WAIVER AND AMENDMENT NO. 8 TO REVOLVING CREDIT AND SECURITY AGREEMENT
Exhibit 10.29.7
WAIVER
AND AMENDMENT NO. 8
TO REVOLVING CREDIT AND SECURITY AGREEMENT
TO REVOLVING CREDIT AND SECURITY AGREEMENT
THIS
WAIVER AND AMENDMENT NO. 8 (this “Agreement”) is entered into as of March 31, 2011, by
and between DIGITAL RECORDERS, INC. (“DR”), TWINVISION OF NORTH AMERICA, INC. (“TVna”,
collectively with DR, each a “Borrower”, and collectively the “Borrowers”), DRI CORPORATION
(“DRI”, DRI and the Borrowers, each a “Loan Party, and collectively, the “Loan Parties”), the
financial institutions party hereto (collectively, the “Lenders” and individually a “Lender”) and
PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the
“Agent”).
BACKGROUND
Loan
Parties, Lenders and Agent are parties to that certain Revolving Credit and Security
Agreement dated June 30, 2008 (as amended, restated, supplemented or otherwise modified from time
to time, the “Loan Agreement”) pursuant to which Agent and Lenders provide Borrowers with certain
financial accommodations.
Loan Parties have requested that Agent and Lenders (x) waive certain Events of Default that
have occurred and are continuing and (y) amend certain provisions of the Loan Agreement as
hereafter provided, and Agent and Lenders are willing to do so on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit heretofore or
hereafter made to or for the account of Borrowers by Agent or Lenders, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined or amended herein shall have the
meanings given to them in the Loan Agreement.
2. Waiver. Subject to satisfaction of the conditions precedent set forth in Section 4 below,
Agent and Lenders hereby waive the Events of Default that have occurred and are continuing pursuant
to Section 10.5 of the Loan Agreement as a result of (x) the Loan Parties failing to comply with the
financial covenants set forth in Section 6.5(a), (b) and (c) for the period ending December 31,
2010 and (y) DRI paying a dividend with respect to its Series K Preferred Stock in an aggregate
amount equal to $51,000 at a time when such dividend was not permitted by Section 7.7 (the
“Existing Defaults”). Notwithstanding the foregoing, the waiver of the Existing Defaults set forth
above does not establish a course of conduct between Borrower and the Agent and Lenders and
Borrower hereby agrees that the Agent and Lenders are not obligated to waive any future Events of
Default under the Loan Agreement.
3. Amendment. Subject to the satisfaction of Section 4 below, the Loan Agreement is hereby
amended as follows:
(a) Section 1.2 of the Credit Agreement is hereby amended by inserting the following
defined terms in their appropriate alphabetical order:
“Eighth
Amendment” means that certain Waiver and Amendment No. 8 to
Revolving Credit and Security Agreement, dated as of March
__, 2011, among the
Loan Parties, the Agent and the Lenders.
“Eighth Amendment Effective Date” means the date that the conditions of
effectiveness to the Seventh Amendment have been satisfied.
(b) Section 6.5
of the Loan Agreement is hereby amended in its entirety to provide as
follows:
“6.5 Financial Covenants.
(a) Fixed Charge Coverage Ratio. Cause to be maintained as of the end of
each fiscal quarter, for the twelve month period ending on the last day of such
fiscal quarter, a Fixed Charge Coverage Ratio of not less than the ratio set
forth below opposite such period:
| Fixed Charge | ||||
| Fiscal Quarter Ending: | Coverage Ratio: | |||
March 31,2011 |
No Test | |||
June 30, 2011 |
No Test | |||
September 30, 2011 |
No Test | |||
December 31, 2011 and
each fiscal quarter ending thereafter |
1.25 to 1.00 | |||
(b) Leverage Ratio. Maintain as of the end of each fiscal quarter, a ratio of
(i) Funded Debt of the Loan Parties on a Consolidated Basis outstanding on the
last day of each fiscal quarter set forth below 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 such
period:
| Fiscal Quarter Ending: | Leverage Ratio: | |||
March 31,2011 |
17.5 to 1.0 | |||
June 30, 2011 |
16.5 to 1.0 | |||
September 30, 2011 |
10.25 to 1.0 | |||
December 31, 2011 and
each fiscal quarter ending thereafter |
4.00 to 1.0 | |||
(c) Minimum Global EBITDA. Maintain as of the end of each fiscal quarter, for
the twelve month period ending on the last day of such fiscal quarter, EBITDA of
DRI on a Consolidated Basis of not less than the amount set forth below opposite
such period:
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| Fiscal Quarter Ending: | Minimum EBITDA: | |||
March 31, 2011 |
$ | 2,750,000 | ||
June 30, 2011 |
$ | 3,000,000 | ||
September 30, 2011 |
$ | 5,000,000 | ||
December 31, 2011 and
each fiscal quarter ending thereafter |
$ | 7,000,000 | ||
(d) Availability. Maintain at all times
Availability of at least $500,000.
(e) Minimum Domestic EBITDA. Maintain as of the end of each fiscal quarter,
for the twelve month period ending on the last day of such fiscal
quarter, EBITDA of Loan Parties on a Consolidated Basis of not less than the
amount set forth below opposite such period:
| Fiscal Quarter Ending: | Minimum EBITDA: | |||
March 31,2011 |
$ | 525,000 | ||
June 30, 2011 |
$ | 625,000 | ||
September 30, 2011 |
$ | 900,000 | ||
December 31, 2011 and
each fiscal quarter ending thereafter |
No Test” | |||
(c) Section 7.7 of the Loan Agreement is hereby amended to read in its entirety as set
forth below:
“7.7
Dividends. Declare, pay or make any dividend or distribution on any shares of
the common stock or preferred stock of any Loan Party (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its stock) or
apply any of its funds, property or assets to the purchase, redemption or other
retirement of any common or preferred stock, or of any options to purchase or acquire
any such shares of common or preferred stock of any Loan Party; provided that Borrowers
(a) DRI may pay non-cash dividends consisting of additional shares of DRI’s capital
stock and (b) shall be permitted to make dividends or distributions to DRI, to enable
DRI to pay (i) professional fees, franchise and other taxes and other Ordinary Course of
Business operating expenses incurred by DRI in its capacity as parent corporation of the
Borrowers and (ii) up to $625,000 in the aggregate in any fiscal year of dividends or
distributions with respect to DRI’s preferred stock, so long (x) as after giving effect
to the payment of such dividend or distribution the Borrowers have at least $750,000 of
Undrawn Availability and (y) Borrowers demonstrate to Agent that after giving effect to
such payment Borrowers will be in pro forma compliance with the Fixed Charge Coverage
Covenant for the fiscal quarter most recently ended prior to such payment (and if the
Fixed Charge Coverage Covenant was not tested in such fiscal quarter, no such payments
shall be permitted); provided, however, that after giving effect to the payment of such
dividends or distributions there shall not exist any Default or Event of Default.”
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(d) Section 13.1 is hereby amended to read in its entirety as set forth below:
“13.1 Term. This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Loan Party, Agent and each
Lender, shall become effective on the date hereof and shall continue in full force and
effect until the earlier of (x) April 30, 2012, or (y) five (5) days prior to the final
stated maturity of the Subordinated Notes (the “Term”) unless sooner terminated as herein
provided. Loan Parties may terminate this Agreement at any time upon ninety (90) days’
prior written notice upon payment in full of the Obligations. In the event the Obligations
are prepaid in full prior to the last day of the Term (the date of such prepayment
hereinafter referred to as the “Early Termination Date”), Loan Parties shall pay to Agent
for the benefit of Lenders an early termination fee in an amount equal to $40,000.”
4. Conditions of Effectiveness. This Agreement shall become effective when Agent shall have
received (x) four (4) copies of this Agreement executed by the Required Lenders and each Loan Party,
(y) an amendment fee of $50,000, which may be charged to Borrowers’ Account as a Revolving Advance
and (z) an executed copy of an amendment to the Subordinated Loan Documentation (“Subordinated
Amendment”) in the form attached hereto as Exhibit A.
5. Consent. Notwithstanding anything to the contrary contained in the Subordination
Agreement, the Agent and Lenders consent to the Subordinated Amendment in the form attached
hereto as Exhibit A.
6. Condition Subsequent. No later than March 31, 2011, DRI shall provide Agent with evidence
reasonably satisfactory to Agent that a Foreign Subsidiary has transferred at least $51,000 to
DRI and DRI has utilized such amount to repay Revolving Advances.
7. Representations, Warranties and Covenants. Each Loan Party hereby represents, warrants
and covenants as follows:
(a) This Agreement, the Loan Agreement and the Other Documents constitute legal, valid and
binding obligations of such Loan Party and are enforceable against such Loan Party in accordance
with their respective terms.
(b) Upon the effectiveness of this Agreement, each Loan Party hereby reaffirms all
covenants, representations and warranties made in the Loan Agreement and the Other Documents to
the extent the same are not amended hereby and agrees that all such covenants, representations
and warranties shall be deemed to have been remade as of the effective date of this Agreement.
(c) The execution, delivery and performance of this Agreement and all other documents in
connection therewith has been duly authorized by all necessary corporate action, and does not
contravene, violate or cause the breach of any agreement, judgment, order, law or regulation
applicable to any Loan Party.
(d) No Event of Default or Default has occurred and is continuing or would exist after giving
effect to this Agreement.
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(e) No Loan Party has any defense, counterclaim or offset with respect to the Loan
Agreement or the Obligations.
8. Effect on the Loan Agreement.
(a) Upon the effectiveness of this Agreement, each reference in the Loan Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference
to the Loan Agreement as amended hereby. Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are hereby ratified and confirmed. This
Agreement shall constitute an “Other Document” for all purposes under the Loan Agreement.
(b) The execution, delivery and effectiveness of this Agreement shall not operate as a waiver
of any right, power or remedy of Agent or any Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered
under or in connection therewith.
9. 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 Agent or any Lender (or any of Agent’s
or any Lender’s Affiliates, officers, directors, employees, attorneys, consultants or agents) and
(b) Agent and each Lender have heretofore properly performed and satisfied in a timely manner all
of their respective obligations to the Loan Parties under the Loan Agreement and the Other
Documents. Notwithstanding the foregoing, Agent and each Lender wish (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 Agent’s or such Lender’s rights, interests,
security and/or remedies under the Loan Agreement and the Other Documents. Accordingly, for and in
consideration of the agreements contained in this Agreement 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” and collectively, the
“Releasors”) does hereby fully, finally, unconditionally and irrevocably release and forever
discharge Agent, each Lender and each of their respective Affiliates, officers, directors,
employees, attorneys, consultants and agents (each a “Released Party” and collectively, the
“Released Parties”) 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 Agreement, the Loan Agreement or any
Other Document, or any act, event or transaction related or attendant thereto, or Agent’s or any
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.
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10. Governing Law. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York (other
than those conflict of law
rules that would defer to the substantive law of another jurisdiction).
11. Cost
and Expenses. Loan Parties hereby agree to pay the Agent, on demand, all costs and
reasonable expenses (including reasonable attorneys’ fees and legal expenses) incurred in
connection with this Agreement and any instruments or documents contemplated hereunder.
12. Headings. Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other purpose.
13. Counterparts; Facsimile Signatures. This Agreement may be executed by the parties hereto
in one or more counterparts of the entire document or of the signature pages hereto, each of which
shall be deemed an original and all of which taken together shall constitute one and the same
agreement. Any signature received by facsimile or electronic transmission shall be deemed an
original signature hereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first written above.
| PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent |
||||
| By: | /s/ Xxxx Xxxxx | |||
| Name: | Xxxx Xxxxx | |||
| Title: | Vice President | |||
| DRI CORPORATION |
||||
| By: | /s/ Xxxxx X Xxxxxx | |||
| Name: | Xxxxx X Xxxxxx | |||
| Title: | Chairman and CEO | |||
| DIGITAL RECORDERS, INC. |
||||
| By: | /s/ Xxxxx X Xxxxxx | |||
| Name: | Xxxxx X Xxxxxx | |||
| Title: | Chairman and CEO | |||
| TWINVISION OF NORTH AMERICA, INC. |
||||
| By: | /s/ Xxxxx X Xxxxxx | |||
| Name: | Xxxxx X Xxxxxx | |||
| Title: | Chairman and CEO | |||
[Signature
Page to Amendment No. 8]
