$3,500,000 and less than $5,000,000, the sum of $1,000,000 plus the ExcessAmount.     “Excess Amount” means the lesser of (i) $500,000 and (ii) an amountdetermined by multiplying (x) the quotient (expressed as a percentage) of (a) theamount by which gross proceeds from the issuance of the Series K Preferred Stockexceed $3,500,000, divided by (b) $1,500,000, by (y) $500,000.     “Fourth Amendment” means that certain Fourth Amendment to the Loan andSecurity Agreement, dated as of October 1, 2009, among the Loan Parties and theLender, as the same may be amended, restated, supplemented or otherwise modified orextended or renewed from time to time.     “Fourth Amendment Effective Date” has the meaning set forth in theFourth Amendment.     “Series K Preferred Stock” means the Series K Senior ConvertiblePreferred Stock of the Guarantor in an amount not to exceed $5,000,000 and describedin that certain Certificate of Designation attached as Exhibit A to the FourthAmendment, issued on or about the Fourth Amendment Effective Date, .     “Prepayment Amount” means, if the Guarantor receives gross proceedsfrom the issuance of the Series K Preferred Stock of (i) no more than $3,500,000,$250,000, (ii) of $5,000,000, $1,000,000, and (iii) an amount in excess of$3,500,000 and less than $5,000,000, the sum of $250,000 plus the AdditionalPrepayment Amount.     (b) Pursuant to Section 5.13 (*Revisions or Updates to Schedules)*of the Loan Agreement,Schedule 4.1(B) is hereby updated and revised as set forth as Exhibit B hereto;     (c) Section 6.3(A) (*Transfers; Liens and Related Matters; Transfers*) of the Loan Agreement ishereby amended by deleting the word “and” where it appears immediately before clause (c) thereof,and by inserting the following immediately prior to the period at the end of such paragraph:     , (d) the Loan Parties shall be permitted to make a recallable equity investment inMobitec AB on or about the Fourth Amendment Effective Date in an amount not toexceed the Contribution Amount and (e) the Loan Parties shall be permitted to make arecallable equity investment in Mobitec Par on or about the Fourth AmendmentEffective Date in an amount not to exceed $400,000     (d) Section 6.4 (*Restricted Payments*) of the Loan Agreement is hereby amended by deleting“$150,000” from clause (ii) of the proviso therein, and substituting therefor the following:the sum of (a) $150,000 plus (b) the result of 9.5% of the amount of Series KPreferred Stock issued by the Guarantor on or prior to October 31, 2009
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     (e) Section 6.6 (*Transactions with Affiliates*) of the Loan Agreement is hereby amended byamending and restating clause (y) of the second sentence thereof as follows:(y) any such transactions, capital contributions, investments and transfers, which,in the aggregate for all such events, do not exceed $2,000,000 plus theContribution Amount     (f) Section 6.14 (*Organizational Documents*) of the Loan Agreement is hereby amended by addingthe following proviso immediately prior to the period at the end of such paragraph:provided, that Guarantor shall be permitted to adopt the Certificate of Designationof, and amend its Organizational Documents to authorize, the Series K Preferred Stock     **Section Three.****Representations and Warranties**. To induce Lender to enter intothis 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 otherLoan Document to which the Loan Parties are a party continue to be true and correct in all materialrespects as of the date hereof, as if repeated as of the date hereof, except for suchrepresentations and warranties which, by their terms, are expressly made only as of a previousdate;     (b) the execution, delivery and performance of this Amendment by each of the Loan Parties iswithin their corporate powers, has been duly authorized by all necessary corporate action on theirpart, and each of the Loan Parties has received all necessary consents and approvals (if any arerequired) for the execution and delivery of this Amendment;     (c) the Organizational Documents of Borrowers and Guarantor previously delivered to Lender bythe Loan Parties have not been amended or modified in any respect as of the date hereof; exceptthat the Organizational Document of Guarantor have been modified by the Articles of Amendment toArticles of Incorporation of DRI;     (d) upon execution of this Amendment, the Loan Agreement as amended by this Amendment shallconstitute the legal, valid and binding obligation of the Loan Parties, enforceable against theLoan Parties in accordance with their terms as so amended, except as such enforceability may belimited 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 havenotified 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 aparty or by which they may be bound which could have a Material Adverse Effect. Neither theexecution and delivery of this Amendment, nor the consummation of the transactions hereincontemplated, nor compliance with the provisions hereof will (i) violate any law or regulationapplicable to any of the Loan Parties, (ii) cause a violation by any of the Loan Parties of any
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order or decree of any court or government instrumentality applicable to them, (iii) conflictwith, or result in the breach of, or constitute a default under, any indenture, mortgage, deed oftrust, or other material agreement or material instrument to which any of the Loan Parties is aparty 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, tosecure 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 AdverseEffect.     **Section Four.****Conditions Precedent**. This Amendment shall become effective onthe date (the “Fourth Amendment Effective Date”) on which the following conditionsprecedent 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. 5 to the Senior LienFinancing Agreement, duly executed by the parties thereto and which shall permit, among otherthings, Guarantor to apply the Prepayment Amount in repayment of the Obligations;     (c) the Loan Parties shall have paid all amounts outstanding on or prior to the date of thisAmendment, including reimbursement or payment of all out-of-pocket expenses (including the legalfees and expenses of Blank Rome LLP), incurred in connection with this Amendment, the LoanDocuments and the transactions contemplated hereby and thereby;     (d) Lender shall have received a certificate of the secretary of Guarantor certifying the trueand correct copy of Articles of Amendment to its Articles of Incorporation, which shall be in fullforce 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 ordevelopment which has had or is reasonably likely to have a Material Adverse Effect shall haveoccurred, in each case, since the date of the Loan Parties’ most recent financial statementsdelivered 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 (orany 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 itsobligations 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 anypossibility that any past conditions, acts, omissions, events or circumstances would impair orotherwise adversely affect any of Lender’s rights, interests, security and/or remedies under theLoan Agreement and the other Loan Documents. Accordingly, for and inconsideration of the
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agreements contained in this Amendment and other good and valuable consideration, the Loan Parties (for themselves andtheir Affiliates and the successors, assigns, heirs and representatives of each of the foregoing)(each a “Releasor”) do hereby fully, finally, unconditionally and irrevocably release andforever 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 andcauses 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 mayhave against any Released Party by reason of any act, omission or thing whatsoever done or omittedto be done on or prior to the date hereof arising out of, connected with or related in any way tothis Amendment, the Loan Agreement or any other Loan Document, or any act, event or transactionrelated 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 themanagement of such advance or the Collateral.     **Section Six.****Agreement**. The Loan Parties shall promptly, but in any event notlater than the second Business Day, following the issuance by the Guarantor of the Series KPreferred Stock, make (i) a prepayment of the principal amount of the Obligations equal to thePrepayment Amount, provided that the Loan Parties shall pay to Lender amounts on account of thePrepayment Amount as proceeds of such issuance are received (subject to the two Business Day graceperiod) until the entire Prepayment Amount has been paid, (ii) an equity investment in Mobitec ABin an amount equal to the Contribution Amount, and (iii) a repayment of a portion of the principalamount outstanding under the Senior Lien Financing Agreement in an amount equal to the result ofthe net proceeds of such issuance minus the sum of the Prepayment Amount and the ContributionAmount. The failure of the Loan Parties to make any such prepayment, investment or repayment asrequired by the preceding sentence shall be deemed to be an Event of Default under the LoanAgreement as if set forth in the Loan Agreement and shall entitle Lender to exercise any and allrights and remedies described in the Loan Agreement.     **Section Seven.****General Provisions**.     (a) Except as herein expressly amended, each of the Loan Agreement and all of the other LoanDocuments are ratified and confirmed in all respects and shall remain in full force and effect inaccordance with their respective terms.     (b) All references to the Loan Agreement in the Loan Agreement and each other Loan Documentshall mean such Loan Agreement as amended as of the effective date hereof, and as amended herebyand as hereafter amended, supplemented and modified from time to time.     (c) This Amendment embodies the entire agreement between the parties hereto with respect tothe subject matter hereof and supersedes all prior agreements, commitments, arrangements,negotiations or understandings, whether written or oral, of the parties with respect thereto.
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     (d) Section and subsection headings in this Amendment are included herein for convenience ofreference only and shall not constitute a part of this Amendment for any other purpose or be givenany substantive effect.     (e) THIS AMENDMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING UNDERCONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED INACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWSPRINCIPLES.     (f) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY CONSENTS TO THEJURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEWYORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISINGOUT OF OR RELATING TO THIS AMENDMENT SHALL BE LITIGATED IN SUCH COURTS. EACH LOAN PARTY FOR ITSELFAND 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 WAIVESANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDEREDTHEREBY IN CONNECTION WITH THIS AMENDMENT. IF ANY LOAN PARTY OR ANY SUBSIDIARY PRESENTLY IS, OR INTHE FUTURE BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, EACH LOAN PARTY FOR ITSELF AND ONBEHALF OF ITS SUBSIDIARIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THATALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURNRECEIPT REQUESTED, DIRECTED TO SUCH PERSON AT SUCH PERSON’S ADDRESS AS SET FORTH IN SECTION8.6 OF THE LOAN AGREEMENT OR AS MOST RECENTLY NOTIFIED BY SUCH PERSON IN WRITING PURSUANT TOSECTION 8.6 OF THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTERTHE SAME HAS BEEN POSTED AS AFORESAID.     (g) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER HEREBY WAIVE THEIRRESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THISAMENDMENT. EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER FURTHER WARRANTAND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLYAND 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, orremedy to which Lender may be entitled, nor constitute a waiver of any provision of the LoanAgreement or any of the other Loan Documents, or any other documents, instruments or agreementsexecuted and/or delivered under or in connection therewith.
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     (j) This Amendment may be executed by the parties hereto in one or more counterparts, each ofwhich when so executed shall be deemed an original; and such counterparts taken together shallconstitute one and the same agreement. Any signatures delivered by a party by facsimile orelectronic 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 withthe foregoing and their intent to be bound thereby.   **LENDER:** **BHC INTERIM FUNDING III, L.P.**     By:  BHC Interim Funding Management III, L.P., its  GeneralPartner  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.**