Amendment, in form and substance satisfactory to Lender,
duly executed by the Loan Parties;
(b) Lender shall have received that certain Consent and Amendment No. 6 to the Senior Lien
Financing Agreement, duly executed by the parties thereto;
(c) the Loan Parties shall have paid all amounts outstanding on or prior to the date of this
Amendment, including reimbursement or payment of all out-of-pocket expenses (including the legal
fees and expenses of Blank Rome LLP), incurred in connection with this Amendment, the Loan
Documents and the transactions contemplated hereby and thereby;
(d) Lender shall have received a certificate of the secretary of Guarantor certifying the true
and correct copy of Articles of Amendment to its Articles of Incorporation, which shall be in full
force and effect as of the date of such certificate; and
(e) no Default or Event of Default shall have occurred be continuing, and no event or
development which has had or is reasonably likely to have a Material Adverse Effect shall have
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occurred, in each case, since the date of the Loan Parties’ most recent financial statements
delivered to Lender.
Section Five. Release. The Loan Parties hereby acknowledge and agree that:
(a) neither they nor any of their Affiliates have any claim or cause of action against Lender (or
any of Lender’s Affiliates, officers, directors, employees, attorneys, consultants or agents) and
(b) Lender has heretofore properly performed and satisfied in a timely manner all of its
obligations to the Loan Parties under the Loan Agreement and the other Loan Documents.
Notwithstanding the foregoing, Lender wishes (and the Loan Parties agree) to eliminate any
possibility that any past conditions, acts, omissions, events or circumstances would impair or
otherwise adversely affect any of Lender’s rights, interests, security and/or remedies under the
Loan Agreement and the other Loan Documents. Accordingly, for and in consideration of the
agreements contained in this Amendment and other good and valuable consideration, the Loan Parties
(for themselves and their Affiliates and the successors, assigns, heirs and representatives of each
of the foregoing) (each a “Releasor”) do hereby fully, finally, unconditionally and
irrevocably release and forever discharge Lender and each of its Affiliates, officers, directors,
employees, attorneys, consultants and agents (each a “Released Party”) from any and all
debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions,
proceedings and causes of action, in each case, whether known or unknown, contingent of fixed,
direct or indirect, and of whatever nature or description, and whether in law or in equity, under
contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter
can, shall or may have against any Released Party by reason of any act, omission or thing
whatsoever done or omitted to be done on or prior to the date hereof arising out of, connected with
or related in any way to this Amendment, the Loan Agreement or any other Loan Document, or any act,
event or transaction related or attendant thereto, or Lender’s agreements contained therein, or the
possession, use, operation or control of any of the assets of agreements contained therein, or the
possession, use, operation or control of any of the assets of the Loan Parties, or the making of
any advance, or the management of such advance or the Collateral.
Section Six. General Provisions.
(a) Except as herein expressly amended, each of the Loan Agreement and all of the other Loan
Documents are ratified and confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
(b) All references to the Loan Agreement in the Loan Agreement and each other Loan Document
shall mean such Loan Agreement as amended as of the effective date hereof, and as amended hereby
and as hereafter amended, supplemented and modified from time to time.
(c) This Amendment embodies the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements, commitments, arrangements,
negotiations or understandings, whether written or oral, of the parties with respect thereto.
(d) Section and subsection headings in this Amendment are included herein for convenience of
reference only and shall not constitute a part of this Amendment for any other purpose or be given
any substantive effect.
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(e) THIS AMENDMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING UNDER
CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
(f) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW
YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AMENDMENT SHALL BE LITIGATED IN SUCH COURTS. EACH LOAN PARTY FOR ITSELF
AND ON BEHALF OF ITS SUBSIDIARIES ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AMENDMENT. IF ANY LOAN PARTY OR ANY SUBSIDIARY PRESENTLY IS, OR IN
THE FUTURE BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, EACH LOAN PARTY FOR ITSELF AND ON
BEHALF OF ITS SUBSIDIARIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT
ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO SUCH PERSON AT SUCH PERSON’S ADDRESS AS SET FORTH IN SECTION
8.6 OF THE LOAN AGREEMENT OR AS MOST RECENTLY NOTIFIED BY SUCH PERSON IN WRITING PURSUANT TO
SECTION 8.6 OF THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER
THE SAME HAS BEEN POSTED AS AFORESAID.
(g) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AMENDMENT. EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
(h) This Amendment is a Loan Document.
(i) Nothing contained in this Amendment shall operate as a waiver of any right, power, or
remedy to which Lender may be entitled, nor constitute a waiver of any provision of the Loan
Agreement or any of the other Loan Documents, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
(j) This Amendment may be executed by the parties hereto in one or more counterparts, each of
which when so executed shall be deemed an original; and such counterparts
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taken together shall constitute one and the same agreement. Any signatures delivered by a
party by facsimile or electronic transmission shall be deemed an original signature hereto.
(This space intentionally left blank — signature page follows.)
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IN WITNESS WHEREOF, Loan Parties and Lender have signed below to indicate their agreement with
the foregoing and their intent to be bound thereby.
| LENDER: | BHC INTERIM FUNDING III, L.P. |
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| By: | BHC Interim Funding Management III, L.P., its General Partner |
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| By: | BHC Investors III, L.L.C., its Managing Member | |||
| By: | GHH Holdings III, L.L.C. | |||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Xxxxxx X. Xxxxxxxx | ||||
| Managing Member | ||||
| BORROWERS: | DIGITAL RECORDERS, INC. |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
| TWINVISION OF NORTH AMERICA, INC. |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
| GUARANTOR: | DRI CORPORATION |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
Signature Page to Fifth Amendment to Loan and Security Agreement
| Consented to and Acknowledged by: DRI EUROPA AKTIEBOLAG |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| Chairman | ||||
| MOBITEC AB |
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| By: | /s/ Xxxxxxx X. Xxxx | |||
| Xxxxxxx X. Xxxx | ||||
| Director | ||||
Acknowledgement to Fifth Amendment to Loan and Security Agreement
