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EXHIBIT 10.27
SHARE PURCHASE AGREEMENT
By and Between
LITE VISION CORPORATION,
as the "Buyer" herein, on the one hand,
and
DIGITAL RECORDERS, INC.
on the other
Dated as of June 30, 1998
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TABLE OF CONTENTS
Section
ARTICLE I
THE SHARE PURCHASE AND ANCILLARY AGREEMENTS
Section 1.1 Purchase of the Shares .......................
Section 1.2 Purchase Price ...............................
Section 1.3 Option and Registration Rights ...............
ARTICLE II
CLOSING ...........................................................
Section 2.1 The Closing ..................................
Section 2.2 Deliveries By DRI ............................
Section 2.3 Deliveries by the Buyer ......................
Section 2.4 Further Assurances ...........................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DRI
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
ARTICLE V
COVENANTS OF DRI ..................................................
Section 5.1 Conduct of Business ..........................
Section 5.2 Access and Information .......................
Section 5.3 Information Following Closing ................
ARTICLE VI
CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE
ARTICLE VII
CONDITIONS TO DRI'S OBLIGATION TO CLOSE ...........................
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATION TO CLOSING
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination ..................................
Section 9.2 Effect of Termination ........................
Section 9.3 Amendment ....................................
Section 9.4 Extension; Waiver ............................
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Section
ARTICLE X
INVESTMENT BANKING FEES ...........................................
ARTICLE XI
INDEMNIFICATION AND CONTRIBUTION ..................................
Section 11.1 Indemnity ...................................
Section 11.2 Notice of Proceeding ........................
Section 11.3 Contribution ................................
ARTICLE XII
NOTICES ...........................................................
ARTICLE XIII
CERTIFICATES OF OFFICERS AND DIRECTORS ............................
ARTICLE XIV
CONFIDENTIALITY ...................................................
ARTICLE XV
COUNTERPARTS ......................................................
ARTICLE XVI
MERGER CLAUSE AND COSTS, FEES AND EXPENSES ........................
ARTICLE XVII
SEVERABILITY ......................................................
ARTICLE XVIII
BENEFIT ...........................................................
ARTICLE XIX
WAIVER ............................................................
ARTICLE XX
HEADINGS ..........................................................
ARTICLE XXI
SURVIVAL ..........................................................
ARTICLE XXII
GOVERNING LAW .....................................................
ARTICLE XXIII
ARBITRATION........................................................
TABLE OF ATTACHMENTS ..............................................
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SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, dated as of June 30_, 1998, by and between
LITE VISION Corporation, a corporation organized in Taiwan (the "Buyer"), on the
one hand, and DIGITAL RECORDERS, INC., a North Carolina corporation ("DRI") on
the other.
W I T N E S S E T H:
WHEREAS, on or about May 27, 1998, the Buyer and DRI entered into a
letter of understanding (the "Letter"), which describes the general terms on
which DRI would sell to Buyer 400,000 restricted shares of DRI Common Stock, par
value $.10 per share, of DRI (the "Shares") and an option to purchase an
additional 100,000 shares of Common Stock of DRI (the "Option"), together with
certain other rights to be vested in the Buyer; and
WHEREAS, the Letter 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 Letter;
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 400,000 restricted shares of Common
Stock of DRI, par value $.10 per share (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").
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 aggregate cash consideration
of $1,050,000 payable in United States currency (the "Purchase Price").
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(b) At the Closing, DRI shall deliver to the Buyer certificates representing the
Shares against delivery by the Buyer to DRI of the Purchase Price. Certificates
for the securities comprising the Shares shall be registered in such name or
names and in such authorized denominations as the Buyer may request in writing
at least five full business days prior to the Closing Date.
Section 1.3 Option and Registration Rights.
(a) Contemporaneously with the execution of this Agreement, the parties
shall execute a registration rights agreement (the "Registration Rights
Agreement"), a copy of which is attached hereto as Annex I and incorporated by
reference herein. The Registration Rights Agreement shall extend to the Buyer
the right, after the Closing Date, to have included on a registration statement
filed by the Company (other than on Form X-0, X-0 or any successor form) during
a three-year period commencing on the Closing Date, the Shares and the Option
Shares, if issued (hereinafter defined). The Registration Rights Agreement shall
by its terms become effective on the Closing Date (as defined below).
(b) On the Closing Date, DRI shall execute and deliver to Buyer an
option agreement (the "Option Agreement") in the form attached hereto as Annex
II and incorporated by reference herein. As set forth in the Option Agreement,
DRI will grant to Buyer or its transferee(s), if any, the right to purchase (the
"Option") up to an additional 100,000 shares of Common Stock of DRI (the "Option
Shares") at an exercise price of $2.4375 ($2-7/16) per share (the "Option
Exercise Price"), all as more fully set forth in the Option Agreement. The
Option Agreement shall be executed by DRI and delivered to Buyer on the Closing
Date. The Buyer shall purchase the Option from DRI for aggregate cash
consideration of $ (the "Option Purchase Price"), which shall be paid
to DRI on the Closing Date.
ARTICLE II
CLOSING
Section 2.1 The Closing. The closing of the sale of Shares contemplated
hereby (the "Closing") shall take place at a date and time to be specified by
the Buyer and DRI (the "Closing Date") following satisfaction or waiver of all
conditions precedent to Closing as described in Articles VI, VII and VIII
hereof, which date, pursuant to the parties' best efforts, shall be June 30,
1998, but not later than July 30, 1998, unless otherwise mutually agreed by the
parties. 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 following instruments and
documents:
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(a) A certificate or certificates representing the Shares registered in
the name of the Buyer or in such name as may be designated by the Buyer. Any
sales, stock transfer or other taxes payable in connection with the sale to the
Buyer by DRI of the Shares, the Option or the Option Shares shall be paid by the
Buyer;
(b) The opinion of counsel for DRI as provided in Article VIII below;
and
(c) Such other documents, instruments and certificates of the officers
of DRI as are described in Article XIII or as may be reasonably requested by the
Buyer.
Section 2.3 Deliveries by the Buyer. At the Closing, the Buyer shall
deliver to DRI or cause to be delivered to DRI the following instruments and
documents:
(a) The Purchase Price as provided in Section 1.2(a) hereof;
(b) Evidence of compliance with United States securities laws for
shareholders owning in excess of 5% of a publicly held entity, including filings
of a Form 3 under Section 16(a) of the Securities Exchange Act of 1934, as
amended, and a Schedule 13D under Section 13 of the 1934 Act; and
(c) Such other documents, instruments and certificates of the officers
of the Buyer as may be reasonably requested by DRI.
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 or the
Option to be 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 and the Option, DRI represents and
warrants to the Buyer, except as disclosed in the Exhibits to this Agreement,
that:
(a) DRI is a corporation duly organized, validly existing and in good
standing under the laws of North Carolina.
(b) Except as disclosed in Exhibit H hereto, DRI does not own or
control, directly or indirectly, any interest in any other corporation, joint
venture, partnership, association or other business entity.
(c) DRI has furnished to the Buyer, or will furnish to the Buyer prior
to the Closing Date, copies of the audited financial statements of DRI for the
years ended December 31, 1997 and 1996 and unaudited financial statements of DRI
for the three months ended March 31, 1998 (hereinafter collectively referred to
as the "DRI Financial Statements"). The DRI Financial Statements, copies of
which are attached as Exhibit A hereto, 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.
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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. The DRI
Financial Statements have been prepared in accordance with generally accepted
accounting principles (except to the extent that certain footnote disclosures
regarding any stub period may have been omitted in accordance with the
applicable rules of the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
consistently applied throughout the periods involved, are correct and complete,
and are in accordance with the books and records of DRI. The accountants whose
report on the audited financial statements is filed with the Commission are, and
during the periods covered by the reports included in filings made with the
Commission were, independent certified public accountants with respect to DRI
within the meaning of the 1934 Act.
(d) DRI has good and marketable title to all of its properties and
assets carried on the DRI Financial Statements and such properties and assets
are subject to no material mortgage, pledge, lien, security interest, claim or
other encumbrance except (i) as disclosed in the DRI Financial Statements and
the notes thereto, or except as otherwise disclosed in this Agreement, or in
writing to Buyer, (ii) as may arise in the ordinary course of business, or (iii)
the interest of a lessor under any non-capital lease.
(e) Except as otherwise described on Exhibit B hereto, since March 31,
1998, there has been no material change in the nature of the business of DRI,
nor in its financial condition or property, and DRI has incurred no material
obligations or liabilities or made any commitments other than as disclosed in
DRI Financial Statements or as otherwise disclosed on Exhibit B hereto.
Moreover, since March 31, 1998, there has been no damage, destruction or loss or
other occurrence or other development (whether or not insured against) which
either singly or in the aggregate materially adversely affects DRI and DRI's
executive officers have no knowledge of any threatened occurrence or development
which would materially adversely affect the properties or assets or the business
or operations of DRI.
(f) Except as disclosed in Exhibit C hereto, DRI is not a party to any
employment agreement with any of its officers, directors or shareholders, or to
any lease, agreement or other commitment, nor to any pension, insurance, profit
sharing or bonus plan.
(g) Except as otherwise disclosed on Exhibit D hereto, DRI is not a
party to any 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.
(h) DRI is not in violation or default of any provision of its Articles
of Incorporation or Bylaws or of any provision of any instrument or contract to
which it is party or by which
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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 and the consummation of the
transactions contemplated hereby 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
each of (a) this Agreement, (b) the Option Agreement, and (c) the Registration
Rights Agreement, and has all requisite power and authority to execute and
deliver the certificates representing the Shares and the Option Shares. All
necessary corporate proceedings of DRI have been duly taken to authorize the
execution, delivery and performance by DRI of this Agreement, the Option
Agreement and the Registration Rights Agreement. This Agreement has been duly
authorized, executed and delivered by DRI, is the legal, valid and binding
obligation of DRI, and is enforceable as to DRI in accordance with its 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, the Option
Agreement or the Registration Rights Agreement. 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, the
Option Agreement or the Registration Rights Agreement.
(i) Since March 31, 1998, DRI has not, except as disclosed in Exhibit E
hereto, and prior to the Closing, DRI will not have (i) paid or declared any
dividends on or made any distributions in respect of, or purchased or redeemed,
any of the outstanding shares of its capital stock or issued any additional
shares of its capital stock; or (ii) made or authorized any amendments to its
Articles of Incorporation, or to its By-Laws; or (iii) mortgaged or pledged or
subjected to any lien, charge or other encumbrance, any of its assets, tangible
or intangible; or (iv) sold, leased, transferred or contracted to sell, lease or
transfer any material assets, tangible or intangible, or entered into any other
transactions outside of the ordinary course of business; (v) made any loan or
advance to or become obligated as guarantor or otherwise on behalf of any
officer, director or shareholder of DRI or to any other person, firm or
corporation; (vi) paid any compensation to any officer or director (in their
capacities as such) other than in the ordinary course of business; (vii)
suffered any labor trouble; (viii) made or become a party to any contract or
commitment or renewed, extended, amended or modified any contract or commitment
which in any case involved an amount in excess of $100,000 or a term in excess
of 180 days, except in the ordinary course of business; (ix) become bound or
entered into any contract, commitment or transaction other than in the ordinary
course of business or except as otherwise contemplated by this Agreement; or (x)
waived any rights which alone or in the aggregate are material to DRI.
(j) The authorized capitalization of DRI consists of 10,000,000 shares
of Common Stock, par value $.10 per share and 1,000,000 shares of Preferred
Stock, par value $.10 per share. As of the date hereof, 2,674,075 shares of
Common Stock have been duly authorized and validly issued and are outstanding,
fully paid and
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nonassessable, and 354 shares of Preferred Stock are issued or outstanding. The
Shares, when issued in accordance with the terms and conditions of this
Agreement, and the Option Shares, when issued in accordance with the terms and
conditions of the Option Agreement, will be duly authorized, validly issued,
fully paid and nonassessable. Except as described in Exhibit F hereto or as may
be contemplated by this Agreement, DRI has no commitments or obligations of any
nature whatsoever to issue, deliver or sell under any preemptive rights, offer,
stock option agreement, bonus agreement or purchase plan, stock incentive
compensation plan, conversion right, contingent share agreement or otherwise,
any Common Stock or Preferred Stock.
(k) Except as set forth in Exhibit G hereto, to the best knowledge of
DRI's executive officers, DRI has not infringed, and is not now infringing upon,
any trademark, trade name, service xxxx or copyright belonging to any other
person, firm or corporation. DRI is not a party to any license agreement, or any
other agreement with respect to any trademark, service xxxx, trade names or
applications for same or any copyrights, except as disclosed in Exhibit G
hereto. To the best of its knowledge after reasonable inquiry, and except as
disclosed on Exhibit G hereto, DRI owns or holds adequate licenses or rights to
use all trademarks, service marks, trade names, or copyrights used in the
business as now conducted by it and such use does not, and will not, infringe
upon or otherwise violate the rights of others in a manner which might have a
material adverse effect on DRI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
As a material inducement to DRI to enter into this Agreement, the
Option Agreement, and the Registration Rights Agreement, the Buyer represents
and warrants to DRI that:
(a) The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Taiwan, and is qualified to transact business as
a foreign corporation in all other jurisdictions in which the character of its
business requires the Buyer to be so qualified; and has all corporate power
necessary to engage in the business in which it is presently engaged.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated, will conflict with or
result in the breach of, or accelerate the performance required by, any terms of
any agreement, or result in the creation of any lien, charge or encumbrance upon
any of the properties or assets of the Buyer under the terms of any such
agreement.
(c) The Buyer is not in violation of any term of its articles of
incorporation or by-laws, or any mortgage, indenture, contract, license, permit,
agreement or instrument to which it is a party, or of any judgment, decree,
order, statute, rule or regulation, which violation might have a material
adverse effect on the business of the Buyer, and the
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execution, delivery and performance of and compliance with this Agreement will
not result in any such violation by the Buyer or be in conflict with or
constitute a default under any such document. The Buyer has all requisite power
and authority to execute, deliver and perform each of (a) this Agreement, (b)
the Option Agreement, and (c) the Registration Rights Agreement, and has all
requisite power and authority to purchase and own the Shares, the Option and the
Option Shares. All necessary corporate proceedings of the Buyer have been duly
taken to authorize the execution, delivery and performance by the Buyer of this
Agreement, the Option Agreement and the Registration Rights Agreement. This
Agreement has been duly authorized, executed and delivered by the Buyer, and is
enforceable as to the Buyer in accordance with its terms. No consent,
authorization, approval, order, license, certificate or permit of or from, or
declaration or filing with, any Taiwan or United States federal, state, local or
other governmental authority or any court or other tribunal is required by the
Buyer for the execution, delivery or performance by the Buyer of this Agreement,
the Option Agreement or the Registration Rights Agreement. No consent of any
party to any contract, agreement, instrument, lease, license, arrangement or
understanding to which the Buyer 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, the Option Agreement or the Registration Rights Agreement.
(d) All corporate action on the part of the Buyer, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement and the performance of all obligations of the Buyer
hereunder has been taken and this Agreement constitutes a valid and legally
binding obligation of the Buyer enforceable in accordance with its terms,
subject to bankruptcy, insolvency and other laws of general application relating
to or affecting creditors' rights, and general principles of equity.
(e) The Buyer has provided DRI with full and complete access to
information concerning all material aspects of, and information with respect to,
the Buyer. All information which has been communicated by the Buyer to DRI with
respect to the business and operations of the Buyer are true, correct and
complete in all material respects.
(f) The Buyer is acquiring the Shares and the Option, upon payment for
and delivery thereof, not with a view to the distribution or public resale
thereof within the meaning of the 1933 Act. The Buyer further agrees that DRI
may cause to be set forth on the certificates for the Shares and, if and when
issued, the Option Shares, to be delivered to the Buyer hereunder and pursuant
to the Option Agreement a legend in substantially the following form:
These securities have not been registered under the Securities
Act of 1933, as amended, and may be offered and sold only if registered
pursuant to the provisions of that Act or if, in the opinion of counsel
to the seller an exemption from registration thereunder is available,
the availability of which must be established to the satisfaction of
DRI.
DRI shall not be obligated to recognize any purported transfer by the
Buyer of the Shares, the Option or the Option Shares unless accompanied by an
opinion of the Buyer's counsel in form and substance satisfactory to counsel for
DRI to the effect that such transfer is not in violation of the 1933 Act.
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ARTICLE V
COVENANTS OF DRI
Section 5.1 Conduct of Business. From the date hereof until the
Closing, except as permitted by this Agreement, reflected in the Exhibits hereto
or as otherwise consented to by the Buyer in writing, which consent shall not be
unreasonably withheld, DRI shall:
(a) Carry on its business only in the ordinary course, in substantially
the same manner in which it previously has been conducted;
(b) Maintain its real and personal property in as good condition and
repair as of the date hereof, except for ordinary wear and tear;
(c) Perform in all material respects all of its material obligations
under all contracts to which DRI is a party;
(d) Use reasonable efforts to preserve intact its present business
organization and to keep available the services of its present officers and
employees;
(e) Not amend its charter or By-Laws;
(f) Not take any action or engage in any transaction which would cause
any of the representations made by DRI herein to be untrue as of the Closing
Date or would cause DRI to be in breach of the terms and conditions of this
Agreement;
(g) Maintain its books of account in its usual, regular and ordinary
manner;
(h) Comply with all registration, filing and reporting requirements of
the 1934 Act;
(i) Maintain a listing of the Common Stock with The Nasdaq Stock
Market, Inc.;
(j) Not issue any shares of its capital stock, except upon the exercise
of any currently outstanding option, warrant, convertible security or similar
right which is described in Exhibit G hereto; or
(k) Not increase, decrease, or exchange any of its outstanding Common
Stock for a different number or class of securities through reorganization,
reclassification, share dividend, share split, or similar change in the
capitalization of DRI.
Section 5.2 Access and Information. DRI shall give to the Buyer and its
representatives full access at all reasonable times prior to the Closing to the
properties, books and records of DRI and to furnish such information and
documents in its possession relating to DRI as the Buyer may reasonably request.
Section 5.3 Information Following Closing. For a period of two years
after the Closing, DRI shall furnish Buyer, without charge, such of the
following documents as may be requested by Buyer:
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(i) As soon as practicable after they have been filed with the
Commission, one copy of each annual and interim financial and other report or
communication filed with the Commission; and
(ii) Such additional documents and information with respect to DRI and
its affairs as the Buyer may from time to time reasonably request.
ARTICLE VI
CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE
In addition to those specific conditions set forth in Articles VII and
VIII below, the obligations of the Buyer and DRI to consummate the transactions
described herein shall be subject to the following:
(a) No government regulatory body or agency shall have instituted court
action or legal proceedings seeking preliminary or permanent injunctive relief
prohibiting purchase of the Shares, the Option or the Option Shares.
(b) The performance of all conditions precedent to Closing set forth in
Articles VII and VIII below.
(c) From the date of this Agreement to the Closing Date, there shall
have been no material adverse change (i) in the business or properties of DRI,
or (ii) in the financial condition of DRI, and the property, business and
operations of DRI shall have not been materially and adversely affected due to
any fire, accident or other casualty or by any act of God, whether or not
insured.
ARTICLE VII
CONDITIONS TO DRI'S OBLIGATION TO CLOSE
DRI's obligation to complete the transactions provided for herein shall
be subject to the performance by the Buyer of all its agreements to be performed
hereunder on or before the Closing, and to the further conditions that:
(a) The representations and warranties of the Buyer contained in
Article IV hereof are true and correct in all material respects as of the
Closing with the same effect as if made on and as of such date and the officers
of the Buyer shall so certify thereto.
(b) The Buyer shall have performed and complied with all the terms and
conditions required by this Agreement, the Option Agreement and the Registration
Rights Agreement to be performed or complied with by it prior to the Closing.
(c) The Buyer shall furnish to DRI resolutions of the Board of
Directors of the Buyer, certified by an appropriate officer of the Buyer,
approving the execution, delivery
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and performance of this Agreement, the Option Agreement and the Registration
Rights Agreement. Additionally, at the Closing, the Buyer shall furnish an
officer's certificate in favor of DRI which shall provide (i) that the Buyer is
an existing corporation under the laws of Taiwan and (ii) that the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been authorized by all necessary action, corporate or otherwise, by
the Buyer, and (iii) that the consummation of the transactions contemplated by
this Agreement do not conflict with or result in a breach of any terms,
condition or provision of the Articles of Association of the Buyer or any note,
indenture, mortgage, deed of trust or other agreement or instrument known to
such officer to which the Buyer is a party or by which the Buyer or any of its
property is bound.
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATION TO CLOSE
The Buyer's obligation to complete the transactions provided for herein
shall be subject to the performance by DRI of all agreements to be performed
hereunder on or before the Closing, and to the further conditions that:
(a) The representations and warranties of DRI contained in Article III
and the covenants of DRI contained in Article V hereof are true and correct and
have been performed or satisfied in all material respects as of the Closing with
the same effect as if made or performed on and as of such date and DRI shall so
certify to the Buyer.
(b) There shall have been no material adverse change in the operating
results or financial condition of DRI since March 31, 1998, except as described
in Exhibit B which are attached to this Agreement and DRI shall so certify in
writing to the Buyer.
(c) The Buyer shall have received from Xxxx, Layton, Kersh, Solomon,
Sigmon, Xxxx & Xxxxx, P.A. and Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C., an
opinion dated the Closing, to the following effect:
(i) DRI is a corporation duly organized, validly existing and
in good standing under the laws of North Carolina.
(ii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties and assets or the
conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company
taken as a whole. DRI has all corporate power and authority necessary
to engage in the business in which it is presently engaged and to
execute, deliver and perform its obligations under this Agreement.
There are no options, puts, calls, or other rights outstanding to
purchase or sell DRI's securities, other than as contemplated in this
Agreement or as disclosed in the Annexes or Exhibits hereto.
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(iii) DRI's authorized capitalization consists of 10,000,000
shares of Common Stock, par value $.10 per share, and 1,000,000 shares
of Preferred Stock, par value $.10 per share. At the Closing Date and
prior to the issuance of the Shares, and as described in Exhibit E
hereto, there will be 2,674,075 shares of Common Stock issued and
outstanding, and 354 shares of Preferred Stock issued and outstanding.
All of such outstanding shares of capital stock have been duly
authorized and are validly issued and are fully paid and nonassessable.
(iv) Execution and delivery of this Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all
necessary action, corporate or otherwise, by DRI. This Agreement and
the Registration Rights Agreement are legal, valid and binding
obligations of DRI, enforceable against DRI in accordance with their
terms except as enforcement may be limited by general equitable
principles or bankruptcy, insolvency or similar laws affecting
creditors' rights generally. DRI has all requisite power and authority
to execute, deliver and perform this Agreement and the Registration
Rights Agreement. All necessary corporate proceedings of DRI have been
taken to authorize the execution, delivery and performance by DRI of
this Agreement and the Registration Rights Agreement.
(v) There are no preemptive rights to acquire DRI's Common
Stock or Preferred Stock.
(vi) The Shares, when issued in accordance with the terms and
conditions of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and will be free and clear of any adverse
claim, security interest, lien, pledge, option, encumbrance or
restriction whatever; provided, however, that the Shares will be
"restricted securities" as such term is defined under the 1933 Act
(unless registered for sale as described in the Registration Rights
Agreement) and the certificates representing the Shares will contain a
legend to reflect such status; and provided further that the Buyer's
status as an "affiliate" as defined under the 1933 Act may subject the
Buyer to certain restrictions as provided in the 1933 Act, the 1934
Act, or the rules and regulations thereunder.
(vii) To the best knowledge of such counsel, DRI is not in
violation or default of any provision of its Articles of Incorporation
or ByLaws or of any provision of any instrument or contract to which it
is party or by which it is bound or, of any provision of any federal,
state or local judgment, writ, decree, order, law, statute, rule or
government regulation, applicable to it. To the best knowledge of such
counsel, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby 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 of encumbrance upon any asset of DRI. 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 or the Registration Rights Agreement. To the best
knowledge of such counsel, no consent of any party to any contract,
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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 or the Registration Rights Agreement.
(viii) The offer and sale of the Shares are exempt from the
registration requirements of Section 5 of the 1933 Act.
(ix) Except as disclosed in this Agreement or the Exhibits
hereto, such counsel is not aware of any pending or threatened action,
suit, proceeding or investigation before any court or any public,
regulatory, or governmental agency, authority or body, involving DRI or
any of its existing officers or directors and such counsel do not know
of any legal matter or government proceedings regarding DRI.
In rendering such an opinion, counsel for DRI may rely (i) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of DRI; and (ii) to the extent they deem proper, upon written
statements or certificates of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of DRI, provided that copies of any such statements or certificates shall be
delivered to counsel for the Buyer.
(d) At the date of this Agreement, the Board of Directors of DRI
consists of a total of eight directorships. At the Closing, the Board of
Directors shall have adopted resolutions expanding the Board of Directors to a
total of nine directorships and, on such date, a nominee designated by the Buyer
shall be appointed to serve on the Board of Directors of DRI.
(e) DRI shall have performed and complied with all the terms and
conditions required by this Agreement and the Registration Rights Agreement to
be performed or complied with by it on or before the Closing.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement and each agreement contemplated
hereby may be terminated at any time prior to the Closing:
(a) Mutual Consent. By the mutual written consent of the Buyer and DRI.
(b) Breach. By DRI if there has been a material breach of any
representation, warranty or agreement on the part of the Buyer set forth in this
Agreement, or by the Buyer if there has been a material breach of any
representation, warranty, covenant or agreement on the part of DRI set forth in
this Agreement.
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(c) No Consummation. By either DRI or the Buyer if the Purchase
Transaction shall not have been consummated on or before July 30, 1998, unless
extended by mutual agreement of the parties.
(d) Litigation. By either DRI or the Buyer if any litigation or
proceeding has been instituted with a view of restraining or prohibiting
consummation of the transaction contemplated by this Agreement.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement or any agreement contemplated hereby, this Agreement or any such other
agreement shall forthwith become void and there shall be no liability or
obligation hereunder or thereunder on the part of any party hereto.
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval hereof. This Agreement or any
agreement contemplated hereby may not be amended except by an instrument in
writing signed on behalf of each of the parties thereto.
Section 9.4 Extension: Waiver. At any time prior to the Closing the
parties hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument signed on behalf of such party.
ARTICLE X
INVESTMENT BANKING FEES
DRI and the Buyer each represent that, except as described in this
Article X, neither has employed any broker or agent or entered into any
agreement for the payment of any fees or compensation to any other person, firm
or corporation in connection with this transaction.
ARTICLE XI
INDEMNIFICATION AND CONTRIBUTION
Section 11.1 Indemnity. Subject to the conditions set forth below, DRI
agrees to indemnify and hold harmless the Buyer, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
the Buyer within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act, against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Article XI, but not be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred, arising out of, resulting
from, based upon, or in connection with any breach of any representation,
warranty, covenant, or agreement of DRI contained in this Agreement. The
foregoing agreement to indemnify shall be in
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addition to any liability DRI may otherwise have, including liabilities arising
under this Agreement. The Buyer agrees to indemnify and hold harmless DRI, its
officers, directors, partners, employees, agents, and counsel and each person,
if any, who controls DRI within the meaning of Section 15 of the 1933 Act or
Section 20(a) of the 1934 Act, against any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Article XI, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred,
arising out of, resulting from, based upon, or in connection with any breach of
any representation, warranty, covenant, or agreement of Buyer contained in this
Agreement.
Except as otherwise agreed by the parties in Article X hereof, (i) DRI
shall indemnify the Buyer for any broker's or finder's fees which may become
payable as a result of any promise or contract which may have been made by DRI
to or with any such broker or finder and (ii) the Buyer shall indemnify DRI for
any broker's or finder's fees which may become payable as a result of any
promise or contract which may have been made by the Buyer to or with any such
broker or finder.
Section 11.2 Notice of Proceeding. If any action is brought against
DRI, the Buyer or any of their officers, directors, employees, agents or
counsel, or any controlling persons (an "Indemnified Party" or collectively
"Indemnified Parties"), in respect of which indemnity may be sought against the
other party (the "Indemnifying Party") pursuant to the foregoing paragraph, such
Indemnified Party or Parties shall promptly notify the Indemnifying Party in
writing of the institution of such action (but the failure so to notify shall
not relieve the Indemnifying Party from any liability it may have) and the
Indemnifying Party shall promptly assume the defense of such action including
the employment of counsel satisfactory to such Indemnified Party or Parties and
payment of expenses. Such Indemnified Party or Parties shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party or Parties,
unless the employment of such counsel shall have been authorized in writing by
the Indemnifying Party in connection with the defense of such action or the
Indemnifying Party shall not have promptly employed counsel satisfactory to the
Indemnified Party or Parties to have charge of the defense of such action or
such Indemnified Party or Parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or other indemnified
parties which are different from or additional to those available to the
Indemnifying Party, in any of which events such fees and expenses shall be borne
by the Indemnifying Party and the Indemnifying Party shall not have the right to
direct the defense of such action on behalf of the Indemnified Party or Parties.
Anything in this paragraph to the contrary notwithstanding, the Indemnifying
Party shall not be liable for any settlement of any claim or action effected
without its written consent.
Section 11.3 Contribution. To provide for just and equitable
contribution if (i) an Indemnified Party makes a claim for indemnification
pursuant to the language set forth in Sections 11.1 and 11.2 above, but it is
found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
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Indemnified Parties seek contribution under the 1933 Act, the 1934 Act, or
otherwise, then the parties shall contribute to any and all losses, liabilities,
claims, damages and expenses whatsoever to which any of them may be subject, in
accordance with the relative fault of the parties in connection with the facts
which result in such losses, liabilities, claims, damages and expenses. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission or alleged omission relates
to information supplied by DRI or the Buyer, the parties' relative intent,
knowledge, access to information and the opportunity to correct such statement,
alleged statement, omission or alleged omission. The parties agree that it would
be unjust and inequitable if the respective obligations of each of the parties
for contribution were determined by prorata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to herein. No persons guilty of a fraudulent misrepresentation within the
meaning of Section 11 (f) of the 1933 Act shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
ARTICLE XII
NOTICES
Any notice given under this Agreement shall be deemed to have been
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, by receipt confirmed facsimile
transmission, or by tested telex, telegram or cable addressed as follows:
If to DRI: Digital Recorders, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx X
Xxxxxx, XX 00000
With a copy to: Xx. Xxxxxx X. Xxxxxx
Xxxxxxxx Xxxxxx Xxxxxx & Xxxxxxxx, P.C.
One Norwest Center
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Xx. Xxxxx X. Xxxx
Xxxx, Layton, Kersh, Solomon,
Sigmon, Xxxx & Xxxxx, P.A.
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, XX 00000-0000
If to the Buyer: Lite Vision Corporation
0xx Xxxxx, Xx. 000-0, Xxxxx-Xxxx Xxxx
Xxxx-Xxxx City, Taipei Hsien
Taiwan, R.O.C.
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or to any other address or addresses which may hereafter be designated by any
party by notice given in such manner. All notices shall be deemed to have been
given as of the date of receipt.
ARTICLE XIII
CERTIFICATES OF OFFICERS AND DIRECTORS
The Buyer and DRI shall provide to each other certificates at the
Closing verifying the representations and warranties made by each party hereto.
Any certificate or other document executed by any officer of DRI or the Buyer
and delivered to the other party or its counsel shall be deemed a representation
and warranty by such officer on behalf of DRI or the Buyer as to the statements
made therein.
ARTICLE XIV
CONFIDENTIALITY
In connection with this Agreement, the Buyer acknowledges that it has
received from DRI certain proprietary information, trade secrets, financial
statements and supporting information, together with statistics, analyses,
compilations, studies and other documents or records prepared by any person
including the Buyer, its agents, advisors, affiliates or representatives
(collectively "Representatives") which contain or otherwise reflect or are
generated from such information (collectively the "Confidential Material"). The
Buyer agrees that the Confidential Material has not and will not be used other
than in connection with the purchase of the Shares, the Option and the Option
Shares. The Buyer has and will make all necessary and appropriate efforts to
safeguard the Confidential Material from disclosure to anyone other than as
permitted hereby. Without the prior written consent of DRI, the Buyer will not,
except as required by law, and will direct its representatives not to, disclose
to any person the fact that the Confidential Material has been made available to
the Buyer or that the Buyer has inspected any portion of the Confidential
Material. The term "person" as used herein shall be broadly interpreted to
include without limitation, any corporation, company, partnership and individual
or group.
In the event that the Buyer or any of its Representatives is requested
or required (by oral question or request for information or documents in legal
proceedings, interrogatories, subpoena, civil investigative demand or similar
process) to disclose any information supplied to the Buyer in the course of its
dealings with DRI or its Representatives, it is agreed that the Buyer will
provide DRI with prompt notice of any request or requirement so that either the
Buyer or DRI or both of them may seek an appropriate protective order and/or, by
mutual written agreement, waive the Buyer's compliance with the provisions of
this Agreement. It is further agreed that if, in the absence of a protective
order or receipt of a waiver, the Buyer or any of its Representatives is
nonetheless, in the reasonable written opinion of its counsel, compelled to
disclose information concerning DRI to any court or else stand liable for
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contempt or suffer other censure, the Buyer or such Representative may
disclosure such information to such court. In any event, the Buyer will not
oppose action by, and will cooperate with, DRI to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded to such information.
The term "Confidential Material" does not include information (i) which
was known to the Buyer or that the Buyer had in its possession prior to the
disclosure of confidential information by DRI hereunder, (ii) which becomes
generally available to the public other than as a result of a disclosure by the
Buyer or its Representatives, (iii) which becomes available to the Buyer on a
nonconfidential basis from a source other than DRI or its Representatives,
provided that such source is not bound by a confidentiality agreement with DRI
or its Representatives or otherwise prohibited from transmitting the information
to the Buyer by a contractual, legal or fiduciary obligation, or (iv) which
otherwise becomes known to the Buyer in a manner which does not violate the
proprietary rights of DRI.
Any of the Confidential Material shall be the property of DRI and, upon
request of DRI, all such Confidential Material shall be returned to DRI or
furnished to DRI without the Buyer retaining any copy thereof.
DRI shall be entitled to seek any relief as may be necessary to enforce
the terms of this Article XIV in the event of a breach by the Buyer or its
Representatives.
ARTICLE XV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be an original, but all of such
counterparts shall constitute one and the same instrument.
ARTICLE XVI
MERGER CLAUSE AND COSTS, FEES AND EXPENSES
This Agreement supersedes all prior agreements and understandings
between the parties, and may not be changed or terminated orally, and no
attempted change, termination or waiver of any of the provisions hereof shall be
binding unless in writing and signed by the parties hereto. Each party shall pay
its own expenses incident to the preparation, execution and delivery of this
Agreement and the consummation of the transactions described herein including,
without limitation, all fees of counsel, accountants and other professional fees
and expenses.
ARTICLE XVII
SEVERABILITY
In the event that any provision of this Agreement is determined to be
partially or wholly invalid, illegal or unenforceable, then such provision shall
be deemed to be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable or, if such a provision cannot be
modified or restricted in a manner so as to make such provision valid, binding
and
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enforceable, then such provision shall be deemed to be excised from this
Agreement and the validity, binding effect and enforceability of the remaining
provisions of this Agreement shall not be affected or impaired in any manner.
ARTICLE XVIII
BENEFIT
The terms and conditions of this Agreement shall inure to the benefit
of, and shall be binding upon, the successors and assigns of the parties hereto,
and the persons and entities referred to in Article XI who are entitled to
indemnification or contribution and their respective successors, legal
representatives and assigns and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement, the Option Agreement or the Registration Rights
Agreement or any provision herein or therein contained.
ARTICLE XIX
WAIVER
The failure of any party to insist upon the strict performance of any
of the provisions of this Agreement shall not be considered as a waiver of any
subsequent default of the same or similar nature. Time is of the essence in this
Agreement.
ARTICLE XX
HEADINGS
The headings for the sections of this Agreement are inserted for
convenience in reference only and shall not constitute a part hereof.
ARTICLE XXI
SURVIVAL
The respective agreements, representations, warranties, covenants and
other statements of the Buyer and DRI set forth in this Agreement shall survive
and remain in full force and effect for a period of one (1) year from the
Closing, regardless of any investigation or inspection made on behalf of the
Buyer or DRI.
ARTICLE XXII
GOVERNING LAW
This Agreement shall be governed by and construed according to the laws
of the State of North Carolina, without giving effect to conflict of laws.
ARTICLE XXIII
ARBITRATION
All disputes arising in connection with the present agreement shall be
finally settled by arbitration in accordance with the Commercial Arbitration
Rule of the American Arbitration Association by one or more arbitrators.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
THE BUYER:
LITE VISION CORPORATION
By
------------------------------------
Print Name:
---------------------------
Title:
--------------------------------
ATTEST:
------------------------------
DRI:
DIGITAL RECORDERS, INC.
By
------------------------------------
Print Name:
---------------------------
Title:
--------------------------------
ATTEST:
------------------------------
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TABLE OF ATTACHMENTS
ANNEX SECTION REFERENCE ARTICLE AND DESCRIPTION
----- ----------------- -----------------------
I Section 1.3a Registration Rights Agreement
II Section 1.3(b) Option Agreement
EXHIBIT SECTION REFERENCE ARTICLE AND DESCRIPTION
------- ----------------- -----------------------
A Article III(c)(ii) DRI Financial Statements
B Article III(e) Material Changes or
Commitments in DRI's Business
C Article III(f) Material Agreements
D Article III(g) Litigation
E Article III(i) Dividends, Distributions,
Disbursements and other
material changes of DRI
F Article III(j) Commitments to issue Common
Stock
G Article III(k) Infringement Exceptions and
License Agreements
H Article III(b) Subsidiaries of DRI
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