AMENDMENT NO. 1 TO

LOAN AND SECURITY AGREEMENT

 

This Amendment No. 1 (“Amendment No. 1”) is dated this 3rd day of August, 2017,
by and between Blow & Drive Interlock Corporation, a Delaware corporation
(“BDIC”), on the one hand; and The Doheny Group, LLC, a Nevada limited liability
company (the “Lender”), on the other hand, to document, in writing, an oral
agreement between the parties on November 9, 2016 to amend the terms of that
certain Loan and Security Agreement entered into by and between the parties
dated September 30, 2016 (the “LSA”). BDIC and Lender shall be referred to
herein as a “Party” and collectively as the “Parties”. In the event the terms of
the LSA and this Amendment No. 1 conflict, the terms of this Amendment No. 1
control. Any defined terms herein that are not defined herein have the meaning
set forth in the LSA.

 

WHEREAS, in the LSA and affiliated documents, Lender agreed to loan BDIC
approximately $500,000 in several phases;

 

WHEREAS, under Section 3.2 of the LSA, in addition to payments of principal and
interest due under the LSA and any corresponding promissory notes, BDIC agreed
to pay the Lender variable royalty payments depending upon a variety of factors,
including, but not limited to, the number of Units BDIC is receiving cash or
other consideration from a Client and whether the Units were Retail Units or
Wholesale Units, as detailed in the LSA (the “Royalty Payments”);

 

WHEREAS, on November 9, 2016, the Parties agreed the calculation of the Royalty
Payments under the LSA were too complex and difficult to calculate and
orally-agreed to that BDIC would pay the Lender a flat royalty of $1.30 per Unit
that BDIC receives cash or other consideration from or on behalf of a Client,
beginning with the first Unit BDIC had on the road and regardless of whether a
Unit is a Retail Unit or a Wholesale Unit; and

 

WHEREAS, the Parties desire to document in writing their previous oral agreement
to amend the terms of the LSA as set forth herein.

 

AMENDMENT

 

1. In consideration of good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree to amend the LSA
as follows:

 

I. Section 3.2 of the LSA is hereby amended by deleting Section 3.2 in its
entirety and replacing Section 3.2 with the following:

 

“3.2 Royalties.

 

(a) In consideration of Lender agreeing to extend credit to Borrower in
connection with the Loan, and in lieu of other fees and charges associated with
the Loan, concurrent with the execution and delivery of this Agreement and
without further consideration, Borrower shall promptly enter into and deliver to
Lender that certain Royalty Agreement in favor of Lender, a copy of which is
attached hereto as Exhibit E (the “Royalty Agreement”), the terms and conditions
of which are incorporated herein and made a part hereof.

 

(b) As more fully set forth in the Royalty Agreement, Borrower agrees to grant
Lender the following per calendar month cumulative royalties in perpetuity on
Total Units: $1.30 per Unit without regard as to whether the Unit is a Retail
Unit or a Wholesale Unit or other Device.

 

 

 

 

(c) Pursuant to the terms and conditions of the Royalty Agreement, the royalty
payment obligation shall commence from and after the Effective Date and will be
payable on all Units on the road, beginning with the first Unit, as further
detailed in this Section (the “Royalty Commencement Date”). After the Effective
Date, then beginning on the first calendar month thereafter, and for every
subsequent calendar month thereafter in perpetuity, Borrower will pay the
applicable royalty payments per calendar month for each of the Total Units in
accordance with the above schedule based on each Total Unit for which Borrower
received cash or other consideration from or on behalf of the Client thereof (or
for which Borrower voluntarily elected to waive any right to payment or other
consideration from the Client thereof). Such payments will be payable to Lender
on the 15th of each calendar month following the Royalty Commencement Date in
perpetuity, even after all Obligations due under the Loan Documents (other than
the Royalty Agreement) have been indefeasibly paid in full (and not subject to
disgorgement or recovery).

 

(d) In connection with each royalty payment, Borrower shall provide a statement
setting forth the calculation of the royalty amount, along with such supporting
documentation as reasonable and appropriate or as may be reasonably requested
from time to time by Lender. The parties expressly acknowledge and agree that
(1) to the extent that Borrower elects to forgo, defer or waive any such payment
due from a Client with respect to a Device, or receive other consideration
concerning said Device, such amount shall nonetheless be included in the
determination of royalties due thereunder, and (2) each will meet on no less
than an annual basis to work in good faith to “true up” the amount of royalties
due under the Royalty Agreement, and in connection therewith, to the extent that
an adjustment is needed (either because too little or too much was paid in
royalties in a given year (or other period), either Borrower will promptly
advance additional liquid funds to Lender, or Borrower will offset present or
future royalties due Lender under the Royalty Agreement, as the case may be.

 

(e) By way of illustration and not of limitation, Borrower will only pay
royalties to Lender for each of the Total Units from and after the Royalty
Commencement Date that it receives payment or other consideration from the
Client of said Total Unit (or for which Borrower voluntarily elected to waive
any right to payment or other consideration from the Client thereof). Solely for
the avoidance of doubt, for purposes of determining the proper amount of
royalties under the Royalty Agreement, (1) in the event that Borrower receives
an advance payment from a Client (for example, $1,200 for twelve monthly
payments due from a Retail Unit Client of $100 per month), then in such a
situation, the amount of royalties due with respect to said Total Unit shall be
$15.60, all of which is payable on the 15th day of the calendar month
immediately following receipt of said $1,200, (2) in the event that Borrower
does not receive payment from a client until after the Device has been provided
to said Client (for example, a Device representing a Retail Unit is given to a
Client on January 1 for a 12 month period, the rental amount is $100/month, and
payment is not received by Borrower until December 20th of said year), then in
such a situation, the amount of royalties due with respect to said Total Unit
shall be $15.60, all of which is payable on January 15 of the following year,
and (3) assuming the same facts as set forth in subsection 3.2(d)(1) above,
except that the Client returns the Device within 6 months and is permitted to
recover the remaining 6 months of payments (representing a refund of $600 from
Borrower to said Client), then in such a situation, Lender and Borrower will
“true up” the amount of royalties due, and in this situation, Borrower will
offset present or future royalties due Lender by the amount of $7.80,
representing the 6 months advanced by said Client which was refunded from
amounts received by Borrower at the commencement of the lease of said Total
Unit.

 

(f) Pursuant to the terms and conditions of the Royalty Agreement, Borrower
shall provide Lender with, among other things, (i) financial statements and
reports consistent with Section 7.1 below, and (ii) audit and inspection rights
consistent with Section 7.2 below, to permit Lender to ascertain Borrower’s
compliance with the terms and conditions of the Royalty Agreement, which
obligations shall survive the expiration of the Term and the indefeasible
payment in full of the Obligations hereunder.

 

 

 

 

(g) Pursuant to the terms and conditions of the Royalty Agreement, in the event
that Borrower enters into any transaction (regardless of form) or upon the
occurrence whereby (x) Borrower sells, conveys, transfers or assigns (in any
manner, including, without limitation, pursuant to a license, lease, assignment
for the benefit of creditors, merger or other consolidation) all or
substantially all of the Devices and/or its assets, or (y) all or substantially
all of the equity of Borrower is sold, conveyed, transferred, or assigned, or
(z) Borrower transfers, sells, assigns or conveys in any manner the Business
and/or control of Borrower and/or the Business, then, as an express condition of
said transaction or occurrence, Borrower expressly acknowledges and agrees that
it shall cause the acquirer/surviving Person (the “Acquirer”) to include in any
acquisition/merger/transfer document a requirement that the royalty obligations
of Borrower under the Royalty Agreement are expressly assumed by such Acquirer,
who shall be liable with respect to the royalties due under the Royalty
Agreement as if an original party thereto. Without limiting any of its rights or
remedies whatsoever, to the extent that the Acquirer is not bound by and/or does
not honor the terms and conditions of the Royalty Agreement, then, Borrower
shall pay to Lender as a “liquidated damage” resulting therefrom in one lump sum
an amount equal to the product of the last 12 calendar months of royalty
payments pursuant to the Royalty Agreement, multiplied by 100.”

 

II. BDIC expressly represents and warrants that, as of the date of this
Amendment No. 1, it has materially complied with all the terms and conditions
(including, without limitation, the representations, warranties, covenants and
agreements) contained in the LSA and the other Loan Documents, and that no Event
of Default has occurred, except to the extent the LSA or other Loan Documents
have been modified by the Parties.

 

III. BDIC expressly reaffirms all of its obligations under the LSA and other
Loan Documents.

 

IV. BDIC and Lender represent and warrant that they have due authority to enter
into, deliver their signatures to, and perform the terms as set forth in,
Amendment No. 1, and that upon such delivery, this Amendment No. 1 will be a
valid and binding agreement enforceable against such Party in accordance with
its terms and conditions.

 

V. The parties acknowledge and agree that the LSA and the other Loan Documents
are and remain valid and enforceable in accordance with their terms except to
the extent of the modification to Section 3.2 of the LSA as expressly set forth
herein

 

 

 

 

IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers or
other authorized signatory, have executed this Amendment No. 1 as of the date
first above written. This Amendment No. 1 may be signed in counterparts and
facsimile signatures are treated as original signatures.

  

“BDIC” “Lender”     Blow & Drive Interlock Corporation Doheny Group, LLC a
Delaware corporation a Nevada limited liability company

 

By: /s/ Laurence Wainer   By: /s/ David Haridim   Laurence Wainer     David
Haridim Its: Chief Executive Officer   Its: Manager