Document:

exv10w46

Exhibit 10.46

THIRD AMENDMENT TO THE LOAN AND SECURITY AGREEMENT 

     THIS THIRD AMENDMENT dated as of August 7, 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, in connection with the Loan Agreement, Mobitec AB granted a pledge in favor of the
Lender of all of its right, title and interest in 180,000 quotas of Mobitec Brasil Ltda,
representing 50% of the issued and outstanding quotas of Mobitec Brasil Ltda. (the “Pledged
Quotas”) under that certain Quota Pledge Agreement, dated as of August 18, 2008 (the
“Brazil Pledge”);

     WHEREAS, as of the date hereof, Mobitec AB has conveyed the Pledged Quotas to Mobitec Par;

     WHEREAS, the Loan Parties have advised the Lender that pursuant to a Quota Purchase Agreement
dated on or about July 22, 2009, Mobitec Empreendimentos e Participações Ltda., a wholly owned
subsidiary of Mobitec AB, will acquire the remaining 50% of the equity interest (the “Demore
Shares”) currently held by Roberto Juventino Demore and Lorena Giusti Demore in Mobitec Brasil
Ltda. as described in that certain Memorandum from Barbosa, Mussnich & Aragao, dated as of July 14,
2009 (the “Memorandum”), attached hereto as Exhibit A;

     WHEREAS, according to the Memorandum, certain transactions (the “Transactions”) have
and will take place in order to effect the purchase of the Demore Shares by Mobitec Empreendimentos
e Participações Ltda and the conveyance of the Pledged Quotas by Mobitec AB to Mobitec Par.

     WHEREAS, in connection with the Transactions, the Loan Parties 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. Effective upon satisfaction of the
conditions precedent set forth in Section Three hereof, the Loan Agreement is hereby
amended as follows:

     (a) Section 1.3. Definitions. Section 1.3 of the Loan Agreement is
hereby amended

 

 

          (i) by adding the following new defined terms in their appropriate alphabetical order:

     “Demore Shares” means 50% of the issued and outstanding quotas held
prior to the completion of the Transactions, by Roberto Juventino Demore and Lorena
Giusti Demore in Mobitec Brazil.

     “DRI Europa German Pledge” means that certain Share Pledge Agreement,
dated as of August 22, 2008, made by DRI Europa in favor of Lender, as the same may
be amended, restated, supplemented or otherwise modified or extended or renewed from
time to time.

     “DRI Europa Swedish Pledge” means that certain Pledge Agreement, dated
as of August 19, 2008, made by DRI Europa in favor of Lender, as the same may be
amended, restated, supplemented or otherwise modified or extended or renewed from
time to time

     “DRI Pledge” means that certain Stock Pledge Agreement, dated as of
June 30, 2008, made by Parent in favor of Lender, as the same may be amended,
restated, supplemented or otherwise modified or extended or renewed from time to
time.

     “Memorandum” that certain Memorandum from Barbosa, Mussnich & Aragao,
dated as of July 14, 2009.

     “Mobitec AB Shares” means the 1,944,825 quotas of Mobitec Brazil,
representing 50% of the issued and outstanding quotas of Mobitec Brazil owned by
Mobitec AB prior to the completion of the Transactions.

     “Mobitec Par” means Mobitec Empreendimentos e Participações Ltda., a
limited liability company organized under the laws of Brazil.

     “Mobitec Par Pledge” means that certain Quota Pledge Agreement, dated
as of July 22, 2009, made by Mobitec Par in favor of Lender, as the same may be
amended, restated, supplemented or otherwise modified or extended or renewed from
time to time.

     “Mobitec AB Pledge” means that certain Quota Pledge Agreement, dated as
of August 19, 2008, made by Mobitec AB in favor of Lender, as the same may be
amended, restated, supplemented or otherwise modified or extended or renewed from
time to time.

     “Quota Purchase Agreement” means that certain Quota Purchase Agreement
dated on or about July 22, 2009, among Mobitec AB, Roberto Juventino Demore and
Lorena Giusti Demore, relating to the purchase by Mobitec Par of the Demore Shares,
as the same may be amended, restated, supplemented or otherwise modified or extended
or renewed from time to time.

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     “Third Amendment” means that certain Third Amendment to the Loan and
Security Agreement, dated as of August 7, 2009, among the Loan Parties and the
Lender, as the same may be amended, restated, supplemented or otherwise modified or
extended or renewed from time to time.

     “Third Amendment Effective Date” has the meaning set forth in the Third
Amendment.

     “Transactions” means those certain transactions described in the
Memorandum and Quota Purchase Agreement, including, but not limited to, the
contribution by Mobitec AB of the Mobitec AB Shares to Mobitec Par, the purchase of
the Demore Shares by Mobitec Par and the merger of Mobitec Par with and into Mobitec
Brazil.

          (ii) deleting the defined terms “Change of Control”, “Pledgor” and “Pledge Agreement”
and inserting the following in lieu thereof:

     “Change of Control” means any of the following: (a) the failure of
David Turney to remain actively engaged in the management of Borrowers or Parent and
to hold the positions held on the Closing Date, including as an officer and
director; (b) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5
under the Exchange Act), shall have acquired beneficial ownership of 20% or more on
a fully diluted basis of the voting and/or economic interest in Parent’s Capital
Stock, (b) the Board of Parent shall cease to consist of a majority of Continuing
Directors, (c) other than as permitted by Section 6.5, any merger or
consolidation of or with any Loan Party or sale of all or substantially all of the
property or assets of any Loan Party or (d) Parent ceases to own (i) 100% of the
Capital Stock of either Borrower, (ii) directly or indirectly, 100% of any Foreign
Subsidiary (other than Cast Master Mobitec), or (iii) at least 51% of Cast Master
Mobitec.

     “Pledgor” means, collectively, Parent, DRI Europa, Mobitec AB, Mobitec
Par and each other Person who shall from time to time hereafter become a party to
the Pledge Agreement, and shall extend to all heirs, estates, successors and
permitted assigns (in each case as applicable) of each such Person.

     “Pledge Agreement” means that certain DRI Europa German Pledge, DRI
Europa Swedish Pledge, DRI Pledge, Mobitec Par Pledge, Mobitec AB Pledge, and any
other collateral pledge agreement executed by the Pledgor in favor of Lender, as the
same may be amended, restated, supplemented or otherwise modified or extended or
renewed from time to time.

     (b) Section 6.1. Indebtedness and Liabilities. Section 6.1 of the
Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

     Indebtedness and Liabilities. No Loan Party shall, nor
shall it permit any Subsidiary to, directly or indirectly create,
incur,

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assume, guaranty, or otherwise become or remain directly or
indirectly liable, on a fixed or contingent basis, with respect to
any Indebtedness except: (i) the Indebtedness to Lender; (ii) (A)
Indebtedness incurred for Capital Expenditures permitted under
Section 6.18(E) hereof and (B) Indebtedness represented by
the promissory note permitted by Section 6.18(A)(i).; (iii)
Indebtedness under the Senior Lien Financing Documents; (iv)
Indebtedness which consists of loans permitted by Section
6.16(b) or (c), (v) Indebtedness set forth on
Schedule 4.4 and any refinancing, refunding or extension
thereof, provided that in connection with any such
refinancing, refunding or extension: (x) the aggregate principal
amount of such Indebtedness is not increased, (y) the scheduled
maturity date of such Indebtedness is not shortened, and (z) the
covenants or defaults are not materially more restrictive or more
onerous than analogous provisions in the documentation of such
Indebtedness as in effect on the date hereof; (vi) Indebtedness
consisting of loans by any Foreign Subsidiary of Parent to any Loan
Party, so long as such Indebtedness is subordinated to the
Obligations on a basis satisfactory to Lender; (vii) trade payables
and normal accruals in the ordinary course of business not yet due
and payable or with respect to which are being Properly Contested;
(viii) Subordinated Debt (including any subordinated shareholder
debt) to which Lender has consented and which is subject to a
subordination agreement in favor of and acceptable to Lender all in
accordance with the requirements of the definition of Subordinated
Debt; (ix) any Indebtedness consisting of guaranty obligations
permitted by Section 6.2; (x) unsecured or, to the extent
Senior Lien Lender is the counterparty, secured Indebtedness of Loan
Parties under any Hedging Agreements, but only to the extent any
such Hedging Agreements are entered into by Loan Parties to protect
against the risks of interest rate fluctuations affecting
Indebtedness permitted hereunder or to protect against the risks of
currency or commodity fluctuations in connection with the ordinary
business operations of Loan Parties in the ordinary course of their
respective businesses and not for speculative or investment
purposes; and (xi) Indebtedness incurred in connection with the
issuance of letters of credit, surety bonds (other than bonds
related to judgments or litigation), performance bonds and other
obligations of a like nature incurred in the normal course of
business.

     (c) Section 6.2. Guaranties. Section 6.2 of the Loan Agreement is
deleted in its entirety and the following is inserted in lieu thereof:

     Guaranties. No Loan Party shall, nor shall it permit
any Subsidiary to, become liable upon the obligations or liabilities
of any Person by assumption, endorsement or guaranty thereof or

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otherwise (other than to Lender) except (a) as set forth on
Schedule 6.2, (b) guarantees made in the Ordinary Course of
Business up to an aggregate amount of Two Hundred Fifty Thousand
Dollars ($250,000), (c) the endorsement of checks in the Ordinary
Course of Business, and (d) guarantees in an aggregate amount not to
exceed 2,000,000 Brazilian Reais made by Mobitec Brazil or Mobitec
Par for the purposes of asset-based working capital and capital
lease financing of Mobitec Brazil.

     (d) Section 6.4. Restricted Payments. Section 6.4 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu thereof:

     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 and, with
respect to preferred stock, dividends that are capitalized,
compounded and added to the preference amount of the preferred
stock) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common stock or
preferred stock, or of any options to purchase or acquire any such
shares of common stock or preferred stock of any Loan Party;
provided that (A) 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 and (ii) up
to $150,000 in the aggregate in any Fiscal Year of dividends or
distributions with respect to Parent’s preferred stock, so long 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); provided,
however, that after giving effect to the payment of such
dividends or distributions there shall not exist any Default or
Event of Default, and (B) Mobitec Par shall be permitted to purchase
the Demore Shares as part of the Transactions and as set forth in
the Quota Purchase Agreement.

     (e) Section 6.5. Restriction on Fundamental Changes. Section 6.5 of
the Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

     Restriction on Fundamental Changes. No Loan Party
shall, nor shall it permit any Subsidiary to, enter into any merger,
consolidation or other reorganization with or into any other Person
or acquire all or a substantial portion of the assets or Capital
Stock of any Person or permit any other Person to consolidate with
or merge with it; provided that the Borrowers shall be
permitted to

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merge or consolidate into each other; and provided,
further, that in order to consummate the Transactions (A)
Mobitec AB shall be permitted to (i) acquire Mobitec Par for the
purpose of acquiring the Demore Shares, and (ii) contribute the
Mobitec AB Shares to Mobitec Par and (B) Mobitec Par shall be
permitted to merge with and into Mobitec Brazil, so long as Mobitec
Brazil is the successor company to such merger.

     (f) Section 6.14. Organizational Documents. Section 6.14 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu thereof:

     Organizational Documents. No Loan Party shall, nor shall it
permit any Subsidiary to, amend, modify or waive any term or material
provision of its Organization Documents or any certificate of designation
unless required by law; provided, that, in order to
consummate the Transactions, (i) Mobitec Brazil may change its
Organizational Documents in connection with the contribution of the Mobitec
AB Shares to Mobitec Par and related changes to the Mobitec AB Pledge, and
(ii) each of Mobitec Brazil and Mobitec Par may change its Organizational
Documents solely in connection with the merger of Mobitec Par with and into
Mobitec Brazil, so long as Mobitec Brazil is the successor company to such
merger.

     (g) Section 6.16. Advances, Loans or Investments. Section 6.16 of
the Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

     Advances, Loans or Investments. No Loan Party shall, nor shall
it permit any Subsidiary to (i) purchase or acquire obligations or Capital
Stock of, or any other interest in, any Person, except for those Permitted
Investments listed on Schedule 6.16 and as otherwise expressly
permitted hereunder, including but not limited to, (y) the purchase by
Mobitec Par of the Capital Stock of Mobitec Brazil as contemplated by the
Quota Purchase Agreement, and (z) the contribution by Mobitec AB of the
Capital Stock held by Mobitec AB in Mobitec Brazil to Mobitec Par, in each
case, in connection with the consummation of the Transactions; or (ii) make
advances, loans or extensions of credit to any Person, including any
Subsidiary or Affiliate, except with respect to (a) the extension of
commercial trade credit in connection with the sale of Inventory in the
Ordinary Course of Business, (b) the Mobitec Loan, (c) so long as no Default
or Event of Default has occurred and is continuing or would result
therefrom, loans by any Loan Party to another Loan Party (other than Parent)
and (d) loans or extensions of credit by the Borrowers or Parent to Foreign
Subsidiaries of Parent (inclusive of (i) amounts utilized for the Mobitec AB
Loan Repayment and (ii) any and all expenses incurred by a Loan Party and
allocated to the Foreign Subsidiaries of Parent for purposes of calculating
the net income of the Loan Parties on a consolidated basis, unless such Loan
Party has been reimbursed in cash for

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such allocated expenses), so long as (x) no Default or Event of Default
has occurred and is continuing or would result therefrom, (y) Borrowers have
at least $750,000 of Undrawn Availability (as defined in the Senior Lien
Financing Documents) after giving effect to such loan or extension of credit
and (z) the aggregate amount of such loans and extensions of credit by
Borrowers to Foreign Subsidiaries do not exceed $1,000,000 in the aggregate
at any time outstanding.

     (h) Section 6.18(A). Aggregate Indebtedness. Section 6.18(A) of the
Loan Agreement is hereby amended by deleting “$1,500,000” from clause (i) of the second proviso,
and inserting in lieu thereof “$1,950,000”.

     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 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. 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

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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 (the
“Third Amendment Effective Date”) upon the satisfaction of the following conditions
precedent:

     (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 the Quota Purchase Agreement, duly executed by the parties
thereto;

     (c) Lender shall have received the first amendment to the Mobitec AB Pledge, in form and
substance satisfactory to Lender, duly executed by the parties thereto and registered with all
necessary Governmental Authorities;

     (d) Lender shall have received the Mobitec Par Pledge, in form and substance satisfactory to
Lender, duly executed by the parties thereto and registered with all necessary Governmental
Authorities;

     (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
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

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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 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 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

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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 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/ Gerald H. Houghton
 

Name: Gerald H. Houghton
	 	 
	 

	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 
	BORROWERS:	 	DIGITAL RECORDERS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David L. Turney
 

Name: David L. Turney
	 	 
	 

	 	 	 	Title: CEO, President	 	 
	 
	 	 	 	 	 	 
	 	 	TWINVISION OF NORTH AMERICA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David L. Turney
 

Name: David L. Turney
	 	 
	 

	 	 	 	Title: CEO, President	 	 
	 
	 	 	 	 	 	 
	GUARANTOR:	 	DRI CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David L. Turney
 

Name: David L. Turney
	 	 
	 

	 	 	 	Title: CEO, President	 	 

Signature Page to Third Amendment to Loan and Security Agreement

 

 

	 	 	 	 	 
	Consented to and Acknowledged by:	 	 
	 
	 	 	 	 
	DRI EUROPA AKTIEBOLAG	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ David L. Turney
 

David L. Turney
	 	 
	Title:

	 	Chairman	 	 
	 
	 	 	 	 
	MOBITEC AB
 	 	 
	 
	By: 

Name:

	 	/s/ Stephen P. Slay
 

Stephen P. Slay
	 	 
	Title:

	 	Director	 	 

Acknowledgement to Third Amendment to Loan and Security AgreementExhibit 10.1

Exhibit 10.1

FIRST AMENDMENT AND WAIVER UNDER CREDIT AGREEMENT

This FIRST AMENDMENT AND WAIVER UNDER CREDIT AGREEMENT (the “Amendment”),
dated this 12 day of August, 2009, is by and among SL INDUSTRIES, INC., a New Jersey corporation
(“Parent Borrower”), the Subsidiaries of the Parent Borrower party hereto (each a
“Subsidiary Borrower” and collectively, the “Subsidiary Borrowers” and together
with the Parent Borrower, each a “Borrower” and collectively, the “Borrowers”), the
lenders party hereto, being not less than the Majority Lenders (the “Amendment Lenders”),
and BANK OF AMERICA, N.A., a national banking association (acting in its capacity as administrative
agent for the Lenders, the “Agent”).

BACKGROUND

A. Pursuant to that certain Amended and Restated Revolving Credit Agreement entered into as of
October 23, 2008, by and among the Borrowers, the Lenders, and the Administrative Agent (as
amended, modified, restated or otherwise supplemented from time to time, the “Credit
Agreement”), the Lenders agreed, inter alia, to extend to the Borrowers a revolving credit
facility of Sixty Million Dollars ($60,000,000).

B. The Parent Borrower has advised the Agent that the Borrowers failed to meet, for the fiscal
quarter ending on June 30, 2009, the Interest Coverage Ratio of not less than 2:50 to 1:00 as of
the end of each fiscal quarter as set forth in Section 7.1(b) of the Credit Agreement, and as
reported in the compliance certificate delivered on August 10, 2009 and such failure resulted in an
Event of Default under Section 10.1(d)(i) of the Credit Agreement (the “Specified
Default”).

C. The Borrowers have requested, and the Amendment Lenders have agreed, upon the terms and
subject to the conditions set forth herein, to: (i) waive the Specified Default; (ii) make certain
amendments to the Interest Coverage Ratio and calculation thereof; (iii) reduce the Commitment from
$60,000,000 to $40,000,000; (iv) increase the Commitment Fee Margin; and (v) make certain other
amendments to the Credit Agreement as hereinafter provided.

Now, therefore, for value received, and in consideration of Loans made or to be made,
and other credit accommodations given or to be given, to the Borrowers by the Lenders from time to
time, each Borrower, each Amendment Lender and the Agent hereby agree as follows:

1. Definitions. Except as expressly set forth herein, all capitalized terms used and
not defined herein shall have the respective meanings ascribed thereto in the Credit Agreement.

 

 

 

2. Waiver of the Specified Default. On the terms and subject to the conditions of
this Amendment, the Amendment Lenders hereby waive the Specified Default for the fiscal quarter
ending on June 28, 2009. Notwithstanding the foregoing, neither the Amendment Lenders’ waiver of the Specified Default, nor any communication between the Agent, Lenders and the
Borrowers or any party’s respective officers, agents, employees or representatives shall be deemed
to constitute a waiver of: (i) any Default or Event of Default existing under the Loan Documents,
whether now existing or hereafter arising under the Loan Documents, other than the Specified
Default; (ii) the ongoing obligations of the Loan Parties to comply with the Credit Agreement and
the other Loan Documents, as amended hereby; or (iii) any rights or remedies which the Agent and
Lenders have against the Loan Parties under the Credit Agreement, the other Loan Documents and/or
applicable law, with respect to any Default or Event of Default, other than rights and remedies
which directly result from the occurrence and existence of the Specified Default. The Agent and
the Lenders hereby reserve and preserve all of their rights and remedies against the Loan Parties
under the Credit Agreement and other Loan Documents and under applicable law, other than the right
to exercise remedies based upon the occurrence and existence of the Specified Default.

3. Schedule A to the Credit Agreement. Schedule A to the Credit Agreement
(being the Commitments of the Lenders) is hereby amended and restated to be in the form of
Schedule A attached hereto.

4. Amendment to Section 7.1(b) of the Credit Agreement. Section 7.1(b) of the Credit
Agreement is hereby amended and restated in its entirety as follows:

(b) Minimum Interest Coverage Ratio. As of any fiscal
quarter end, with the exception of the fiscal quarter ending on
September 30, 2009, the Interest Coverage ratio shall not be less
than 2:50 to 1:00. As of the fiscal quarter ending on September 30,
2009, the Interest Coverage Ratio shall not be less than 1:00 to
1:00.

5. Amendments to Section 11.1 of the Credit Agreement.

(a) The definition of “Commitment” is hereby amended and restated in its
entirety as follows:

“Commitment” means the obligations of the Lenders pursuant
to the terms hereof to make Revolving Credit Loans to the Borrowers
in the aggregate principal amount outstanding at any time not to
exceed Forty Million Dollars ($40,000,000), from time to time until
the Termination Date. The amount of the Commitment may be reduced
pursuant to the terms hereof.

(b) The definition of “Commitment Fee Margin” is hereby amended to amend and
restate the table contained therein in its entirety as follows:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Then the Commitment Fee
	Tier	 	If the Total Leverage Ratio is:	 	Margin is
	 	1	 	 	Less than or equal to 1.50 to 1.00

	 	 	0.50	%
	 	2	 	 	Greater than 1.50 to 1.00, but less
than or equal to 2.50 to 1.00

	 	 	0.60	%
	 	3	 	 	Greater than 2.50 to 1.00, but less
than or equal to 3.00 to 1.00

	 	 	0.75	%
	 	4	 	 	Greater than 3.00 to 1.00

	 	 	0.90	%

 

 

 

(c) The definition of “Interest Coverage Ratio” is hereby amended and restated
in its entirety as follows:

“Interest Coverage Ratio” means, as of any date, the ratio
of (a) EBIT, for the period of four (4) consecutive fiscal quarters
ending on or immediately prior to such date, to (b) Interest Expense
(whether or not paid), payable during the period of four (4)
consecutive fiscal quarters ending on or immediately prior to such
date; provided that for the period of four (4) consecutive
fiscal quarters ending on or immediately prior to September 30, 2009
only, EBIT shall include the Restructuring Charges.

(d) The following definition of “Restructuring Charges” is hereby added in its
entirety as follows:

“Restructuring Charges” means, for the period of four (4)
consecutive fiscal quarters ending on or immediately prior to
September 30, 2009, certain restructuring charges resulting from
work force reductions actually incurred and paid by (i) SL Power
Electronics Corporation in an amount not to exceed Five Hundred
Eighty-Five Thousand Dollars ($585,000) and (ii) MTE Corporation in
an amount not to exceed One Hundred Fifteen Thousand Dollars
($115,000), which charges in the aggregate shall not exceed Seven
Hundred Thousand Dollars ($700,000), during such period and included
in the calculation of EBIT.

6. No Further Consent or Waiver. Other than the Specified Default, no Default or
Event of Default exists immediately before or immediately after the date hereof. Other than the
Specified Default, nothing in this Amendment nor any communication between the Agent, any Lender,
the Loan Parties or any of their respective officers, agents, employees or representatives shall be
deemed to constitute a waiver of: (i) any Default or Event of Default arising as a result of the
foregoing representation proving to be false or incorrect in any material respect; or (ii) any
rights or remedies which the Agent or any Lender has against the Loan Parties under the Credit
Agreement or any other Loan Document and/or applicable law, with respect to any such Default or
Event of Default arising as a result of the foregoing representation proving to be false or
incorrect in any material respect.

7. Representations and Warranties. Each of the Borrowers hereby represents and
warrants to the Agent and the Lenders that: (i) the representations and warranties set forth in
the Credit Agreement are true and correct in all material respects as of the date hereof, except
those representations and warranties made as of a date certain which remain true and correct in all
material respects as of such date or otherwise would be incorrect as a result of the Specified

 

 

 

Default; (ii) after giving effect to the waiver provided in this Amendment there is no Default
or Event of Default under the Credit Agreement; (iii) each Borrower has the corporate or limited
liability company power necessary to execute, deliver this Amendment, to the extent each is a party
thereto; and (iv) the execution, delivery and performance of this Amendment have been duly
authorized by the applicable governing body of each Borrower, and when executed, this Amendment
will constitute the valid, binding and enforceable obligations of each Borrowers.

8. Further Agreements and Representations. Each of the Borrowers hereby, jointly and
severally:

(a) ratifies, confirms and acknowledges that the Credit Agreement, as amended hereby,
and all other Loan Documents continue to be valid, binding and in full force and effect as
of the date hereof, and enforceable in accordance with their terms;

(b) covenants and agrees to perform all of their respective obligations under the
Credit Agreement, as amended hereby, and all other Loan Documents;

(c) acknowledges and agrees that as of the date hereof, no Borrower has any defense,
set-off, counterclaim or challenge against the payment of any sums owing to the Agent or the
Lenders or the enforcement of any of the terms of the Credit Agreement, as amended hereby,
or any of the other Loan Documents;

(d) acknowledges and agrees that all Loans presently or hereafter outstanding under the
Loan Documents shall continue to be secured by the Collateral;

(e) acknowledges and agrees that this Amendment does not constitute a novation of the
Loans;

(f) ratifies, confirms and continues all rights and remedies granted to the Agent and
the Lenders in the Loan Documents; and

(g) ratifies and confirms all waivers made by the Borrowers in the Loan Documents.

9. Conditions to Effectiveness of this Amendment. The Agent’s and the Amendment
Lenders’ obligations hereunder are conditioned upon the satisfaction by the Borrowers of the
following conditions precedent:

(a) receipt by the Agent of this Amendment, duly executed by each of the Borrowers and
Majority Lenders;

(b) the Borrowers shall have paid to the Agent for the ratable benefit of the Amendment
Lenders an amendment and waiver fee equal to 0.50% of the Commitments (as reduced by this
Amendment) of the Amendment Lenders, which shall be fully earned upon each such Amendment
Lender’s execution of this Amendment, together with all reasonable out of pocket expenses of
the Administrative Agent incurred in connection with this Amendment, including, without
limitation, the reasonable fees and expenses of Administrative Agent’s counsel; and

 

 

 

(c) receipt by the Agent of such additional agreements, instruments, documents,
writings and actions as the Agent and the Lenders may reasonably request.

10. Miscellaneous.

(a) No reference to this Amendment need be made in the Credit Agreement or in any other
Loan Document.

(b) This Amendment shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no Loan Party shall assign its
rights or obligations under this Amendment.

(c) This Amendment shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania without reference to the choice of law doctrine of the
Commonwealth of Pennsylvania.

(d) This Amendment may be executed in any number of counterparts with the same effect
as if all the signatures on such counterparts appeared on one document and each such
counterpart shall be deemed an original. Any signature on this Amendment, delivered by any
party by facsimile transmission shall be deemed to be an original signature thereto.

(e) To the extent of any inconsistency between the terms and conditions of this
Amendment and the terms and conditions of the Loan Documents, the terms and conditions of
this Amendment shall prevail. All terms and conditions of the Credit Agreement and any
other Loan Documents not inconsistent herewith shall remain in full force and effect.

(f) This Amendment is the entire agreement between the parties relating to the subject
matter hereof, incorporates or rescinds all prior agreements and understandings between the
parties hereto relating to the subject matter hereof, cannot be changed or terminated orally
or by course of conduct, and shall be deemed effective as of the date it is accepted by the
Agent.

(g) Except as expressly set forth herein, neither the execution, delivery or
performance of this Amendment, nor anything contained herein, shall be construed as or shall
operate as a course of conduct, course of dealing or a consent to or waiver of any provision
of, or any right, power or remedy of the Agent or any Lender under, the Credit Agreement and
the agreements and documents executed in connection therewith.

[remainder of page intentionally left blank]

 

 

 

Schedule A

Lenders and Commitments

	 	 	 	 	 
	Lender	 	Commitment	 
	Bank of America, N.A.
	 	$	20,000,000	 
	PNC Bank, National Association
	 	$	10,000,000	 
	KeyBank, N.A.
	 	$	10,000,000	 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment and Waiver under
Credit Agreement to be duly executed as of the date first above written.

	 	 	 	 	 
	 	Parent Borrower:

SL INDUSTRIES, INC.

 	 
	 	By:  	/s/ David R. Nuzzo
 	 
	 	 	David R. Nuzzo 	 
	 	 	Vice President & Chief Financial Officer 	 
	 

Subsidiary Borrowers:

SL DELAWARE, INC.

SL DELAWARE HOLDINGS, INC.

MTE CORPORATION

RFL ELECTRONICS INC.

SL MONTEVIDEO TECHNOLOGY, INC.

CEDAR CORPORATION

TEAL ELECTRONICS CORPORATION

MEX HOLDINGS LLC

SL POWER ELECTRONICS CORPORATION

SLGC HOLDINGS, INC.

SLW HOLDINGS, INC.

SL AUBURN, INC.

SL SURFACE TECHNOLOGIES, INC.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ David R. Nuzzo
 	 
	 	 	David R. Nuzzo 	 
	 	 	Authorized Officer 	 
	 

 

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., in its capacity as Agent

 	 
	 	By:  	/s/ Anne Zeschke 	 
	 	 	Name:  	Anne Zeschke	 
	 	 	Title  	Vice President

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