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EXHIBIT 10.28
OPTION AGREEMENT
OPTION AGREEMENT, dated as of June , 1998, by and between LITE VISION
CORPORATION, a corporation organized in Taiwan (the "Optionee"), on the one
hand, and DIGITAL RECORDERS, INC., a North Carolina corporation ("DRI") on the
other.
WHEREAS, effective as of June _, 1998, the Optionee and DRI entered
into a Share Purchase Agreement (the "Purchase Agreement") pursuant to which,
among other things, the Optionee is to receive the right (the "Option") to
purchase up to 100,000 shares of Common Stock, par value $.10 per share (the
"Option Shares") of DRI pursuant to the terms of an option agreement; and
WHEREAS, this option agreement (the "Option Agreement") constitutes the
option agreement described in the Purchase Agreement;
NOW, THEREFORE, in consideration of the agreements set forth below, the
parties hereto agree as follows:
1. The Option. Subject to the terms and conditions hereof, the Optionee
is hereby granted the Option, at any time or from time to time commencing on the
date of this Option Agreement and at or before 5:00 P.M., Eastern Time, on July
1, 2001 (such three-year period hereinafter the "Option Exercise Period"), but
not thereafter, to subscribe for and purchase any or all of the Option Shares
for a price of $2.4375 ($2-7/16) per Option Share purchased (the "Option
Exercise Price"). If the rights represented hereby shall not be exercised during
the Option Exercise Period, this Option shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.
2. Exercise of Option. During the Option Exercise Period, the Optionee
may exercise this Option upon presentation and surrender of this Option and upon
payment of the Option Exercise Price for the Option Shares to be purchased to
DRI at the principal office of DRI. Upon exercise of this Option, the form of
election hereinafter provided must be duly executed and the instructions for
registration of the Option Shares acquired by such exercise must be completed
and delivered with this Option to DRI. If this Option is exercised in part, the
Optionee shall be required to exercise this Option with respect to a minimum of
25,000 shares of Common Stock upon each such exercise in part. In the event of
the exercise of this Option in part only, DRI shall cause to be delivered to the
Optionee a new Option of like tenor to this Option in the name of the Optionee
evidencing the right of the Optionee to purchase the number of Option Shares
purchasable hereunder as to which this Option has not been exercised. On
exercise of this Option, unless (i) DRI receives an opinion from counsel
satisfactory to it that such a legend is not required in order to assure
compliance with the Securities Act of 1933, as amended (the "1933 Act"), or any
applicable state securities laws, or (ii) the Option Shares are registered under
the 1933 Act, each certificate for Option Shares issued hereunder shall bear a
legend reading substantially as follows:
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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.
The foregoing legend may be removed with respect to any Option Shares
sold upon registration or sold pursuant to an exemption from registration,
including the exemption for sales made in accordance with Rule 144 promulgated
under the 1933 Act, provided DRI receives an opinion from counsel satisfactory
to it that such legend may be removed.
3. Assignment. Subject to the terms contained herein, this Option may
be assigned by the Optionee in whole or in part by execution by the Optionee of
the form of assignment attached hereto, (i) in the sole discretion of the
Optionee, to an affiliate of the Optionee, or (ii) with the prior written
consent of DRI, to any other party. In the event of any permitted assignment,
DRI, upon request and upon surrender of this Option by the Optionee at the
principal office of DRI accompanied by payment of all transfer taxes, if any,
payable in connection therewith, shall transfer this Option on the books of DRI.
If the permitted assignment is in whole, DRI shall execute and deliver a new
Option or Options of like tenor to this Option to the appropriate assignee
expressly evidencing the right to purchase the aggregate number of Option Shares
purchasable hereunder; and if the permitted assignment is in part, DRI shall
execute and deliver to the appropriate assignee a new Option or Options of like
tenor expressly evidencing the right to purchase the portion of the aggregate
number of Option Shares as shall be contemplated by any such permitted
assignment, and shall concurrently execute and deliver to the Optionee a new
Option of like tenor to this Option evidencing the right to purchase the
remaining portion of the Option Shares purchasable hereunder which have not been
transferred to the assignee.
4. Transfer of Option. The Optionee, by acceptance hereof, agrees that,
before any transfer is made of all or any portion of this Option, the Optionee
shall give written notice to DRI at least 15 days prior to the date of such
proposed transfer, which notice shall specify the identity, address and
affiliation, if any, of such transferee. No such transfer shall be made unless
and until DRI has received an opinion of counsel for DRI or for the Optionee
stating that no registration under the 1933 Act or any state securities law is
required with respect to such disposition or a registration statement has been
filed by DRI and declared effective by the Securities and Exchange Commission
covering such proposed transfer and the Option and/or the Option Shares have
been registered under appropriate state securities laws. Any transfer of this
Option shall be subject to the same restrictions set forth in Section 3 hereof,
that is, the Optionee may transfer this Option to an affiliate in its sole
discretion, and any other transfer shall be subject to the prior written consent
of DRI.
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5. Share Dividends, Reclassification. Reorganization Provisions. (a)
If, prior to the expiration of this Option by exercise or by its terms, DRI
shall issue any of its Common Stock as a share dividend or subdivide the number
of outstanding shares of Common Stock into a greater number of shares then, in
either of such cases, the Option Exercise Price per share purchasable pursuant
to this Option in effect at the time of such action shall be proportionately
reduced and the number of Option Shares purchasable pursuant to this Option
shall be proportionately increased; and conversely, if DRI shall reduce the
number of outstanding shares of Common Stock by combining such shares into a
smaller number of shares then, in such case, the Option Exercise Price per share
purchasable pursuant to this Option in effect at the time of such action shall
be proportionately increased and the number of Option Shares at that time
purchasable pursuant to this Option shall be proportionately decreased. If DRI
shall, at any time during the life of this Option, declare a dividend payable in
cash on its Common Stock and shall at substantially the same time offer to its
shareholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all Common Stock
so issued shall, for the purpose of this Option, be deemed to have been issued
as a share dividend. Any dividend paid or distributed upon Common Stock in
shares of any other class of securities convertible into Common Stock shall be
treated as a dividend paid in Common Stock to the extent that Common Stock is
issuable upon the conversion thereof.
(b) If, prior to the expiration of this Option by exercise or by its
terms, DRI shall be recapitalized by reclassifying its outstanding Common Stock,
or DRI or a successor corporation shall consolidate or merge with or convey all
or substantially all of its or any successor corporation's property and assets
to any other corporation or corporations (any such corporation being included
within the meaning of the term "successor corporation" used above in the event
of any consolidation or merger of any such corporation with, or the sale of all
or substantially all of the property of any such corporation, to another
corporation or corporations), the Optionee shall thereafter have the right to
purchase, upon the basis and upon the terms and conditions and during the time
specified in this Option, in lieu of the Option Shares theretofore purchasable
upon the exercise of this Option, such shares, securities or assets as may be
issued or payable with respect to, or in exchange for, the number of Option
Shares theretofore purchasable upon the exercise of this Option had such
recapitalization, consolidation, merger or conveyance not taken place and, in
any such event, the rights of the Optionee to an adjustment in the number of
Option Shares purchasable upon the exercise upon this Option as herein provided
shall continue and be preserved in respect of any shares, securities or assets
which the Optionee becomes entitled to purchase.
(c) If: (i) DRI shall take a record of holders of its Common Stock for
the purpose of entitling them to receive a dividend payable otherwise than in
cash, or any other distribution in respect of the Common Stock (including cash),
pursuant to, without limitation, any spin-off, split-off, or distribution of
DRI's assets; or (ii) DRI shall take a record of the holders of its Common Stock
for the purpose of entitling them to subscribe for or purchase any shares of any
class or to receive any other rights; or (iii) in the event of any
classification, reclassification or other reorganization of the securities which
DRI is authorized to issue, consolidation or merger by DRI with or into another
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corporation, or conveyance of all or substantially all of the assets of DRI; or
(iv) in the event of any voluntary or involuntary dissolution, liquidation or
winding up of DRI; then, and in any such case, DRI shall mail to the Optionee,
at least 15 days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend, distribution or
rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be, will be effected. Such notice shall also specify
the date or expected date, if any is to be fixed, as to which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution
or rights, or shall be entitled to exchange their Common Stock or securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be.
(d) If DRI, at any time while this Option shall remain unexpired and
unexercised in whole or in part, shall sell all or substantially all of its
property, dissolve, liquidate or wind up its affairs, the Optionee may
thereafter receive upon exercise hereof, in lieu of each Option Share which it
would have been entitled to receive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation or winding up with respect to each share of Common
Stock of DRI purchased upon exercise of this Option.
6. Reservation of Shares Issuable on Exercise of Option. At all times
during the Option Exercise Period, DRI will reserve and keep available out of
its authorized Common Stock, solely for issuance upon the exercise of this
Option, such number of shares of Common Stock and other securities as from time
to time may be issuable upon exercise of this Option.
7. Request to Transfer Agent. On exercise of all or any portion of this
Option, DRI shall, within ten days of the receipt of good and clean funds for
the purchase of any or all of the Option Shares, advise its Transfer Agent and
Registrar of the required issuance of the number of Option Shares and the names
in which such Option Shares are to be registered pursuant to the exercise form
attached hereto. DRI shall also execute and deliver any and all such further
documents as may be requested by the Transfer Agent and Registrar for the
purpose of effecting the issuance of Option Shares upon payment therefor by the
Optionee or any assignee.
8. Loss Theft Destruction or Mutilation. Upon receipt by DRI of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the ownership of and the loss, theft, destruction or mutilation of this Option,
and the purchase by the Optionee of a lost security bond (or, if acceptable to
DRI, the provision of a satisfactory indemnity from the Optionee) in an amount
equal to or exceeding the total value of the Option Shares to be purchased
hereunder, DRI will execute and deliver, in lieu thereof, a new Option of like
tenor.
9. Optionee Not a Shareholder. The Optionee or any other holder of this
Option shall, as such, not be entitled by reason of ownership of this Option to
any rights whatsoever of a shareholder of DRI.
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10. Transfer Taxes. The Optionee or its assignee(s) will pay all taxes
in respect of the issue or transfer of this Option or the Option Shares issuable
upon exercise hereof.
11. Mailing of Notice. All notices and other communications from DRI to
the Optionee or from the Optionee to DRI shall be mailed by first class,
certified mail, postage prepaid, or sent by receipt confirmed facsimile
transmission, to the address furnished to each party in writing by the other
party.
12. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Option. With respect to
any fraction of a share called for upon the exercise hereof, DRI shall issue to
the Optionee at no extra cost another whole share for any fraction which is
one-half or greater, and the Optionee shall forfeit the fractional share that is
less than one-half of a share.
13. Common Stock Defined. Whenever reference is made in this Option to
the issue or sale of Common Stock, the term "Common Stock" shall mean the voting
Common Stock of DRI of the class authorized as of the date hereof and any other
class of stock ranking on a parity with such Common Stock.
14. Registration Rights. The Optionee and DRI acknowledge their
execution of a Registration Rights Agreement between the parties which provides,
among other things, for certain registration rights which are for the benefit of
the Optionee and any assignee(s). DRI's agreements with respect to the
registration rights will continue in effect regardless of the exercise or
surrender of this Option by either the Optionee or any assignee(s).
15. Payment for Option. Upon the execution and delivery of this Option
Agreement, together with the legal opinion and certificates of DRI described
below, the Optionee shall deliver to DRI good funds in the amount of $ ,
which is the Purchase Price for the Option.
16. Opinion of Legal Counsel. As a condition to the execution and
delivery of this Option Agreement by the parties and the payment by Optionee of
the Purchase Price specified in Section 15, DRI shall deliver to Optionee an
opinion of its legal counsel to the following effect:
(i) DRI is a corporation duly organized, validly existing and in good
standing under the laws of North Carolina. 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 Option Agreement.
To the best of such counsel's knowledge, there are no options, puts, calls or
other rights outstanding to purchase or sell DRI's securities other than as
contemplated by the Option Agreement or as disclosed in the Annexes or Exhibits
to the Purchase Agreement.
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(ii) 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. As of the date of this Option Agreement, there are
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 Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
(iii) Execution and delivery of the Option 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 Option
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
Option Agreement and the Registration Rights Agreement.
(iv) There are no preemptive rights to acquire DRI's Common Stock or
Preferred Stock.
(v) The Option Shares, when issued in accordance with the terms and
conditions of this Option 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 Option 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
Option Shares will contain a legend to reflect such status; and provided further
that the Optionee'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.
(vi) The offer and sale of the Option are exempt from the registration
requirements of Section 5 of the 1933 Act. The offer and sale of the Option
Shares, when issued in accordance with all terms and conditions of the Option
Agreement, will be exempt from the registration requirements of Section 5 of
this 1933 Act.
(vii) Except as disclosed in the Share Purchase Agreement or the
Exhibits or Annexes thereto, 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.
17. Representations of DRI. As a condition to the execution and
delivery of this Option Agreement and the payment by Optionee of the Purchase
Price specified in Section 15, DRI shall deliver to Optionee a certificate of
the chief executive officer and chief financial officer of DRI to the effect
that, as of the date of the Option Agreement:
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(i) All of the representations and warranties of DRI contained in
Article III of the Purchase Agreement are in all material respects true and
correct and all of the covenants of DRI contained in Article V of the Purchase
Agreement have in all material respects been satisfied or performed; and
(ii) DRI has all requisite power and authority to execute, deliver and
perform this Option Agreement, and has all requisite power and authority to
execute and deliver the certificates representing the Option Shares. All
necessary corporate proceedings of DRI have been duly taken to authorize the
execution, delivery and performance by DRI of the Option Agreement. The Option
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 the Option
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 the Option Agreement. The Option Shares,
when issued in accordance with the terms and conditions of this Option
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.
18. Governing Law. This Option shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Option Agreement on
the day and year first above written.
DRI:
DIGITAL RECORDERS, INC.
By:
Print Name:
Title:
OPTIONEE:
LITE VISION CORPORATION
By:
Print Name:
Title:
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FORM TO BE USED TO EXERCISE OPTION:
EXERCISE FORM
The undersigned hereby elects irrevocably to exercise the within Option
and to purchase 100,000 shares of Common Stock of Digital Recorders, Inc.,
called for hereby, and hereby makes payment of $______________ (at the rate of
$2.4375 per share) in payment of the Option Exercise Price pursuant hereto.
Please issue the shares as to which this Option is exercised in accordance with
the instructions given below.
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Signature
Signature Guaranteed
Date:
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INSTRUCTIONS FOR REGISTRATION OF SHARES:
Register Shares in name of:
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(Print)
Address:
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FORM TO BE USED TO ASSIGN OPTION:
ASSIGNMENT
For value received ___________________________ does hereby sell, assign and
transfer unto ______________________________ the right to purchase
______________________ shares of Common Stock of Digital Recorders, Inc.,
evidenced by the within Option, and does hereby irrevocably constitute and
appoint Digital Recorders, Inc. and/or its Transfer Agent as attorney to
transfer the same on the books of Digital Recorders, Inc. with full power of
substitution in the premises.
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Signature
Signature Guaranteed
Date:
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NOTICE: The signature to the form to exercise or form to assign must correspond
with the name as written upon the face of the within Option in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by a
firm having membership on a registered national securities exchange.
