WAIVER AND EIGHTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
Exhibit 10.31.9
WAIVER AND EIGHTH AMENDMENT TO THE LOAN AND SECURITY
AGREEMENT
AGREEMENT
THIS WAIVER AND EIGHTH AMENDMENT is entered into as of April 6, 2011 (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.
WHEREAS, the Loan Parties have requested that Lender (i) waive certain Events of Default that
have occurred and are continuing and (ii) amend certain provisions of the Loan Agreement as
hereafter provided, and Lender is willing to do so on the terms and conditions hereafter set forth;
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. Waiver. Subject to satisfaction of the conditions precedent set forth
in Section Five below, Agent and Lenders hereby waive the Events of Default that
have occurred and are continuing pursuant to Section 7.1 of the Loan Agreement as a result
of (x) the Loan Parties failing to comply with the financial covenants set forth in Section
6.18(B), (C), (D) and
(F) 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 6.4 (the “Existing Defaults”). Notwithstanding the foregoing, the
waiver of the Existing Defaults set forth above does not establish a course of conduct between Loan
Parties and Lender and Loan Parties hereby agree that Lender is not obligated to waive any future
Events of Default under the Loan Agreement.
Section Three.
Amendment to Loan Agreement. Effective upon satisfaction
of the conditions precedent set forth in Section Five below, the Loan Agreement is hereby
amended as follows:
(a) The defined term “Maturity Date” in Section 1.3 (Certain Defined Terms) of the Loan
Agreement is hereby amended in its entirety to read as follows:
“Maturity Date” means Xxxxx 00, 0000
(x) The table appearing in Section 2.4(D) (Termination Fee) of the Loan
Agreement is hereby amended in its entirety to read as follows:
| Then the amount of the | ||||
| Termination Fee with shall | ||||
| If the Payment Date is: | equal: | |||
On or before June 30, 2011 |
$ | 800,000 | ||
After June 30, 2011, but on or
before September 30, 2011 |
$ | 1,000,000 | ||
After September 30, 2011, but on
or before December 30, 2011 |
$ | 1,300,000 | ||
January 1, 2012 and thereafter |
$ | 1,700,000 | ||
(c) Section 6.4 (Restricted Payments) of the Loan Agreement is hereby amended in its
entirety to read in its entirety as follows:
6.4 Restricted Payments. No Loan Party shall, nor shall it permit
any Subsidiary to, 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 (a) Parent may pay non-cash dividends consisting of additional
shares of Parent’s capital stock and (b) Borrowers shall be permitted to make
dividends or distributions to Parent, to enable Parent to pay (i) professional fees,
franchise and other taxes and other Ordinary Course of Business operating expenses
incurred by Parent 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 Parent’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 (as defined in the Senior Lien Financing Documents) and (y)
Borrowers demonstrate to Lender that after giving effect to such payment Borrowers
will be in pro forma compliance with Section 6.18(B) for the fiscal quarter
most recently ended prior to such payment (and if the Fixed Charge Coverage Ratio
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.
(d) Section 6.18(B) (Fixed Charge Coverage Ratio) of the Loan Agreement is hereby amended in
its entirety to read as follows:
(B) Fixed Charge Coverage Ratio. Loan Parties shall maintain as of the
end of each fiscal quarter, for the twelve month period ending on the last day
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of such fiscal quarter, a Fixed Charge Coverage Ratio of not less than
the ratio set forth below opposite such period:
| Fixed Charge Coverage | ||||
| Fiscal Quarter Ending: | 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 | |||
(e) Section 6.18(C) (Net Worth) of the Loan Agreement is hereby amended in its entirety
to read as follows:
(C) Net Worth. Loan Parties shall maintain, at all times during and
at the end of each fiscal quarter, a Net Worth of not less than $12,500,000.
(f) The table appearing in Section 6.18(D) (Leverage Ratio) of the Loan Agreement is hereby
amended in its entirety to read as follows:
| Fiscal Quarter Ending: | Leverage Ratio: | |||
March 31, 2011 |
17.50 to 1.0 | |||
June 30, 2011 |
16.50 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 | |||
(g) The table appearing in Section 6.18(F) (EBITDA) of the Loan Agreement is hereby
amended in its entirety to read as follows:
| 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 | ||
Section Four. 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
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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) 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;
(d) except as set forth herein or as the Loan Parties or their representatives shall have
notified Lender 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. 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;
(e) except for the Existing Defaults, no Default or Event of Default has occurred and is
continuing; and
(f) 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 Five. 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 Waiver and Amendment No. 8 the Revolving Credit
and Security Agreement with respect to the Senior Lien Financing Agreement, duly executed by the
parties thereto;
(c) Lender shall have received a non-refundable fee in the amount of Fifty Thousand Dollars
($50,000), which fee shall be fully earned and payable on the date hereof;
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(d) 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; and
(e) no Default or Event of Default, other than the Existing Defaults, 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 occurred, in each case, since the date of the Loan Parties’ most recent
financial statements delivered to Lender.
Section Six. 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 or 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 Seven. 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.
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(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.
(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 WAIVES
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
WARRANTS AND REPRESENTS 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.
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(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 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 is 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. |
|||
| 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: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Xxxxxx X. Xxxxxxxx | ||||
| Managing Member | ||||
| BORROWERS: | DIGITAL RECORDERS, INC. |
|||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
| TWINVISION OF NORTH AMERICA, INC. |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
| GUARANTOR: | DRI CORPORATION |
|||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| CEO, President | ||||
Signature Page to Eighth Amendment to Loan and Security Agreement
Consented to and Acknowledged by:
| DRI EUROPA AKTIEBOLAG |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| Chairman | ||||
| MOBITEC AB |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| Director | ||||
Acknowledgement
to Eighth Amendment to Loan and Security Agreement
