ITEM 1.01. Entry into a Material Definitive Agreement.
On September 27, 2013, Brekford Corp. (the “Company”), as borrower, and PNC Bank, National Association (“PNC”) as lender, executed a Second Amendment to Loan Documents, effective as of September 28, 2013 (the “Modification Agreement”), relating to the Company’s $3.5 million credit facility with PNC (the “Credit Facility”) pursuant to which the maturity date of the Credit Facility was extended to March 31, 2014. All other terms and conditions of the Credit Facility remain unchanged, except as discussed in the following paragraph and except that (i) the Company is now required to submit financial statements to PNC on a monthly basis rather than on a quarterly basis, (ii) the maximum ratio of total indebtedness (excluding Subordinated Debt) to EBITDA that the Company may maintain, to be tested on a quarterly basis, was increased to 3.5 to 1.0 (from 3.0 to 1.0), and (iii) the minimum rolling four-quarter Debt Service Coverage Ratio that the Company is required to maintain as of the end of each fiscal quarter was reduced to 1.0 to 1.0 (from 1.30 to 1.00). The terms and conditions of the Credit Facility were summarized in Item 1.01 of the Company’s Current Report on Form 8-K that was filed with the Securities and Exchange Commission (the “SEC”) on July 18, 2012, which item is incorporated herein by reference.
In connection with the Modification Agreement, the Company and PNC also executed a Borrowing Base Rider, effective September 28, 2013, which limits the aggregate principal amount of indebtedness that may be outstanding under the Credit Facility at any one time to a Borrowing Base and conditions the Company’s request for an advance under the Credit Facility on the Company’s submission of a Borrowing Base Certificate to the Bank on or before the 15th day of each month. As defined in the Borrowing Base Rider, the “Borrowing Base” is defined as the lesser of (i) $3.0 million and (ii) the sum of (a) 80% of Qualified