Exhibit 10.39.7
FIFTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT
     THIS FIFTH AMENDMENT is entered into as of December 29, 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 Loan Parties have requested that 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. 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. Amendment to Loan Agreement. Effective upon satisfaction of
the conditions precedent set forth in Section Four hereof, the Loan Agreement is
hereby amended as follows:
     (a) Section 6.18(A) (Aggregate Indebtedness) of the Loan Agreement is
hereby deleted in its entirety and the following is hereby substituted therefor:
          Aggregate Indebtedness. The aggregate principal amount of all
Indebtedness of Parent and its consolidated Subsidiaries, including the
Obligations, shall not exceed at any time during or at the end of each fiscal
quarter $19,000,000 (or the equivalent thereof in any foreign currency);
provided, that, the aggregate principal amount of all Subsidiaries of the
Foreign Subsidiaries shall not exceed at any time during or at the end of
(i) each fiscal quarter, other than the fiscal quarter ending on December 31,
2009, $6,000,000 (or the equivalent thereof in any foreign currency) and
(ii) the fiscal quarter ending on December 31, 2009, $6,200,000 (or the
equivalent thereof in any foreign currency); provided, further, that, in
addition thereto (i) Mobitec AB shall be permitted to issue to the seller of the
fifty percent (50%) of Mobitec Brazil that Mobitec AB does not own as of the
date hereof a promissory note in a principal amount not to exceed $1,950,000 (or
the equivalent thereof in a foreign currency) if such note is unsecured and
subordinated to the Obligations on terms and conditions satisfactory to Lender
in its sole discretion and (ii) Mobitec Australia

 

--------------------------------------------------------------------------------

 

shall be permitted to enter into a working capital facility in a principal
amount not to exceed $1,000,000 (or the equivalent thereof in a foreign
currency) on terms and conditions satisfactory to Lender in its sole discretion.
     (b) Section 6.18(D) (Leverage Ratio) 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:
September 30, 2009
    5.25:1.0  
December 31, 2009
    5.0:1.0  
March 31, 2010
    6.75:1.0  
June 30, 2010
    8.25:1.0  
September 30, 2010
    7.0:1.0  
December 31, 2010 and each fiscal quarter ending thereafter
    5.5:1.0  

     Section Three. 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; except that the Organizational Document of
Guarantor have been modified by the Articles of Amendment to Articles of
Incorporation of DRI;

-2-

--------------------------------------------------------------------------------

 

     (d) 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;
     (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;
     (f) 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;
     (g) no Default or Event of Default has occurred and is continuing; and
     (h) 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 Four. 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 Consent and Amendment No. 6 to
the Senior Lien Financing Agreement, duly executed by the parties thereto;
     (c) 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;
     (d) Lender shall have received a certificate of the secretary of Guarantor
certifying the true and correct copy of Articles of Amendment to its Articles of
Incorporation, which shall be in full force and effect as of the date of such
certificate; and
     (e) 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

-3-

--------------------------------------------------------------------------------

 

occurred, in each case, since the date of the Loan Parties’ most recent
financial statements delivered to Lender.
     Section Five. 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 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
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 Six. 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 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.

-4-

--------------------------------------------------------------------------------

 

     (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 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

-5-

--------------------------------------------------------------------------------

 

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.)

-6-

--------------------------------------------------------------------------------

 

     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 Fifth Amendment to Loan and Security Agreement

 

--------------------------------------------------------------------------------

 

          Consented to and Acknowledged by:

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

Acknowledgement to Fifth Amendment to Loan and Security Agreement