SECOND AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
Exhibit 10.88
SECOND AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
SECOND AMENDMENT dated as of March 26, 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 Borrowers have requested that the 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. Amendment to Loan Agreement.
(a) Section 6.18(D). Leverage Ratio. Section 6.18(D) 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: | ||||
March 31, 2009 |
5.7:1.0 | ||||
June 30, 2009 |
6.25:1.0 | ||||
September 30, 2009 |
4.55:1.0 | ||||
December 31, 2009 |
3.0:1.0 | ||||
March 31, 2010 and each fiscal
quarter ending thereafter |
2.5:1.0 | ||||
(b) Section 6.18 (F). EBITDA. Section 6.18 (F) is hereby deleted in its
entirety and the following is hereby substituted therefor:
(F) EBITDA. Parent and its consolidated Subsidiaries, on a consolidated basis,
shall maintain as of the end of each quarter set forth below, for the twelve month period
ending on the last day of such fiscal quarter, a minimum EBITDA as follows:
| Fiscal Quarter Ending: | EBITDA: | |||
March 31, 2009 |
$ | 3,000,000 | ||
June 30, 2009 |
$ | 2,500,000 | ||
September 30, 2009 |
$ | 4,000,000 | ||
December 31, 2009 and each
fiscal quarter ending
thereafter |
$ | 5,000,000 | ||
Section Two. 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;
(d) upon its execution, 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. Neither the
execution and delivery of this Amendment, nor the consummation of the transactions herein
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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.
(f) no Default or Event of Default has occurred and is continuing; and
(g) 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 Three. Conditions Precedent. This Amendment shall become effective upon the
satisfaction of the following conditions precedent:
(a) Lender shall have received this Amendment, duly executed by the Loan Parties;
(b) 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
occurred, in each case, since the date of the Loan Parties’ most recent financial statements
delivered to Lender.
Section Four. 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” and collectively, the “Releasors”) does 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”
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 Amendment,
the Loan Agreement or any other Loan Document, or any act, event or transaction related or
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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 Five. 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 Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement 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
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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 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., | |||||||
| 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
|
|||||||
| Title: Managing Member | ||||||||
| BORROWERS: | DIGITAL RECORDERS, INC. | |||||||
| By: | /s/ XXXXX X. XXXXXX
|
|||||||
| Title: CEO, President | ||||||||
| TWINVISION OF NORTH AMERICA, INC. | ||||||||
| By: | /s/ XXXXX X. XXXXXX
|
|||||||
| Title: CEO, President | ||||||||
| GUARANTOR: | DRI CORPORATION | |||||||
| By: | /s/ XXXXX X. XXXXXX
|
|||||||
| Title: CEO, President | ||||||||
Signature Page to Second Amendment to Loan and Security Agreement
