AMENDMENT NO. 7 TO REVOLVING CREDIT AND SECURITY AGREEMENT
Exhibit 10.6
AMENDMENT NO. 7
TO REVOLVING CREDIT AND SECURITY AGREEMENT
TO REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 7 (this “Agreement”) is entered into as of November 12, 2010, 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 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. Amendment. Subject to the satisfaction of Section 3 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:
“Seventh Amendment” means that certain Amendment No. 7 to Revolving
Credit and Security Agreement, dated as of November 12, 2010, among the Loan
Parties, the Agent and the Lenders.
“Seventh Amendment Effective Date” means the date that the
conditions of effectiveness to the Seventh Amendment have been satisfied.
(b) Section 2.22 of the Loan Agreement is hereby amended by deleting the word “and” where it
appears immediately before sub-clause (iv) of clause (a) thereof, and by inserting the following
sub-clause immediately prior to the period at the end of such clause (a):
and (v) make a recallable equity investment in Mobitec AB on or after the
Seventh Amendment Effective Date in an amount not to exceed $1,000,000
(c) Section 2.6(b) of the Loan Agreement is hereby amended in its entirety to provide as
follows:
Each Borrower recognizes that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may
not be collectible by Agent on the date received. In consideration of
Agent’s agreement to conditionally credit Borrowers’ Account as of the next
Business Day following the Agent’s receipt of those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all
items of payment shall be deemed applied by Agent on account of the
Obligations one (1) Business Day after (i) the Business Day following the
Agent’s receipt of such payments via wire transfer or electronic depository
check or (ii) in the case of payments received by Agent in any other form,
the Business Day such payment constitutes good funds in Agent’s account.
Agent is not, however, required to credit Borrowers’ Account for the amount
of any item of payment which is unsatisfactory to Agent and Agent may charge
Borrowers’ Account for the amount of any item of payment which is returned
to Agent unpaid.
(d) Section 6.5(a) of the Loan Agreement is hereby amended in its entirety to provide as
follows:
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: | |
September 30, 2010
|
0.70 to 1.0 | |
December 31, 2010
|
0.85 to 1.0 | |
March 31, 2011
|
1.00 to 1.0 | |
June 30, 2011
|
1.05 to 1.0 |
(e) The table appearing in Section 6.5(b) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
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| Fiscal Quarter Ending: | Leverage Ratio: | |
September 30, 2010
|
8.85 to 1.0 | |
December 31, 2010
|
8.25 to 1.0 | |
March 31, 2011
|
7.25 to 1.0 | |
June 30, 2011
|
7.00 to 1.0 |
(f) Section 6.5(c) of the Loan Agreement is hereby amended in its entirety to provide as
follows:
Minimum 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:
| Fiscal Quarter Ending: | Minimum EBITDA: | |
September 30, 2010 |
$4,750,000 | |
December 31, 2010 |
$4,250,000 | |
March 31, 2011 and each fiscal quarter ending thereafter |
$5,000,000 |
(g) Section 7.4 of the Loan Agreement is hereby amended in its entirety to provide as follows:
Investments. Purchase or acquire obligations or Equity Interests
of, or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b)
commercial paper with maturities of not more than 180 days and a published
rating of not less than A-1 or P-1 (or the equivalent rating), (c)
certificates of time deposit and bankers’ acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (i) such bank has a combined
capital and surplus of at least $500,000,000, or (ii) its debt obligations,
or those of a holding company of which it is a Subsidiary, are rated not
less than A (or the equivalent rating) by a nationally recognized investment
rating agency, (d) U.S. money market funds that invest solely in obligations
issued or guaranteed by the United States of America or an agency thereof,
(e) so long as no Default or Event of Default has occurred and is continuing
or would result therefrom, Investments by a Loan Party in any other Loan
Party (other than DRI), (f) loans permitted by Section 7.5, (g) a recallable
equity investment in Mobitec AB in an amount not to exceed the Contribution
Amount and (h) a recallable equity investment in Mobitec AB on or after the
Seventh Amendment Effective Date in an amount not to exceed $1,000,000,
provided that both prior to and after giving effect to such recallable
equity investment, (x) no Default or Event of Default has
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occurred and is continuing and (y) the Borrowers have at least $500,000 of
Undrawn Availability.
(h) Clause (y) of the second sentence of Section 7.10 of the Loan Agreement is hereby amended
by deleting the amount of “2,000,000” appearing therein and inserting the amount of “$3,000,000” in
lieu thereof.
(i) Schedule 5.9 to the Loan Agreement is hereby restated in its entirety by Schedule 5.9
attached hereto.
3. 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 $30,000, which may be charged to Borrowers’ Account as a
Revolving Advance and (z) an executed copy of an amendment to the Subordinated Loan Documentation
in form and substance satisfactory to Agent.
4. 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.
(e) No Loan Party has any defense, counterclaim or offset with respect to the Loan Agreement
or the Obligations.
5. 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
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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.
6. 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.
7. 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).
8. 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.
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9. 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.
10. 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.
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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: | CEO | |||
| DIGITAL RECORDERS, INC. |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Name: | Xxxxx X. Xxxxxx | |||
| Title: | CEO | |||
| TWINVISION OF NORTH AMERICA, INC. |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Name: | Xxxxx X. Xxxxxx | |||
| Title: | CEO | |||
[Signature Page to Amendment No. 7]
