Contract
Exhibit 10.6
The security
interest granted pursuant to this instrument is subordinated to other security
interests pursuant to, and to the extent provided in, and is otherwise subject to the terms of, the
Intercreditor Agreement, dated as of June 30, 2008, between BHC Interim Funding III L.P.,
as Junior Creditor, and PNC Bank, National Association, as Agent under the Revolving Credit and
Security Agreement, as Senior Creditor, as the same may be amended, restated, supplemented or
otherwise modified or extended or renewed from time to time.
CONTINUING UNCONDITIONAL GUARANTY
(Corporate)
(Corporate)
WHEREAS, Digital Recorders, Inc., a North Carolina corporation, TwinVision of North America,
Inc., a North Carolina corporation (“Borrowers”) and DRI Corporation, a North Carolina
corporation (“Guarantor”), are entering into that certain Loan and Security Agreement dated
as of even date herewith (as may be amended, restated, supplemented or otherwise modified from time
to time, the “Loan Agreement”) with BHC Interim Funding III, L.P., a Delaware limited
partnership (“Lender”), pursuant to which Lender is concurrently making a secured term loan
to Borrowers (the “Term Loan”); and
WHEREAS, Lender has required that Guarantor execute and deliver this Continuing Unconditional
Guaranty, dated as of June 30, 2008 (this “Guaranty”), to Lender as a condition precedent
to making the Term Loan to Borrowers pursuant to the Loan Agreement; and
WHEREAS, Borrowers are wholly-owned subsidiaries of Guarantor and therefore Guarantor will
directly or indirectly receive certain benefits from the credit accommodations hereinabove
described and is therefore willing to guaranty the prompt payment and performance of the
Obligations (as such term is hereinafter defined) of Borrowers, on the terms set forth in this
Guaranty.
NOW, THEREFORE, for value received and in consideration of Lender’s execution of the Loan
Agreement and making of the Term Loan to Borrowers, the undersigned unconditionally guarantees
(i) the full and prompt payment when due, whether at maturity or earlier, by reason of acceleration
or otherwise, and at all times thereafter, of all of the indebtedness and obligations of every kind
and nature of Borrowers to Lender, or any parent, affiliate or subsidiary of Lender (the term
“Lender” as used hereafter shall include such parents, affiliates and subsidiaries), pursuant to
the terms of the Loan Agreement and the other Loan Documents (as such term is defined in the Loan
Agreement), and whether principal, interest, fees, costs, expenses or otherwise (including, without
limitation, any interest, fees or expenses accruing following the commencement of any insolvency,
receivership, reorganization or bankruptcy case or proceeding relating to Borrowers (or either of
them), whether or not a claim for post-petition interest, fees or expenses is allowed in such case
or proceeding), howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several,
now or hereafter existing, or due or to become due, and howsoever
owned, held or acquired by Lender, whether through discount, overdraft, purchase, direct loan or as
collateral or otherwise; and (ii) the prompt, full and faithful discharge by Borrowers of each and
every term, condition, agreement, representation and warranty now or hereafter made by Borrowers to
Lender under the Loan Agreement and the other Loan Documents (all such indebtedness and obligations
being hereinafter referred to as the “Obligations”). For sake of clarity, the Obligations
shall include all “Obligations” as defined in the Loan Agreement. Guarantor further agrees to pay
all reasonable out-of-pocket costs and expenses, including, without limitation, all court costs and
reasonable attorneys’ and paralegals’ fees paid or incurred by Lender in collecting all or any part
of the Obligations from, or in prosecuting or defending any action against, Guarantor or any other
guarantor of all or any part of the Obligations. All amounts payable by Guarantor under this
Guaranty shall be payable upon demand by Lender and shall be made in lawful money of the United
States, in immediately available funds.
SECTION 1. No Fraudulent Conveyance. Notwithstanding any provision of this Guaranty to the
contrary, it is intended that this Guaranty, and any liens and security interests granted by
Guarantor to secure this Guaranty, do not constitute a “Fraudulent Conveyance” (as defined below).
Consequently, Guarantor agrees that if this Guaranty, or any liens and security interests securing
this Guaranty, would, but for the application of this sentence, constitute a Fraudulent Conveyance,
this Guaranty and each such lien and security interest shall be valid and enforceable only to the
maximum extent that would not cause this Guaranty or such lien and security interest to constitute
a Fraudulent Conveyance, and this Guaranty or the Loan Documents providing for such liens and
security interests shall automatically be deemed to have been amended accordingly at all relevant
times. For purposes hereof, “Fraudulent Conveyance” means a
fraudulent conveyance under Section 548 of the Bankruptcy Code (as hereinafter defined) or a
fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent
conveyance or fraudulent transfer law or similar law of any state, nation or other governmental
unit, as in effect from time to time.
SECTION 2. Unconditional Guaranty. Guarantor hereby agrees that, except as hereinafter
provided, its obligations under this Guaranty shall be irrevocable, absolute and unconditional,
irrespective of (i) the validity or enforceability of the Obligations or any part thereof, or of
any promissory note or other document evidencing all or any part of the Obligations, (ii) the
absence of any attempt to collect from Borrowers or any other guarantor all or any part of the
Obligations or other action to enforce the same, (iii) the waiver or consent by Lender with respect
to any provision of any instrument evidencing the Obligations, or any part thereof, or any other
agreement heretofore, now or hereafter executed by Borrowers or any other guarantor, and delivered
to Lender, (iv) failure by Lender to take any steps to perfect and maintain its security interest
in, or to preserve its rights to, any security or collateral for the Obligations, (v) the existence
or nonexistence of any defenses which may be available to Borrowers or any other guarantor with
respect to all or any part of the Obligations, (vi) the institution of any proceeding under Chapter
11 of Title 11 of the United States Code (11 U.S.C. § 101 et seq.), as amended (the “Bankruptcy
Code”), or any similar proceeding, by or against Borrowers or any other guarantor or Lender’s
election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code,
(vii) any borrowing or grant of a security interest by Borrowers, as debtor-in-possession, under
Section 364 of the Bankruptcy Code (or use of
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cash collateral under Section 363 of the Bankruptcy
Code), (viii) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender’s claim(s) for repayment of the Obligations, or (ix) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of any other guarantor.
SECTION 3. Waiver. Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of any Borrowers or any other
guarantor, protest or notice (except as provided elsewhere in the Loan Documents) with respect to
the Obligations and all demands whatsoever, and covenants that this Guaranty will not be
discharged, except by complete and indefeasible payment and performance of the Obligations.
Guarantor further waives notice of (i) acceptance of this Guaranty, (ii) the existence or incurring
from time to time of any Obligations guarantied hereunder, (iii) the existence of any Default or
Event of Default, the making of demand, nonpayment, or the taking of any action by Lender, under
the Loan and Security Agreement or any other Loan Document, and (iv) default and demand hereunder.
Upon the occurrence and during the continuance of any Event of Default (as defined in the Loan
Agreement), Lender may, at its sole election (regardless of whether the liability of Borrowers or
any other guarantor of all or any part of the Obligations has matured or may then be enforced),
proceed directly and at once, without notice, against Guarantor to collect and recover the full
amount or any portion of the Obligations, without first proceeding against any Borrowers or any
other person, firm or corporation, or against any security or collateral for the Obligations.
Guarantor agrees that this Guaranty constitutes a guarantee of payment when due and not of
collection.
SECTION 4. Authorization. Lender is hereby authorized, without notice or demand and without
affecting the liability of Guarantor hereunder, at any time and from time to time to
(i) renew, extend, accelerate or otherwise change the time for payment of, or other terms
relating to, the Obligations or otherwise modify, amend or change the terms of any promissory note
or other agreement, document or instrument now or hereafter executed by Borrowers or any other
guarantor and delivered to Lender; (ii) accept partial payments on the Obligations; (iii) take and
hold security or collateral for the payment of the Obligations guaranteed hereby, or for the
payment of this Guaranty, or for the payment of any other guaranties of the Obligations, and
exchange, enforce, waive and release any such security or collateral; (iv) apply such security or
collateral and direct the order or manner of sale or other disposition thereof as in its discretion
it may determine; and (v) settle, release, compromise, collect or otherwise liquidate the
Obligations and any security or collateral therefor in any manner, without affecting or impairing
the obligations of Guarantor hereunder. Lender shall have the exclusive right to determine the
time and manner of application of any payments or credits, whether received from Borrowers or any
other source, and such determination shall be binding on Guarantor. All such payments and credits
may be applied, reversed and reapplied, in whole or in part, to any of the Obligations as Lender
shall determine in its discretion without affecting the validity or enforceability of this
Guaranty.
SECTION 5. Security Interest. To secure the payment and performance of the Obligations and
Guarantor’s obligations hereunder, Guarantor grants to Lender a continuing perfected lien on and
security interest in all of Guarantor’s right, title and interest in and to the following
(collectively, the “Collateral”):
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(i) all Accounts, Chattel Paper (including all Electronic Chattel Paper and Tangible Chattel
Paper), Commercial Tort Claims, Deposit Accounts, Documents (including all warehouse receipts and
bills of lading), Equipment, Fixtures, General Intangibles (including all Payment Intangibles and
Software), Goods, Instruments (including all Promissory Notes and Negotiable Instruments),
Inventory (including all stock-in-trade, raw materials, work in process, items held for sale or
lease or furnished or to be furnished under contracts of sale or lease, goods that are returned,
reclaimed or repossessed, and materials used or consumed in such Loan Party’s business), Investment
Property and Financial Assets (including all Commodity Accounts, Commodity Contracts, Securities
(including all Certificated Securities and Uncertificated Securities), Security Entitlements and
Securities Accounts), Letter of Credit Rights and Money,
(ii) all parts, substitutions or replacements to or of or accessories to any tangible assets
and property included in the foregoing, and all Software and computer programs embedded in the
foregoing, and all Accessions to the foregoing,
(iii) all Supporting Obligations for any of the foregoing and all rights of such Loan Party in
any property belonging to any third party in which a Lien of any kind or nature has been granted to
such Loan Party to secure the payment or performance of any third party under or with respect to
any of the foregoing,
(iv) all Records, books, ledger cards, files, correspondence, customer lists, blueprints,
technical specifications, manuals, computer software, computer printouts, tapes, disks and other
electronic storage media and related data processing software and similar items that at any time
evidence or contain information relating to any of the foregoing or are otherwise
necessary or helpful in the collection thereof or realization thereupon and all other business
books and Records of such Loan Party, and
(v) all cash and non-cash Proceeds (including, without limitation, insurance proceeds),
products, rents and profits of all of the foregoing. Guarantor hereby authorizes Lender to record
without such Guarantor’s signature any and all financing statements deemed necessary or appropriate
by Lender to the perfection of its security interest in the Collateral.
All of the capitalized terms used in subsections (i) – (v) above, unless otherwise defined herein,
shall have the meanings ascribed to such terms under the Uniform Commercial Code as in effect in
the State of New York. Guarantor hereby authorizes Lender to record without such Guarantor’s
signature any and all financing statements deemed necessary or appropriate by Lender to the
perfection of its security interest in the Collateral. Guarantor agrees that Lender shall have the
rights and remedies of a secured party under the Uniform Commercial Code of New York, as now
existing or hereafter amended, with respect to all of the aforesaid property, including, without
limitation, thereof, the right to sell or otherwise dispose of any or all of such property and
apply the proceeds of such sale to the payment of the Obligations. In addition, at any time during
the existence of an Event of Default, Lender may, in its discretion, without notice to Guarantor
and regardless of the acceptance of any security or collateral for the payment hereof, appropriate
and apply toward the payment of the Obligations (i) any indebtedness due from Lender to Guarantor,
and (ii) any moneys, credits or other property belonging to Guarantor, at any time held by or
coming into the possession of Lender whether for deposit or otherwise.
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SECTION 6. Guarantor’s Responsibility. Guarantor hereby assumes responsibility for keeping
itself informed of the financial condition of Borrowers and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the Obligations and of all
other circumstances bearing upon the risk of nonpayment of the Obligations or any part thereof, and
Guarantor hereby agrees that Lender shall have no duty to advise Guarantor of information known to
Lender regarding such condition or any such circumstances or to undertake any investigation. If
Lender, in its discretion, undertakes at any time or from time to time to provide any such
information to Guarantor, Lender shall be under no obligation to update any such information or to
provide any such information to Guarantor on any subsequent occasion. Guarantor further
acknowledges that Guarantor has examined or had the opportunity to examine the Loan and Security
Agreement and the other Loan Documents, and waives any defense which may exist resulting from
Guarantor’s failure to receive or examine at any time the Loan and Security Agreement or the other
Loan Documents.
SECTION 7. Consent. Guarantor consents and agrees that Lender shall be under no obligation to
marshal any assets in favor of Guarantor or against or in payment of any or all of the Obligations.
Guarantor further agrees that, to the extent that Borrowers, Guarantor or any other Person (as
defined in the Loan Agreement) makes a payment or payments to Lender, or Lender receives any
proceeds of collateral, which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrowers, its
estate, trustee, receiver or any other Person, including, without limitation, Guarantor, under any
bankruptcy law, state or federal law, common law or equitable theory, then to the extent of such
payment or repayment, the Obligations or the part thereof which has been paid, reduced or satisfied
by such amount, and Guarantor’s obligations hereunder
with respect to such portion of the Obligations, shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction occurred.
SECTION 8. Transfer. Lender may sell or assign the Obligations or any part thereof, or grant
participations therein, and in any such event, each and every immediate or remote assignee or
holder of, or participant in, all or any of the Obligations shall have the right to enforce this
Guaranty, by suit or otherwise, for the benefit of such assignee, holder or participant, as fully
as if herein by name specifically given such right, but Lender shall have an unimpaired right,
prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty
for the benefit of Lender, as to any part of the Obligations retained by Lender.
SECTION 9. Binding on Assigns. This Guaranty shall be binding upon Guarantor and upon the
heirs, executors, successors (including, without limitation, any receiver, trustee or
debtor-in-possession of or for Guarantor) and assigns of Guarantor, and shall inure to the benefit
of Lender and its successors and assigns; provided, however, that Guarantor’s
obligations hereunder may not be delegated or assigned without Lender’s prior written consent.
SECTION 10. Representations and Warranties. Guarantor represents and warrants (which
representations and warranties shall survive the execution and delivery hereof) to Lender that:
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(a) Guarantor has the full power, authority and legal capacity to execute, deliver and perform
this Guaranty and the transactions contemplated hereby;
(b) No consent of any person (including, without limitation, creditors of Guarantor), and no
consent, permit, approval or authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of this Guaranty and the transactions
contemplated hereby;
(c) This Guaranty has been duly executed and delivered on behalf of Guarantor, and constitutes
the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors’ rights generally;
(d) The execution, delivery and performance of this Guaranty will not violate any requirement
of law applicable to or material contractual obligation of Guarantor; and
(e) It is in Guarantor’s direct interest to assist Borrowers in procuring credit because
Guarantor has a direct or indirect investment in or business relationship with Borrowers.
SECTION 11. Continuation. This Guaranty shall continue in full force and effect (and may not
be revoked or terminated), and Lender shall be entitled to make the Term Loan and extend other
financial accommodations to Borrowers on the faith hereof until such time as Lender has, in
writing, notified Guarantor that all of the Obligations (including, without limitation, the
Obligations under the Warrant) have been indefeasibly paid and satisfied in full and the Loan
Agreement has been terminated.
SECTION 12. Subrogation. Any and all rights of any nature of Guarantor to subrogation,
contribution, reimbursement or indemnity and any right of Guarantor to recourse to any assets or
property of, or payment from, Borrowers or any other guarantor of all or any part of the
Obligations as a result of any payments made or to be made hereunder for any reason are hereby
unconditionally waived, and Guarantor shall not at any time exercise any of such rights unless and
until all of the Obligations have been indefeasibly paid and satisfied in full. Any payments
received by Guarantor in violation of this Section 12 shall be held in trust for and
immediately remitted to Lender.
SECTION 13. Subordination. The payment of any and all of indebtedness, liabilities and
obligations of Borrowers to Guarantor of every kind or nature, whether joint or several, due or to
become due, absolute or contingent, now existing or hereafter arising, and whether principal,
interest, fees, costs, expenses or otherwise (collectively, the “Subordinated Debt”), is
expressly subordinated to the Obligations. So long as any Obligations remain outstanding and the
Loan and Security Agreement has not been terminated, no payment of any kind (by voluntary payment,
prepayment, acceleration, setoff or otherwise) of any portion of the Subordinated Debt may be made
by Borrowers or received or accepted by Guarantor at any time. Until such time as
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the Obligations
have been indefeasibly paid and satisfied in full and the Loan and Security Agreement has been
terminated, Guarantor will not (i) obtain any Lien on any property of any Borrowers to secure the
Subordinated Debt, or (ii) make demand for payment of the Subordinated Debt or commence any
lawsuit, action or proceeding of any kind against any Borrowers to recover all or any part of the
Subordinated Debt. Any payments received by Guarantor in violation of this Section shall be held
in trust for and immediately remitted to Lender.
SECTION 14. GOVERNING LAW. THIS GUARANTY 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.
SECTION 15. CONSENT TO JURISDICTION; SERVICE OF PROCESS. GUARANTOR 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 GUARANTY SHALL BE LITIGATED IN SUCH COURTS. GUARANTOR ACCEPTS FOR
ITSELF, 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 GUARANTY. GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO GUARANTOR, AT GUARANTOR’S ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF OR AS MOST RECENTLY NOTIFIED BY GUARANTOR IN WRITING, AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID.
SECTION 16. JURY TRIAL WAIVER. GUARANTOR 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 GUARANTY. GUARANTOR
AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS GUARANTY AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. GUARANTOR 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.
SECTION 17. Entire Agreement; Severability. This Guaranty represents the entire understanding
and agreement between Guarantor, on the one hand, and Lender, on the other hand, with respect to
the subject matter contained herein, and there are no other existing
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agreements or understandings,
whether oral or written, between or among such parties as to such subject matter. Wherever
possible, each provision of this Guaranty shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
SECTION 18. Cumulative Remedies; Amendments. All rights and remedies hereunder and under the
Loan and Security Agreement and the other Loan Documents are cumulative and not alternative, and
Lender may proceed in any order from time to time against Borrowers, Guarantor or any other
Guarantor of all or any part of the Obligations and their respective assets. Lender shall not have
any obligation to proceed at any time or in any manner against, or exhaust any or all of Lender’s
rights against, Borrowers or any other Guarantor of all or any part of the Obligations prior to
proceeding against Guarantor hereunder. No failure or delay on the part of Lender in the exercise
of any power, right or privilege shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of any other right,
power or privilege. No amendment, modification or waiver of any provision of this Guaranty, or
consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Guarantor. Each amendment, modification or waiver shall be
effective only in the specific instance and for the specific purpose for which it was given.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned as of the date
first written above.
| DRI CORPORATION | ||||
| By: | /S/ XXXXX X. XXXXXX | |||
| Name: Xxxxx X. Xxxxxx | ||||
| Title: CEO/President | ||||
| Address: | 00000 Xxxx Xxxx, Xxxxx 000 | |||
| Xxxxxx, Xxxxx 00000 | ||||
| Accepted: | ||||
| BHC INTERIM FUNDING III, L.P. | ||||
By:
|
BHC Interim Funding Management III, L.P., | |||
| its General Partner | ||||
By:
|
BHC Investors III, L.L.C., | |||
| its Managing Member | ||||
By:
|
GHH Holdings III, L.L.C. | |||
By: Name: |
/S/ XXXXXX X. XXXXXXXX
|
|||
Title:
|
Managing Member | |||
