JOHN D. HIGGINS
as the “Buyer” herein, on the one hand,
DIGITAL RECORDERS, INC.
as “DRI” herein, on the other hand
Dated as of October 31,
2005
THIS SHARE
PURCHASE AGREEMENT (this “Agreement”), dated as of
October 31, 2005, by and between JOHN D. HIGGINS (the
“Buyer”), on the one hand, and DIGITAL RECORDERS, INC.
(“DRI”) on the other.
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 50 shares of the Company’s
Series H Redeemable Convertible Preferred Stock (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 H Convertible
Preferred Stock attached hereto as Exhibit 1.1.
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 issue the Shares to
the Buyer and tender a cash payment in the amount of $2,301,37 (the
“Cash Payment”) in exchange for the surrender and
cancellation of that certain promissory note created by DRI on
July 25, 2005, in favor of Buyer in the original principal
amount of $252,301.37 attached hereto as Exhibit 1.2 (the
“Higgins Note”).
(b) At the
Closing, DRI shall deliver to the Buyer a certificate representing
the Shares against delivery by the Buyer to DRI of the Higgins Note
and the Cash Payment for cancellation by DRI. The certificate for
the securities comprising the Shares shall be registered in the
name of John D. Higgins.
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
55,000 shares of common stock, par value $0.10 per share, of DRI
(the “Warrant Stock”) at an exercise price of $2.02 per
share for a period of five (5) years from the Closing Date,
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”) to be entered into as
of the Closing Date. The Warrant Agreement and the Registration
Rights Agreement are referred to collectively herein as the
“Related Agreements”.
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 DRI upon the satisfaction or waiver of
and closing conditions specified in Articles VI, VII and VIII (the
“Closing Date”), but effective as of October 31,
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, the Cash Payment, together with the
Warrant Agreement and the Registration Rights Agreement executed by
DRI.
Section 2.3 Deliveries by the Buyer. Buyer will
deliver to DRI the Higgins Note for cancellation 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 and June 30,
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 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 June 30, 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 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 other than as set
forth in Article VI. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding
to which DRI is a party, or to which any of its properties or
assets are subject, is required for the execution, delivery or
performance of this Agreement and the Related
Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
As a material
inducement to DRI to enter into this Agreement and the Related
Agreements and to sell and issue the Shares, the Buyer represents
and warrants to DRI that:
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