Exhibit 10.1
SHARE PURCHASE AGREEMENT
By and Between
DOLPHIN OFFSHORE PARTNERS, L.P.
as the “Buyer” herein, on the one hand,
and
DIGITAL RECORDERS, INC.
as “DRI” herein, on the other hand
Dated as of June 23, 2005
SHARE PURCHASE AGREEMENT
SHARE PURCHASE
AGREEMENT, dated as of June 23, 2005, by and between DOLPHIN
OFFSHORE PARTNERS, L.P. (the “Buyer”), on the one hand,
and DIGITAL RECORDERS, INC. (“DRI”) on the
other.
W I T N E S S E T H:
WHEREAS, on or
about June 23, 2005, the Buyer and DRI entered into a
non-binding understanding (the “Understanding”), under
which DRI would sell to Buyer 336 restricted shares of DRI
Series G Redeemable Convertible Preferred Stock, par value
$.10 per share, of DRI (the “Shares”); and
WHEREAS, the
Understanding contemplates that the parties will enter into a
definitive agreement and prepare such other documentation as the
parties and their respective legal counsel determine is
appropriate; and
WHEREAS, the
parties intend that this Share Purchase Agreement (the
“Agreement”), together with the schedules, exhibits and
other documents attached hereto, serve as the definitive agreement
between the parties with respect to the transactions described in
the Understanding.
NOW, THEREFORE, in
consideration of the covenants, representations, warranties and
mutual agreements herein set forth, the Buyer and DRI hereby agree
as follows:
ARTICLE I
THE SHARE PURCHASE AND ANCILLARY AGREEMENTS
Section 1.1 Purchase of the Shares. Subject to
and upon the terms and conditions hereof and the representations,
warranties and covenants contained herein, on the Closing Date (as
defined below) DRI shall sell, transfer, assign and deliver
certificate(s) representing the Shares to the Buyer, and the Buyer
shall purchase the Shares from DRI, free and clear of all liens,
claims and encumbrances thereon (the “Purchase
Transaction”). The Shares shall have the rights, obligations
and preferences set forth in the Certificate of Designation of
Series G Convertible Preferred Stock attached hereto as
Exhibit 1.1.
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Section 1.2 Purchase Price .
(a) Upon the
terms and subject to the conditions herein set forth, DRI and the
Buyer agree that on the Closing Date DRI shall sell to the Buyer,
and the Buyer shall purchase from DRI, the Shares for an aggregate
purchase price of $1,680,000 (the “Purchase
Price”).
(b) At the
Closing, DRI shall deliver to the Buyer a certificate representing
the Shares against delivery by the Buyer to DRI of the Purchase
Price. The certificate for the securities comprising the Shares
shall be registered in the name of Dolphin Offshore Partners,
L.P.
Section 1.3 Additional Warrant Shares .
Additionally, DRI shall deliver to the Buyer at the Closing a Stock
Purchase Warrant, in the form set forth as Exhibit 1.3., with
the rights, obligations and preferences as set forth therein (the
“Warrant Agreement”). The basic terms of the Warrant
Agreement shall provide Buyer with the right to purchase up to
240,000 shares of common stock, par value $0.10 per share, of DRI
(the “Warrant Stock”) at an exercise price of $2.21 per
share for a period of five (5) years, subject to the terms and
conditions set forth in the Warrant Agreement.
Section 1.4 Registration Rights . At the
Closing, the parties shall enter into a Registration Rights
Agreement, in the form set forth as Exhibit 1.4 (the
“Registration Rights Agreement”). Pursuant to the
Registration Rights Agreement, DRI shall agree: (a) to file
with the Securities and Exchange Commission (the “SEC”)
and use its best efforts to maintain the effectiveness of a
registration statement covering the resale by the Buyer of the
shares of common stock issuable upon conversion of the Shares (the
“Conversion Shares”), and (b) to use its best
efforts to effect the registration of (1) the shares of common
stock issuable upon conversion of shares of DRI Series G
Redeemable Convertible Preferred Stock issued as dividends on the
Shares and (2) the Warrant Stock with the SEC upon demand by
the Buyer in certain circumstances, subject to the terms and
conditions set forth in the Registration Rights Agreement. The
Warrant Agreement and the Registration Rights Agreement are
referred to collectively herein as the “Related
Agreements”.
ARTICLE II
CLOSING
Section 2.1 The Closing. The closing of the sale
and purchase of the Shares contemplated hereby (the
“Closing”) shall take place at a date and time to be
specified by the Buyer and
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DRI (the “Closing
Date”), but effective as of June 23, 2005. The Closing
shall take place at the offices of DRI in Research Triangle Park,
North Carolina, or any other place mutually agreeable to the
parties, subject to the right of the parties to close by exchange
of executed counterpart documents on the Closing Date.
Section 2.2 Deliveries By DRI . At the Closing,
DRI shall deliver to the Buyer or cause to be delivered to the
Buyer the certificate or certificates representing the Shares
registered in the name of the Buyer or in such name as may be
designated by the Buyer and the Warrant Agreement and Registration
Rights Agreement executed by DRI.
Section 2.3 Deliveries by the Buyer. At the
Closing, the Buyer shall deliver to the trust account of Gray,
Layton, Kersh, Solomon, Sigmon, Furr & Smith, P.A. the sum of
$1,680,000 (the “Investment Funds”) by wire transfer of
immediately available funds in payment of the Purchase Price and a
copy of the Registration Rights Agreement executed by
Buyer.
Section 2.4 Further Assurances. DRI shall
execute and deliver on the Closing Date or thereafter any and all
such other instruments, and take or cause to be taken all such
further action as may be necessary or appropriate to vest fully and
confirm to the Buyer title to and possession of the Shares
delivered hereunder by DRI.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DRI
As
a material inducement to the Buyer to (i) enter into this
Agreement, and (ii) purchase and acquire the Shares, DRI
represents and warrants to the Buyer, except as disclosed in the
Exhibits to this Agreement or in the documents filed by DRI with
the SEC (the “SEC Filings”) pursuant to the
requirements of the Securities Exchange Act of 1934 (the
“1934 Act”), that:
(a) DRI is a
corporation duly organized, validly existing and in good standing
under the laws of North Carolina.
(b) The
audited financial statements of DRI for the year ended
December 31, 2004 and unaudited financial statements of DRI
for the three months ended March 31, 2005 that have been filed
with the SEC Filings (hereinafter collectively referred to as the
“DRI Financial Statements”) include, as applicable to
the relevant period, a balance sheet and related statements of
net
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income (loss),
shareholders’ equity and cash flows for the periods ended on
such dates. The DRI Financial Statements fairly present the
financial position, results of operations and other information
purported to be shown therein at the respective dates and for the
respective periods to which they apply. Since March 31, 2005,
there has been no material change in the nature of the business of
DRI, nor any material adverse change in its financial condition or
property, nor have any warrants, options, shares of common stock or
securities or instruments convertible into or exchangeable for
common stock been issued, and DRI has incurred no material
obligations or liabilities or made any commitments other than as
disclosed in the DRI Financial Statements, the SEC Filings, or
otherwise to Buyer.
(c) DRI is
not a party to any material litigation, pending or threatened, nor
has any claim been made or, to the best knowledge of DRI’s
executive officers, asserted against DRI nor are there any
proceedings threatened or pending before any federal, state or
municipal government, or any department, board, body or agency
thereof, involving DRI that would, if resolved adversely to DRI,
have a material adverse effect on DRI or its financial condition or
operations.
(d) DRI is
not in violation or default of any provision of its Articles of
Incorporation or Bylaws or of any provision of any material
instrument or contract to which it is a party or by which it is
bound or, to the best knowledge of its executive officers, of any
provision of any federal, state or local judgment, writ, decree,
order, law, statute, rule or government regulation, applicable to
it. The execution, delivery and performance of this Agreement or
the Related Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a violation or default
under any such provision or an event which results in the creation
of any lien, charge or encumbrance upon any asset of DRI. DRI has
all requisite power and authority to execute, deliver and perform
this Agreement and the Related Agreements and has all requisite
power and authority to execute and deliver the certificates
representing the Shares. All necessary corporate proceedings of DRI
have been duly taken to authorize the execution, delivery and
performance by DRI of this Agreement and the sale and issuance of
the Shares. This Agreement and the Related Agreements have been
duly authorized, executed and delivered by DRI, are the legal,
valid and binding obligations of DRI, and are enforceable as to DRI
in accordance
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with their respective terms. No
consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other
tribunal is required by DRI for the execution, delivery or
performance by DRI of this Agreement and the Related Agreements. No
consent of any party to any contract, agreement, instrument, lease,
license, arrangement
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