Exhibit 10.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"), AND SHALL
NOT BE SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED, UNLESS SUCH TRANSFER IS
MADE IN COMPLIANCE WITH THE ACT AND THE STATE ACTS.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (this "Warrant"), dated October 13, 2003,
is issued to DOLPHIN OFFSHORE PARTNERS, L.P. (the "Holder"), by DIGITAL
RECORDERS, INC., a North Carolina corporation (the "Company").
1. Purchase of Shares. Subject to the terms and conditions hereinafter
set forth, the Holder is entitled, upon surrender of this Warrant at the
principal office of the Company (or at such other place as the Company shall
notify the Holder hereof in writing), to purchase from the Company three hundred
nineteen thousand one hundred forty-nine (319,149) fully paid and non-assessable
shares of Common Stock, $.10 par value (the "Common Stock"), of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") for the purchase price
specified in Section 2 below.
2. Purchase Price. The purchase price for the Shares is $3.00 per
share. Such price shall be subject to adjustment pursuant to Section 7 hereof
(such price, as adjusted from time to time, is herein referred to as the
"Warrant Price").
3. Exercise Period. This Warrant is exercisable in whole or in part at
any time from the date hereof through October 13, 2010.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, but in increments of no less than 50,000 shares, the purchase
rights evidenced hereby. Such exercise shall be effected by surrender of this
Warrant, together with a duly executed copy of the form of Exercise Notice
attached hereto, to the Secretary of the Company at its principal offices, and
the payment to the Company of an amount equal to the aggregate purchase price
for the number of Shares being purchased.
5. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Common Stock, free
from all preemptive rights with respect thereto, which will be sufficient to
permit the exercise of this Warrant for the full number of Shares specified
herein. The Company further covenants that such Shares, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as follows:
(a) Stock Dividends, Subdivisions, Combinations and Other
Issuances. If the Company shall at any time prior to the expiration of this
Warrant subdivide its Common Stock, by stock split or otherwise, combine its
Common Stock or issue additional shares of its Common Stock as a dividend with
respect to any shares of its Common Stock, the number of Shares issuable on the
exercise of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend and proportionately decreased in the
case of a combination. Appropriate adjustments shall also be made to the Warrant
Price payable per Share, but the aggregate Warrant Price payable for the total
number of Shares purchasable under this Warrant (as adjusted) shall remain the
same. Any adjustment under this Section 7(a) shall become effective at the close
of business on the date the subdivision or combination becomes effective or as
of the record date of such dividend, or, in the event that no record date is
fixed, upon the making of such dividend.
(b) Reclassification, Reorganization, Merger, Sale or
Consolidation. In the event of any reclassification, capital reorganization or
other change in the Common Stock of the Company (other than as a result of a
subdivision, combination or stock dividend provided for in Section 7(a) above)
or in the event of a consolidation or merger of the Company with or into, or the
sale of all or substantially all of the properties and assets of the Company to,
any person, and in connection therewith consideration is payable to holders of
Common Stock in cash, securities or other property, then as a condition of such
reclassification, reorganization or change, consolidation, merger or sale,
lawful provision shall be made, and duly executed documents evidencing the same
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant immediately prior to such
event, the kind and amount of cash, securities or other property receivable in
connection with such reclassification, reorganization or change, consolidation,
merger or sale, by a holder of the same number of shares of Common Stock as were
purchasable upon exercise hereof by the Holder immediately prior to such
reclassification, reorganization or change, consolidation, merger or sale. In
any such case, appropriate provisions shall be made with respect to the rights
and interest of the Holder so that the provisions hereof shall thereafter be
applicable with respect to any cash, securities or property deliverable upon
exercise hereof. Notwithstanding the foregoing, (i) if the Company merges or
consolidates with, or sells all or substantially all of its property and assets
to, any other person, and consideration is payable to holders of Common Stock in
exchange for their Common Stock in connection with such merger, consolidation or
sale which consists solely of cash, or (ii) in the event of the dissolution,
liquidation or winding up of the Company, then the Holder shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Common Stock as if this Warrant had been exercised immediately prior to such
event, less the Warrant Price. Upon receipt of such payment, if any, the rights
of the Holder shall terminate and cease, and this Warrant shall expire. In case
of any such merger, consolidation or sale of assets, the surviving or acquiring
person and, in the event of any dissolution, liquidation or winding up
of the Company, the Company shall promptly, after receipt of this surrendered
Warrant, make payment by delivering a check in such amount as is appropriate
(or, in the case of consideration other than cash, such other consideration as
is appropriate) to such person as it may be directed in writing by the Holder
surrendering this Warrant.
(c) Certain Distributions. In case the Company shall fix a
record date for the making of a dividend or distribution of cash, securities or
property to all holders of Common Stock (excluding any dividends or
distributions referred to in Section 7(a) or 7(b) above), the number of Shares
purchasable upon an exercise of this Warrant after such record date shall be
adjusted to equal the product obtained by multiplying the number of Shares
purchasable upon an exercise of this Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such distribution, and the denominator of which shall be
the Warrant Price immediately prior to such distribution, less the fair market
value per Share, as reasonably determined by the Holder, of the cash, securities
or property so distributed. Such adjustment shall be made successively whenever
any such distribution is made and shall become effective on the effective date
of distribution.
(d) Coordination with Terms of Series F Preferred Stock.
Pursuant to Section 6(d)(i) of the Certificate of Designation of Series F
Convertible Preferred Stock of Digital Recorders, Inc. (the "Certificate of
Designation"), the Conversion Price of the Series F Preferred Stock is subject
to adjustment for the issuance of Additional Common Stock for a consideration
per share less than the Conversion Price. If the Conversion Price of the Series
F Preferred Stock is adjusted pursuant to Section 6(d)(i) of the Certificate of
Designation, then the Warrant Price hereunder shall be adjusted by multiplying
the Warrant Price in effect at the time of the event requiring the adjustment by
a fraction, the numerator of which is the Conversion Price as adjusted and the
denominator of which is the Conversion Price in effect immediately prior to the
adjustment. In that event, the number of Shares purchasable under this Warrant
would be proportionately increased, so that the aggregate Warrant Price payable
for the total number of Shares purchasable under this Warrant (as adjusted)
would remain the same. Capitalized terms used but not defined in this paragraph
shall have the meanings given to them in the Certificate of Designation.
(e) Coordination with Registration Rights Agreement. The
Warrant Price and the number of Shares purchasable under this Warrant shall also
be subject to adjustment pursuant to the provisions of Section 1.1 of the
Registration Rights Agreement (as defined below), which provisions are
incorporated herein by this reference.
8. Pre-Exercise Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a shareholder with respect to the Shares,
including without limitation, the right to vote such Shares, receive preemptive
rights or be notified of shareholder meetings, and the Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company.
9. Registration Rights. The Shares of Common Stock issuable upon
exercise of this Warrant shall be subject to the registration rights set forth
in the Registration Rights Agreement of even date herewith by and between the
Holder and the Company (the "Registration Rights Agreement"), and the Holder
shall be entitled to all rights and benefits thereof.
10. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
and their respective successors and assigns, provided that neither party may
assign its rights or obligations hereunder with the prior written consent of the
other party.
11. Governing Law. This Warrant shall be governed by the laws of the
State of North Carolina, excluding the conflicts of laws provisions thereof.
DIGITAL RECORDERS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Chairman, Chief Executive Officer and
President
EXERCISE NOTICE
Dated _________, ____
The undersigned hereby irrevocably elects to exercise the Stock
Purchase Warrant, dated October ___, 2003, issued by DIGITAL RECORDERS, INC., a
North Carolina corporation (the "Company") to the undersigned to the extent of
purchasing ___________ shares of Common Stock and hereby makes payment of
$_________ in payment of the aggregate Warrant Price of such shares.
DOLPHIN OFFSHORE PARTNERS, L.P.
By:
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