Exhibit 10.31.9
WAIVER AND EIGHTH AMENDMENT TO THE LOAN AND SECURITY
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 April 30, 2012

 

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     (b) 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/ Gerald H.
Houghton         Gerald H. Houghton        Managing Member      BORROWERS:
DIGITAL RECORDERS, INC.
      By:   /s/ David L. Turney         David L. Turney        CEO, President   
    TWINVISION OF NORTH AMERICA, INC.
      By:   /s/ David L. Turney         David L. Turney        CEO, President   
  GUARANTOR: DRI CORPORATION
      By:   /s/ David L. Turney         David L. Turney        CEO, President   
 

Signature Page to Eighth Amendment to Loan and Security Agreement

 

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Consented to and Acknowledged by:

         DRI EUROPA AKTIEBOLAG
      By:   /s/ David L. Turney         David L. Turney        Chairman       
MOBITEC AB
      By:   /s/ David L. Turney         David L. Turney        Director       

Acknowledgement to Eighth Amendment to Loan and Security Agreement